Managing volatility in logistics markets

Managing volatility in logistics markets

The University of St. Gallen has analyzed how shippers can manage the volatility of freight rates. The study provides answers to challenges, practices, and tools.

Fluctuations between supply and demand always influence logistics markets. The same applies to disruptions in supply chains during singular events such as (natural) disasters, terrorism, and social or political upheavals. 

However, we have experienced a new dimension of volatility during the last two years. Almost every economic sector is affected by more frequent supply bottlenecks, interruptions, or the collapse of supply networks. Anyone who attributes this solely to the COVID-19 crisis is missing the point. The causes are as complex as the approaches to mitigation and defense. 

Various studies have long documented the need for resilient supply chains and adaptive risk management. In Gartner's Hype Cycle for Supply Chain Strategy 2021, the latter was put in the trough of disillusionment. A clear signal that the real pro-gress in managing volatility has not kept pace with expec-tations. In reality, we underestimate the scope and chal-lenges of the transformation.

New insights and "aha" moments

In this vein, the present study will lead to an "aha" moment for those concerned. The comprehensive presentation of volatility dimensions and different logistics scenarios promotes the necessary understanding of distinct interrelationships. Therefore, the original study objective has even been expanded by classifying problems and assigning practical solutions.

Six case studies extend the scope of the study to demonstrate relevant approaches logistics actors can adopt when managing freight price volatility. The six cases of Coop, DB Cargo, EK Procurement, Fygen, Heraeus, and Migros provide insights into how companies have directly addressed the study's guiding theme in practice.