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Provide two "windows" for carriers to communicate with you. One is for collecting proposals on business your carriers need to balance their networks, and one is for them to hand back business they no longer want. Understand that a carrier has a network to manage, and that business changes constantly; what works for both parties today may not work next year. Try to find a better home for business that's no longer a good fit with the incumbent.
Re-optimize your carrier choices as often as necessary. Make sure you're in a position to re-optimize your carrier base whenever your business requirements or the supply market change dramatically. Otherwise you'll be paying for service that no longer reflects your company's needs.
Measure performance and provide financial incentives to carriers. Make it worth carriers' while to routinely accept tendered loads, pick them up on time, deliver them on time, and get good grades from your customers.
Make it easier for carriers to do business with you. In a buyer's market carriers will go out of their way to get your business. But that's not the case today, when carriers can easily walk away from shippers that are more trouble than their shipments are worth. It's a good time to rethink how easy you make it for your carriers to get pickup and delivery appointments, how often loads are ready when they arrive, how many times they have to wait beyond promised appointment times, and how many invoices are held up for payment. Align your interests
It's not hard to build a good working relationship with motor carriers. The most important thing to keep in mind is that successful relationships are no longer just about leverage; they're about finding and maintaining the right "fit" for both sides in a partnering relationship. Bullying suppliers with your $100 million spend may have been easy and may have saved you money a few years ago, but those days are gone. Any shipper that spent 2004 trying to cover loads has to be second-guessing those methods now.
A successful shipper-carrier relationship is built on understanding your own requirements and those of your carriers—and on closely aligning them. It also requires realigning your choices to keep your solution fine-tuned. This is considerably more difficult than the way many shippers operated when it was a buyer's market. But transportation sourcing can be and is being successfully managed, even in today's difficult conditions—and companies that are doing so are still saving money and achieving higher stakeholder satisfaction rates.
| Author Information |
| Jeffrey P. Ryan, a senior vice president at Verticalnet, has more than 20 years of experience as a consultant and as asupply chain manager in the pharmaceutical and high-tech industries. |
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1. The business wasn't a good "fit" with the carrier's network. By overexerting their leverage, shippers can cause carriers to accept business that is actually disruptive to their networks or is inefficient in relation to the fixed infrastructure that's a feature of less-than-truckload (LTL) transportation.
2. "Bad" business was bundled with "good."Common leveraging techniques frequently force carriers to cross-subsidize business and take the "good" with the "bad." That ultimately leads to mediocre asset utilization.
3. Meeting performance requirements was harder than expected. The business offered may have been inadequately or inaccurately described in the request for proposal (RFP). As a result, carriers may have made incorrect assumptions about the origin and destination requirements.
4. The shipper was hard to work with. Shippers can place onerous procedural requirements on carriers in a well-intentioned effort to streamline their own internal processes. Such transfers of administrative burdens show up in the tendering process, shipment tracking, appointment scheduling, invoice requirements, reporting requirements, and so forth.
5. A stakeholder was sabotaging the carrier.It's not uncommon for stakeholders that have been under-represented or weren't consulted during the carrier-selection process to actively work to cause new carriers to fail.
6. Service quality was below expectations.Such failures typically result from one of two factors: Either the shipper placed too much emphasis on price and not enough on the carriers' qualifications, or the business requirements were not adequately described in the RFP.
7. The carrier had unaddressed weaknesses.Shippers sometimes select carriers they know need to develop certain capabilities or with the expectation of continuous improvement. Shippers that pay inadequate attention to this aspect of supplier management often are disappointed in the service they receive.
8. More desirable business has presented itself.When capacity is tight, carriers tend to look for more efficient, cost-effective business.
9. Requirements were poorly communicated.Shippers often fail to adequately orient all parties involved when they add new lanes or new customers, or tender existing business to new carriers or drivers.
10. The shipper didn't follow up after signing contracts.Transportation is not a category where you can select a carrier base, cut a two-year deal, and then turn your back, assuming everything will be fine until the contract comes up for renewal. Frequent fluctuations in demand, mode mix, customer and supplier bases, and shipment characteristics require shippers to maintain constant vigilance over their transportation activities.
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