Economic winter is coming. Is your commercial strategy ready?

Inflation is approaching double-digit percentages, even in developed markets. Key shipping lanes, not to mention European stability, have been disrupted by war. Consumer confidence is testing its early-pandemic lows. What does all this mean? A recession is months – not years – away.

Pandemic lockdowns and trade sanctions are reshaping globalization. Manufacturers, having learned not to depend entirely on distant production locations, are onshoring or “nearshoring” assembly lines. This will shorten supply chains and reduce transport spend. Growing environmental pressure will only reinforce this.

In short: shipping demand has nowhere to go but down in the next few years – especially if you carry goods across borders. But demand isn’t the only problem.

You already know Amazon.com has long been buying or chartering aircraft, trucks, and container ships for its sole use. Now, other retailers like Target and Home Depot are chartering their own vessels, while producers like Fresh Del Monte Produce are selling surplus capacity on their wholly-owned assets. These services utilize remote, uncongested ports and airports, driving ultra-high on-time performance and increased asset utilization.

Tech-enabled freight brokers like Convoy and Arrive Logistics are revolutionizing middle-mile trucking. Their dispatch optimization is so sophisticated that, as an operator, you can “drop and hook” trailers in adjacent bays and be back on the road in minutes. Such platforms can maximize your fleet utilization … but at rock-bottom yields, as drivers compete for loads in what is effectively a reverse auction. In air cargo, digital marketplaces like Freightos and cargo.one are delivering rate transparency, just like Expedia did with passenger airfares in the 1990s.

It’s only a matter of time before such innovations expand to rail and ocean shipping. As Jeff Bezos famously said, “your margin is my opportunity.”

How do you compete in such a market? Carriers in all modes – air, sea, road, and rail – must seize the moment if they want to extend their prosperity beyond the present supply chain crisis. You need demand-driven and customer-centric pricing, a broader service offering than just basic transportation, and less reliance on brokers and other low-rate middlemen to deliver volume.

Passenger airlines began this “revenue revolution” 40 years ago with demand forecasting, optimized pricing, capping third-party commissions, and introducing service innovations to maximize revenue capture. Your company has millions of euros or dollars in future profitability, just waiting to be tapped!

Monetize schedule and service advantages: Almost every carrier has some competitive edge over other carriers, which it can monetize to earn a rate premium. In the present supply-chain chaos, just having short-term availability is a big edge! Do you know your company’s advantages and do you price for them – or do you simply “follow the leader” when it comes to pricing?

Capture greater share of BCO/shipper spend: Every beneficial cargo owner (BCO) or shipper has unique needs and willingness to pay for transport, which you can tap with customized (bespoke) service packages. In many cases, BCO willingness to pay is directly correlated with the time sensitivity of the shipment – so the easiest way to charge more is to offer multiple levels of time-definite delivery. However, this can impact your service schedule, so it’s important to compare alternatives when designing an expedited offering.

Expand service offerings, including intermodal options: You can offer value-added services with higher margins, like “white label” insurance, priority handling, and even cartage or drayage. The gold standard in service offerings is “supply chain as a service” or 5PL (fifth-party logistics), which includes end-to-end transportation and handling of all goods from the production site to the retailer or end customer. You should also consider options, or at least partnerships, for intermodal service (e.g., road-to-rail or air-to-road).

Of course, smaller carriers lack the scale and resources to deliver this level of service, and smaller ones may not be able to fully invest in such expansion. But every carrier has room to grow – and the higher profit margin of a wider service offering almost certainly justifies the investment!

Build direct partnerships with BCOs/shippers: The average broker or forwarder makes a gross margin of 10-15%, although this can range up to 65% depending on the scope of services offered. You can recapture some of this margin – while offering highly competitive pricing – by forming direct sales relationships with your BCOs. Yes, this requires investment in sales staff and processes, but again, the incremental margin will be greater than what you spend.

Now is the time to modernize your commercial strategy! To learn more, visit Propel Revenue at propelrev.com or message me for a no-cost, no-pressure conversation about your business. Together, we’ll propel your revenue to the sky!