High-Wire Act (page 4)

-- Logistics Management, 9/1/2005

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Meanwhile, invoice accuracy improved in all modes except for railroads and national LTL. The drop in the billing error rate was most significant among truckload carriers, which cut error rates by nearly half.

One of the study's most troubling findings was that the percentage of shipments being turned down by carriers has more than doubled in some modes since last year. In 2004, national LTL shippers said that carriers refused less than one percent of their shipments. This year, it was a different story as those shippers reported a 1.8-percent turn-down rate. According to respondents, express package carriers, railroads, and regional LTL carriers have increased the percentage of shipment refusals. Only truckload shippers reported any improvement, from 5 percent in 2004 to 4.3 percent this year. These findings appear to indicate that carriers are becoming more selective about which freight they haul in a market where capacity is limited, costs are high, and demand for transportation services is rising.

Focus On Customer Service

In addition to collecting benchmarking data, the Masters of Logistics study tries to get a sense of the operational and strategic issues shippers are confronting.

Because transportation costs are rising in all modes, survey takers were asked which actions they've taken to resolve various transportation issues. Greater communication with carriers emerged as the leading response, with 10.3 percent of participants saying that they had increased communication with their transportation providers. Another 9.6 percent said they had improved shipment consolidation, while 7.3 percent were using more dedicated contract carriage.

On the opposite end of the scale, only 1.5 percent had implemented a reverse auction for carrier bidding. (See Figure 6.)

As noted last year, there's a small but steady shift away from cost reduction and toward customer service as the main focus for logistics managers. This year, nearly 40 percent of survey takers told us that customer service was the most important strategic focus for their division or business unit, up from 36 percent last year. At the same time, the percentage who said that their strategy was to be "all things to all people" increased from 30 percent to 34 percent. The primary focus on product and market innovation declined from 17 to 13 percent, and cost leadership dropped from 16 percent to 13 percent over the past year.

Increasing customer satisfaction, with 32.5 percent, beat out cost reduction (31.9 percent) as the primary objective for respondents this year. Another 24.1 percent named maximizing profitability as their overall goal.

As the survey results make clear, logistics managers will continue to face demands that they balance control of fast-rising costs and delivery of higher levels of customer satisfaction. To be successful, they'll have to muster every resource and bit of knowledge they have. In today's business environment, says Holcomb, "Transportation skills and expertise are needed now more than ever."

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