CSCMP's Supply Chain Quarterly
January 20, 2020
Forward Thinking

The silver lining

Although last year was a tough one for many shippers, it did propel them to form more collaborative relationships with carriers and service providers.

Even though 2018 was a painful year for many shippers, the Council of Supply Chain Management Professionals' (CSCMP's) 30th Annual "State of Logistics Report"—which reviews business logistics costs and trends for the previous year—ends up sounding an overall optimistic note.

The main thrust of this optimism is that many shippers and carriers responded to the tight capacity, rising rates, and difficulty of finding drivers and warehouse workers by embracing greater collaborative relationships. Many shippers pursued "shipper of choice" programs that strove to make themselves more attractive to carriers, for example by having rest areas and facilities for drivers, collaborating on strategic initiatives, and improving turnaround times to get drivers in and out of facilities as quickly as possible.

Even as the economy begins to soften and capacity opens up, most companies show no sign of reverting to past bad habits, according to the report. "Neither shippers nor suppliers seem satisfied with business as usual and the opportunity to leverage technology and collaborative practices is driving tangible efficiencies and shared gains," said Michael Zimmerman, a partner at the global management company A.T. Kearney and one of the report's main authors.

This sense of optimism was echoed by the panel of industry experts that addressed the report's finding at the National Press Club in Washington, DC, when the report was released in June. Jill Donaghue, vice president of supply chain for Bumble Bee Foods, was heartened by the change that has occurred in the industry. "After last year, shippers and carriers are truly coming together to collaborate," she says. "No longer is it, 'You've got to reduce your rates.' Instead it's, "How can we work together to be more efficient so that both of us make decent margins?'"

Donaghue says that even though Bumble Bee has been a "shipper of choice" for many years, it made an additional effort to be more collaborative. For example, based on carrier feedback, Bumble Bee has shifted how it contracts out its business. This year the company is working with a few core carriers and using quarterly pricing instead of year-round pricing. This change has reduced uncertainty for the carriers, she says.

Walmart also has had a "shipper of choice" program in place for over a decade, according to Ken Braunbach, vice president of U.S. transportation. But last year, the retail giant renewed its focus on efficiency at the dock. For example, in the past, if perishable products arrived at Walmart's docks not meeting temperature specifications, the retailer would hold the truck at the dock until the problem was sorted out. Now, it is unloading the products from the truck and allowing the drivers to go on their way, improving driver and truck utilization.

On the carrier side, some companies also followed a more collaborative approach in spite of the lure of increased rates last year. For example, Derek Leathers, president and CEO of Werner Enterprises, said that Werner did not chase the favorable rate increases seen in the spot market and instead stuck with its shippers.

"In some cases, we did take rate increases," he said. "But they were not in excess of what the market was seeing, and in many cases, they were significantly below that. We stuck by our shippers, and we are seeing them reciprocate this year."

The entire panel discussion as well as Zimmerman's presentation of the report can be found on Penske Logistics' YouTube page. Penske Logistics is the main sponsor of the "State of Logistics Report."

Susan Lacefield is Executive Editor of CSCMP’s Supply Chain Quarterly.

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