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Relationships rule the day
Major trends in trucking may have changed little over the past few years, but the core capabilities required to navigate today's and tomorrow's logistics landscape are in a state of transformation. Although the economy is improving, shippers and carriers need new ways to confront the many challenges they are facing. Recruiting and retaining drivers remains a problem with no immediate fix, hampering carriers' ability to meet shippers' capacity needs. Rates continue to rise even as fuel prices remain low, as motor carriers must increase their investments in drivers' wages, new equipment, and technology. Shippers are experiencing longer delivery times, which disrupts service to their customers.
To address these and other concerns, many shippers are engaging in initiatives that are designed to strengthen the capabilities, or skill areas, that affect how they serve their customers and meet company goals. This is a wise path to follow: Our research has found that the development of core capabilities and solutions that address today's trucking-related challenges will be key to shippers' future success.
[Figure 1] Capability map Enlarge this image
Three capabilities suggest solutions
Leveraging our client relationships and logistics experience as well as our firm's experience working with organizations across industries, we developed a framework consisting of 16 distinct capabilities. EY's Capability Map (Figure 1) is a listing of typical operating capabilities used in a logistics and fulfillment function. These capabilities may have varying degrees of maturity based on companies' strategic priorities, but they all directly impact the efficiency and effectiveness of companies' operating performance.
To better understand what capabilities and solution strategies would be necessary for successfully managing truck transportation in the future, we interviewed carriers and shippers about trends in trucking. Based on the interviews conducted for this article, we determined that the most important capabilities are visibility, fleet/mobile asset management, and transportation management. These capabilities suggest the following solutions, which could mitigate the challenges of operating in the environment shippers and carriers are likely to encounter for the foreseeable future.
Visibility and stronger relationships
Visibility as an operational capability ranks high in importance for both shippers and carriers. We define visibility as the ability to have knowledge of or insights into upstream or downstream supply chain operations. More specifically, it is the availability of data from supply chain partners that enables an organization to make better decisions.
Despite its importance, visibility is not easy to attain. Traditionally, logistics is not invited to the cross-functional sales and operations planning (S&OP) meetings that coordinate an organization's commercial and operational teams. Moving forward, logistics must have a seat at that table. The benefits of doing so are clear. Shippers that consider transportation and warehousing in their initial S&OP conversations are better able to forecast their transportation requirements. When the logistics team is involved upfront, the time lapse between plan creation and transportation procurement will be minimized. Any changes in the plan, moreover, will be quickly communicated to the carrier. With this increased visibility into their customers' plans, carriers can design their networks and manage lane volumes in a way that optimizes their assets (both drivers and equipment).
Openly discussing strategic plans and forecasts, and sharing the data behind them—information about expected demand, cost pressures, and expectations, for instance—strengthens the shipper-carrier relationship. It can result in better all-around performance on the part of the carrier and allows shippers and carriers to prepare for the future together. For example, when a shipper informs a carrier that capacity for a new lane may be needed in the future—and why—it gives the carrier an idea of what is ahead.
Sharing data between shippers and carriers is not a new idea; however, they often do not realize the full benefits of this practice. Shippers need to approach their relationship with motor carriers as a partnership, with both parties providing information that will help each other better manage their business. The payoff can be significant. Carriers are reducing their customer pools because of capacity constraints as well as a desire to have strong partnerships with few customers, rather than transactional relationships with many customers. They also are increasing their volume of business with prioritized shippers with which they have a solid, long-term relationship. The result is better service levels for those shippers—a competitive advantage driven by secured capacity that may not be available to one's competitor.
A "dedicated mindset" in fleet/asset management
In addition to sharing operational improvement initiatives and shipment forecasts, shippers can further develop carrier partnerships by adopting a "dedicated mindset"; that is, by working with a carrier like it is part of the shipper's own organization.
As the need for predictability grows, carriers are looking to partner with shippers that can provide them with load-demand forecasts in advance. Transparency of desired outcomes and visibility of shippers' plans will prove vital to the success of this partnership. Alignment on initiatives will help shippers and carriers work together more effectively by focusing on the same priorities, such as the development of new lanes or an increase in backhauls.
When shippers consider selected carriers as their own dedicated fleets and consider fleet asset management in their daily plans, both partners can operate more efficiently. Additionally, the shippers will be mindful of their loading and unloading processes, and will strive to reduce truck idle time and deadhead miles, thus creating efficiencies for the carriers. Further, this collaboration can create a beneficial familiarity between the shipper and drivers. This is a win-win for both the driver, who gets to know the shipper's operation and employees well and is guaranteed miles, and the shipper, which has confidence in the driver's understanding of its requirements, and in the quality of coverage of the load. With the retention challenges carriers are facing, shippers are being more mindful of drivers' needs. Many drivers are well aware of which shippers are slow at loading, have poor facilities, or will overload trailers. Driver lounges and waiting areas with cleaner restrooms, snacks, and beverages are investments that some shippers are making to appeal to drivers. Some shippers are even installing weight scales on site to make things easier and more efficient for drivers. If scales are located on the shipper's premises, drivers can scale and easily rework the load if it turns out to be over the allowable weight limit, rather than weigh the load many miles down the highway and have to return to the shipper's premises to be reworked. Perhaps the most important, and least expensive, initiative should be to treat drivers with courtesy and respect. Considering the carrier's assets and drivers as the company's own resources creates benefits for all.
Innovative application of transportation management technology
Best-in-class companies not only employ a transportation management system (TMS), but also modify their use of the technology to meet evolving needs and challenges. Leveraging data analytics and revamping existing load-tendering processes allow carriers to be more efficient in covering loads. A TMS with the capability to execute an enhanced load-tendering process that can cascade multiple tenders to different carriers using varied parameters, with the ability to adjust tender-acceptance windows, reduces the amount of resources required to cover loads.
Best-in-class companies also employ a strategic approach that integrates software applications that could positively impact truck loading and unloading. The result is a designed system that incorporates gate management, yard management, and warehouse management into an undisrupted flow of picking, packing, and loading that minimizes movements in the warehouse and drivers' time at the dock.
The driver shortage and capacity constraints are not short-term trends but rather are lasting conditions of the logistics industry. To combat these conditions, shippers must continue collaborating and further developing their core capabilities in order to thrive. Shippers that are capable of adopting the "dedicated mindset" can create higher-performing environments for carriers and drivers as routes become standard, familiar, and guarantee miles. Utilizing and integrating logistics technology enhancements can improve the load-tendering process and impact operational performance. In short, successfully operating today and driving future performance will require shippers to further develop their core capabilities focused on people, process, and technology.
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