CSCMP's Supply Chain Quarterly
Logistics
May 19, 2019
Forward Thinking

Commentary: Four steps to becoming a "shipper of choice"

Comment
With high demand, tight capacity, and a continuing shortage of drivers, trucking companies can afford to be choosy about which loads they take. Here's how to make yours more appealing.

Truck driving down roadToday's freight transportation landscape is more challenging than ever before. Demand from shippers is increasing as the digitization of retail drives the need for faster and more frequent shipments. At the same time, carriers are facing a capacity crunch as they battle the demand-supply imbalance and an ongoing driver shortage. According to The Washington Post, America had a shortage of 51,000 truck drivers at the end of 2017, a number that rose from 36,000 in 2016.

For shippers, the challenges around moving product to distribution centers, stores, and customer locations are forcing them to improve their freight's reputation and "carrier-friendliness." For carriers, the increased demand and reduced supply has resulted in increased freight rates and greater shipper scrutiny. Carriers evaluate a number of factors when selecting shippers, including visibility and forecasting of freight demand, delivery and pickup conditions, appointment flexibility, and driver amenities. To that end, here are a few recommendations and tips to help you become a "shipper of choice" in today's logistics marketplace.   

1. Help carriers better utilize their assets and optimize their routes.

Carriers want to maximize use of their assets and operate efficiently. Shippers who unload efficiently and on a timely basis help carriers avoid poor trailer utilization or excessive trailer inventories. In this capital-intensive industry, carriers prefer to work with "preferred shippers" that optimize their "rolling stock" and keep it moving. In addition, shippers who are able to optimize shipment routing and facilitate efficient "one pick, one drop" loads, thereby eliminating multiple stops and time-consuming routes, are highly appealing to most carriers. In fact, smarter asset utilization and route optimization benefit both shippers and carriers through improved service levels and lower overall transportation costs.

2. Align your network to theirs and provide better freight visibility.

Shippers looking to make themselves more attractive to carriers should also consider the value of aligning their freight to a carrier's preferred lanes and backhaul needs. Carriers with a balanced network can realize significant increases in operating efficiencies and cost savings with consistent volumes, minimization of empty miles, and improved driver productivity. Moreover, shippers who provide full visibility into their current and forecasted freight demand give carriers more choices and opportunities to ensure their trucks are in the right place at the right time. In return, carriers will reward efficient shippers with enhanced service levels and reduced freight costs.

Network alignment is a good example of how shippers and carriers can work together to move their relationship from a purely transactional basis to a strategic level by creating an atmosphere where both sides realize tangible and sustainable value. Shippers that adopt holistic, carrier-friendly business practices and policies will benefit in increased freight coverage, lower transportation costs, and lasting loyalty from their carrier partners.

3. Offer contract flexibility.

The unprecedentedly tight trucking capacity is also driving shippers and carriers to rethink the terms and conditions of their freight contracts. Typically, most shippers bid their network annually. However, given current market conditions, some are adjusting the lengths and terms of their contracts. For example, many shippers are now requesting volume guarantees, two- to three-year contracts, price protection tied to the Consumer Price Index (CPI), or fixed year-over-year price increases to secure rates and stabilize capacity while maintaining control over transportation costs and avoiding exploitation in the spot market. Shippers can obtain preferred status if they utilize contract flexibility or "expressive bidding" during bids and rate negotiations.

For example, requests for proposal (RFPs) and requests for quotation (RFQs) generally contain a predefined network of lanes by mode, which the carriers are asked to bid on as discrete or independent lanes only. Therefore, with inflexible RFQs and RFPs or negotiations, carriers are not able to price in possible synergies by bundling lanes or offering alternate modes that would optimize their existing networks and result in a more competitive rate or overall lower freight spend for the shipper. In an environment of tight carrier capacity, more flexibility in RFP and RFQs and negotiations benefits both the carrier and the shipper from a cost and service level perspective. This "flexible" approach maximizes a carrier's ability to highlight and articulate their strengths and abilities and enhances their "shipper of choice" mindset through all carrier-shipper transactions.

4. Make your facilities and practices "driver friendly."

Today, many carriers are evaluating shippers by how well they accommodate drivers with desirable facilities and efficient shipping and receiving docks. Carriers prefer to work with shippers that offer clean and welcoming amenities, like parking, restrooms, and break areas. Moreover, streamlined processes for yard check-in and check-out, flexible appointments with broad delivery windows, and driver-friendly drop-and-hook freight all make a shipper more attractive to carriers. 

The pressures of today's hypercompetitive logistics marketplace are putting a strain on the working relationship between shippers and carriers. However, this doesn't have to be the case. Forward-thinking shippers that provide carriers with improved visibility and establish a more collaborative and flexible relationship will be rewarded with increased business and more loyal customers.

Ron Lazo is vice president of professional services for Manhattan Associates.

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