Improving Shipment Efficiencies in the Adhesives and Sealants Industry
Challenges exist within many transportation departments, including a lack of drivers, new hours of service rules, fluctuating demand, and higher prices.
According to Grand View Research, the global adhesives and sealants market was valued at $52.6 billion in 2017 and is expected to witness a CAGR of 5.6% from 2018-2025. Increasing demand from automotive, construction, packaging, furniture, footwear, and pressure-sensitive applications are primary factors driving growth. In the automotive industry, traditional welding and mechanical fastening methods are expected to be replaced by enhanced adhesives with superior bonding capabilities.
Raw materials for sealants and adhesives are derived from petrochemicals and crude oil, so the volatile prices of these materials is affecting the profitability of some companies. However, use in certain sectors of the industry, such as automotive, construction, and manufacturing, are seeing growth. For example, resurged demand for agricultural and mining equipment is expected to drive demand for sealants in industrial assembly.
With growth comes the need to improve efficiencies within transportation processes for both inbound and outbound shipments so that raw materials arrive on time and at the right location, and outbound shipments can be made on time to the right customers at the right price. In addition to improving efficiencies, the need to keep costs down and customer experiences up is fundamental to success. But challenges exist within many transportation departments, including a lack of drivers, new U.S. Department of Transportation Hours of Service rules, fluctuating demand, and higher prices.
Lack of Truck Drivers
For years, shippers have been complaining about tight capacity due to more and more shipments being required with fewer and fewer truck drivers to choose from. Steve Banker, an industry analyst, writes in Forbes magazine, “Since 2005 the American Trucking Associations (ATA) has been releasing reports on the driver shortage. The ATA is the largest national trade association for U.S. truck carriers. Most recently the ATA estimated that the trucking industry ended 2018 with a shortage of more than 60,000 truck drivers.”
However, Banker continues to write that the U.S. Bureau of Labor Statistics did a report in May that said just the opposite and that “there is not a driver shortage.” The report states that there were close to 3 million truck drivers, from light trucks to heavy tractors, in the U.S. in 2017. The demand for truck drivers has remained strong, despite turnover being very high. The Bureau of Labor cites an annual ATA survey of carriers, which shows that, “between 1995 and 2017, the annual turnover rate at large Truck Load (TL) carriers averaged 94 percent and that at small TL carriers averaged 79 percent. In contrast, the rate at firms in a different segment, less-than-truckload, averaged only 12 percent.”
The argument between the two groups is that the bureau accepts there is a high turnover in the truckload market, but they won’t call that a driver shortage. The ATA looks at the turnover and cites a driver shortage. Both organizations are continuing to butt heads over the issue. Regardless, shippers of adhesives and sealants need to improve efficiencies within their transportation operations. But will this solve long-term issues related to increasing numbers of truck drivers retiring from the profession? Not unless young people join the industry.
Millennials don’t want to be truck drivers; instead, they want careers that will allow them to work 9-5 and return home at the end of the day. Carriers need to attract the younger generation to truck driving jobs by paying higher salaries and giving them the perks millennials want, such as returning home at the close of business, less travel, and more benefits for health and education.
Better Planning to Optimize Capacity
Customers today demand immediate information, quick delivery, and instant notification if something will be delayed. Businesses want this same visibility into their supply chain processes to gain insights regarding improving efficiencies, profits, and customer satisfaction while reducing risk. Today, a growing number of companies are addressing the driver shortage by optimizing their relationships with logistics service providers, improving planning with shippers/carriers and buying forecasted capacity. This works for both parties, as shippers lock in delivery capacity while carriers can optimize their scheduling of drivers around these shipment forecasts.
To optimize capacity based on customer demand for both inbound and outbound logistics processes, companies are leveraging vendor-managed inventory (VMI) and the more real-time customer signals data capture found in a digital supply network (DSN). These companies are connecting and automating their supply chains with their trading partners across each transaction, communication, and collaboration. Sales forecasts and transportation capacity requirements are shared based on this data, providing an improved buying experience for the end customer and making it easier to do business with the supplier.
Managing Freight Costs
Manufacturers of adhesives and sealants can reduce transport costs by automating manual processes involved in transportation. With automation, processes such as executing transportation, securing bids, and sending invoices streamline operations and speed efficiencies. Shippers need to get a handle on accessorial charges as well. If carriers want shorter wait times, the shipper can work to reduce these times.
Another way to reduce freight costs is to work more closely with carriers to understand what makes them tick and how they want to do business. Making it easier to do business with your company will improve carrier relationships, which may help you get lower shipping rates.
Using a digital supply network to connect all parties involved in supply chain operations, such as shippers, carriers, suppliers, and logistics service providers, eliminates inter-operational glitches in communication and collaboration. Everyone connected to the network knows what everyone else is doing on the network, bringing visibility across the enterprise. Because of visibility, adhesives and sealants manufacturers can alert their customers if there is going to be a delay in a delivery and can proactively find a resolution to the problem.
With a digital supply network, companies gather transactional information from constituents and trading partners. This data can be analyzed to uncover bottlenecks in the supply chain that can lead to a disruption or add costs. Carriers can also get access to the sales forecast to help them understand demand, helping shippers avoid the cost of expedited shipments to meet service levels.
For the transportation of adhesives and sealants, accessorial charges and other costs for services related to hazmat transportation can be accessed on a delivery, making prices even higher. These charges can come from factors like the cleaning of a tank after handling chemicals or from yard accessorials from the opening or closing of a gate.
Adhesives and sealants companies are looking to improve operational performance, grow margins, and increase customer satisfaction. Finding a more efficient way to manage freight costs is a critical factor for success.
For more information, visit www.elemica.com.