Study finds leading shippers deploy new set of best practices

By Beth Enslow, Vice President Aberdeen Group -- Logistics Management, 6/1/2005

A new set of best practices is emerging to meet today's reality of capacity constraints, rising rates and surcharges, and an increasing hunger for transportation information by other corporate departments and customers. A recent Aberdeen Group study found that shippers are implementing "carrier-friendly" programs, wider information access, and "scorecarding" as best practices. Aberdeen Group drew these conclusions from its survey of 286 companies in 2004 and additional research in 2005 on best-in-class domestic transportation operations.

Many best-in-class companies are implementing carrier-friendly programs in an effort to become lower-cost customers. In return, they are receiving much lower rate increases (and even rate decreases) from carriers. In addition, they are able to secure capacity more consistently from their primary carriers, even during peak seasons and holiday weeks. In fact, companies adopting these programs report 50 percent reductions in load-tender turndown rates. Key elements of these programs include: sharing rolling capacity forecasts with carriers, tendering earlier, reducing driver turnaround time at pickup and delivery locations, increasing hours of operation or drop-yard use, and paying carriers faster.

Besides working with carriers, companies are making efforts to share more information both inside and outside the corporate walls. The need to synchronize higher-velocity, lower-cost supply chains is creating greater demand for transportation-related information. Thus, the survey results showed that increased internal and customer demand for accurate delivery status and cost information is the most influential pressure triggering companies to enhance their transportation processes. This information helps the organization better source goods, plan inventory flow, smooth manufacturing and warehouse workloads, and deliver high service levels.

Finally, shippers are applying more metrics in their operations. Perhaps nowhere is the gap between best-in-class and laggard companies more noticeable than in the area of transportation performance measurement, or scorecarding. Fully half of laggards say they have no plans to use any type of system for even basic carrier measurements. By comparison, best-in-class companies are measuring carrier performance weekly or even daily.

These companies use performance metrics such as on-time delivery and tender turndowns in their carrier-selection decisions, enabling them to identify and react to service slippages or improvements and thus provide better service to their customers. Moreover, these companies are taking a 360-degree view by scorecarding their internal and trading-partner performance on metrics that impact the carriers' ability to perform. These metrics may include dock dwell time, changed orders, insufficient documentation, and accessorial work for drivers. Leaders create action plans for the organization based on the scorecarding and analytics results. For instance, customer service may be asked to convert customers with excessive delays at their receiving docks to a customer pickup plan.

These new best practices join well-established practices—such as centralizing the transportation management organization, automating order consolidation, taking greater control of inbound freight, and self-invoicing—as tenets of successful transportation management organizations.