Understanding Industry Dynamics

Six Strategies for Managing Transportation

Published in the August 2013 Issue Published online: Aug 06, 2013 Luke Gowdy, C.H. Robinson transportation operation
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Having a successful transportation program is a challenging element of any company's business in today's market, even more so than in years past. Shippers who understand the dynamics that impact the trucking industry, and the ways their own behaviors and operations can affect them, will be better positioned to have more productive relationships, positive carrier service levels and access to better rates and capacity.

The availability of capacity is driven by economic change. Capacity shortages, like the economy, are also cyclical. So, while there are no fail-proof ways to absolutely identify when a capacity shortage will occur, shippers can watch certain economic indicators to understand what is happening in the market and anticipate potential impacts on transportation rates.

Various freight indices offer views of spot market freight that represent changes week-over-week, month-over-month and year-over-year in transactional capacity and rates. Other indices, such as the Active Truck Utilization index from Freight Transportation Research Associates, provide helpful information for planning. Shippers who are aware of changes in the market can better communicate with their providers, offer details about their annual bidding cycle and reiterate the desire to maintain an ongoing relationship, fostering a winning long-term strategy.

Most likely, you are not interested in paying higher rates for the same service. Given the ebbs and flows in transportation capacity, it's not too late to start taking a more strategic approach to truckload procurement-a mutually beneficial relationship between shippers and service providers. An ongoing effort to seek alignment between shipper and service provider networks is a strategy that can show benefits to both parties and can result in better rates and exceptional service levels over time.

So how do shippers and service providers align their business goals so everyone is happy? That is precisely what this article will try to demonstrate by providing six insights for achieving a greater advantage in capacity and rates. At the end of this article, shippers, by taking these steps, will have a better idea of how to obtain better access to capacity, better rates and exceptional service levels, regardless of seasonal or economic conditions.

1) Look beyond the lowest rates when making freight awards. Identify the carriers that closely match freight needs in a particular lane first, and then look for low rates within this subset of carriers. The chosen carrier may have the lowest rates, but that should not be the only criteria for awarding business.

2) Make sure shipper and carrier goals are aligned. Negotiations are most successful when both parties get what they want. This alignment will likely have a direct impact on the carrier's commitment after freight is awarded.

3) Learn as much as possible about the carrier's current customer base. What shippers do carriers currently do business with and how long have those shippers been customers? This information provides a deeper understanding of the carrier's transportation volumes by lane or region. Low customer turnover or long-term relationships may lead to more favorable rates from the carrier and better commitment levels.

4) Make freight more attractive to carriers. Inspecting the inside of trailers to make sure they are clean, dry and odor-free is just the start. Ensure that your carriers know your standard operating procedures, and that your shipping department confirms proper loading temperatures and matches case counts to bills of lading. In addition, consistent freight volumes are attractive to carriers because they make it easier to justify equipment and capital investments.

5) Change processes that make freight unattractive to carriers and result in higher rates. Freight rates will be higher if:

The driver is responsible for an accurate piece count;

Pallet exchange is required, and there are multiple drops with firm appointments that cause excessive trip duration;

Freight is insufficiently secured, resulting in damage to trailers or compromise to the trailer's integrity (e.g., floor or wall damage);

Appointments do not allow for the most efficient transit time and use of a driver's hours of service (HOS). Sometimes, the driver will be held up a day because a receiver has a small dock and too small a window for unloading;

6) Leverage the scale, technology and expertise of a transportation service provider or 3PL. Sometimes, a shipper does not have the scale to mitigate ebbs and flows in the market or to manage seasonal fluctuations. Some do not possess the technology and processes to provide reliable information and data regarding their shipping habits. Both situations can be solved by leveraging a transportation service provider to improve payment terms, conduct strategic procurement exercises and bring balance to their service network.