2011 Logistics Management Best Practices Award: ParknPool’s LTL cost plunge
Jason O’Mahony, logistics and operation manager, ParknPool
June 01, 2011
Taking the plunge
O’Mahony credits the rating tool, which is based on a model used by most third party logistics providers (3PLs), with keeping carriers on their toes through honest competition. The idea was to diversify ParknPool’s carrier selection and create a base of several core carriers both in its long-haul and regional lanes.
“We saw across the board that all of our LTL carriers made use of API technology,” O’Mahony explained. “We can see all the carriers’ rates per our tariff and it gives us the bottom line rate for each shipment.”
All this is done by entering four pieces of information for every shipment—shipper ZIP code, consignee ZIP code, weight, and classification. Enter that information, push a button, and specific rate quotes with individual tariffs are given nearly instantaneously from every carrier along with transit times on a shipment-by-shipment basis.
While the main goal was to be able to select the best carrier on a shipment-by-shipment basis, O’Mahony found several unforeseen benefits including:
Maximized lane efficiency. While O’Mahony found some carriers were not able to provide competitive rates on one lane, others could step in and provide that service with far better rates.
A climate of constant competition. “One of the benefits is that our carriers know we’re doing this,” he says. “It turns the negotiation table into more of a math equation. I like all my transportation sales reps; but if they don’t get a shipment it’s not because I don’t like them. It’s because their company is not giving me the best rate on a particular lane.”
Insulation from cost increases. If one carrier chooses to raise rates, there are options. He’s found that some LTLs have stayed with rate hikes, but others can see that they’ve reduced business with them and then reduced their tariffs as a result.
“It’s not perfect,” O’Mahony says. “But compared to where we were, we likely would have had to absorb many of those price increases.”
It turns out that the rating tool has proven to be a boon to sales as well. Prior to installation of the tool, whenever a ParknPool account manager fielded a call the person had to rely on the supplier to provide an estimate of the cost of transportation. This required a secondary call to the supplier, which meant the customer could not receive a final quote until later in the day. Usually, that took at least another hour. Sometimes, during that interim, sales were lost.
Now, as soon as a customer calls, the account manager can receive a final estimate on cost nearly instantaneously while on the phone. “We have that pre-programmed in and it literally takes about two or three seconds to pull that information,” O’Mahony says.
“Before when we quoted shipping, it was roughly $1,700. Now it’s like $500. Customers are surprised rather than offended at our shipping rates.”
O’Mahony says ParknPool ships “for a lot less” than its competitors. “But we’ve made a lot more money as a result of this logistics move,” he says. “Our sales are faster and more efficient with this tool in place.”
At a time when fuel surcharges are rising in double-digits and carriers are trying to take rate increases in the 5 percent to 6 percent annual range, ParknPool has seen its transport costs drop from 17 percent of sales to what O’Mahony estimates will be about 5 percent of its sales this year.
ParknPool currently uses three large national LTL carriers—YRC, FedEx, and ABF Freight System—that O’Mahony says are “all very close on rates.” It utilizes about a half dozen regional LTL carriers, including Southeastern, Roadrunner, Holland, and Reimer in Canada.
As far as the carriers go, they seem pleased that ParknPool is so engaged with them. Recently, ParknPool honored YRC Worldwide with its carrier of the year award for excellent service.
Michael Driscoll, the YRC senior sales executive charged with the ParknPool account, says it’s a “good account for YRC. We value their business.” When asked about ParknPool’s rating system of carriers, Driscoll says YRC is comfortable with the arrangement. “It lets their employees see a side-by-side price and service comparison on each order shipment,” he says. “This allows ParknPool to choose the best carrier for each shipment.”
Driscoll adds that such transportation management systems “are definitely a trend” in the industry. Some companies are bringing them in through contracting with 3PLs and others are purchasing software and integrating them directly into their existing systems. “I definitely understand the need to determine actual shipping costs and trying to reduce transportation expenses in general,” says Driscoll.
For his part, O’Mahony says the new in-house transportation management system has brought his company out of the Dark Ages of transportation and onto the cutting edge of relationships with ParknPool’s carrier base.
“It’s changing the dynamic between shipper and carrier,” he says. “It’s one of the biggest benefits of this tool.”
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