The “Bullwhip Effect” on Rail

Between Coronavirus, supply chain slow-downs, and an encroaching recession, we’re entering a perfect storm of “inventory drawdown.” As FreightWaves puts it, we’re bracing for a “bullwhip effect”: “a scenario in which temporary surges in retail demand are magnified and exaggerated by upstream manufacturers and suppliers, who rapidly increase production well beyond the level that can be supported by consumers.”

You may have read about a handful of Big Box companies falling prey to inventory excess. First came Walmart, then Target. Samsung is the latest on the list. While Big Box stores have the bandwidth to cancel orders efficiently, inventory issues will still affect the supply chain — especially the ports, which are slated to be hit hardest in July. Port slow-downs will largely impact trucks, which are also suffering from radically increasing gas prices. As deliveries become less efficient, more and more customers will cancel orders, which will impact revenue.

According to FreightWaves, LTL — smaller parcel shipping — will feel the impact sooner than FTL carriers. But what about rail? Because rail lacks the network visibility of other modes of transportation, congestion and slow-downs tend to pack a larger punch. With a bullwhip on the horizon, rail network visibility is more important than ever.

Our data is here to alleviate pain points when the road ahead gets rough — when a bullwhip effect hits, for example. If you can see areas of the railroad that are backed up — i.e. where trains have or haven’t moved, where empties are or aren’t coming — you’ll be able to make strategic decisions. More control over your decisions means more control over your operations. We’re here to help you make decisions at the edge.

Read the full FreightWaves article here.