Eleven critical behaviors for logistics managers
July 01, 2011
As we turn the corner towards a lasting recovery, we’re reminded of the columns that we wrote in the recent past signaling the shifts in partnerships between shippers and transportation providers—specifically on the rates and services “dance” and potential capacity tension.
What we realized a year ago, when the economy started to come back, was that it also beckoned a shift in negotiating power back to the transportation provider. We wrote about the carrier standing fast on their fleet size, and in some cases, right-sizing (reducing) the fleet to more efficiently manage the bottom line. For the most part very little, if any, rolling stock was added to existing fleets, thereby setting capacity at a level consistent with the tendered requirements of the past three “down” years.
My best guess, based on the information I get from the many carriers that I communicate with each month, is that the current average fleet size is equivalent to approximately 82 percent to 84 percent of the levels maintained during the 2006–2008 business years.
So, let’s break it down: An improving economy will produce more load tenders to a collective fleet with trending lower capacity. The notion then becomes that an old-fashioned “Dutch Auction” will take place in the rate negotiations. Thus leading one to conclude that rates will increase substantially or that service may become compromised as some shippers abdicate service for lower rates. Well, it isn’t necessarily so. Good, bilateral partnerships will prevail. Those that worked with their partners during the lean days will be there for each other for the fat days. However, your definition of what constitutes a good partner may differ considerably from how your partner’s.
For some clarity, I asked a group of carriers and shippers to help me prepare a list of shipper behaviors that would be beneficial to the transportation providers in stabilizing costs or even becoming more competitive.
Do not require driver to load or unload freight. The driver has been on the road a long time, his on-duty hours are shrinking, and he needs to be back on the road to pick-up a lane-balancing load. Establish “drop and hook” trailer pools, and remember that load labor increases expenses and reduces productivity for the carrier.
Reduce multi-stop truckloads or the number of stops. These types of loads are very costly from a productivity perspective. Although you may be paying an additional stop-in-transit fee for this service, the carrier tends to loose time and money on each one.
Develop scheduled appointments for live unloads. If you don’t currently have scheduled appointments for your inbound freight or your “live” outbound loads, then you’re creating productivity and expense losses for your carrier. Trucks in cue are hugely unproductive.
Ship SL&C under seal to eliminate the driver count. Let the driver do what he does best. Establish your count, lock it up, and seal it. If the seal is intact at destination, then the driver is off the hook for the count.
Give longer lead times. Give the driver/carrier a little extra time to the delivery appointment. This will accommodate his new log requirements and HOS hassels.
Where and when possible, offer continuous miles. Do you have freight that could be tendered to the driver upon completion of his delivery that would eliminate dead head miles?
Pay your invoices on time. Stay within your agreed payment terms with the carrier. He is your transportation service provider, not your bank.
Do not file frivolous freight claims. Do your internal investigations first and thoroughly. File a claim only when you are convinced that you have incurred a loss.
Do not embellish cargo insurance requirements. Don’t require a carrier to provide you with far more insurance than you will ever encounter in total losses. If the maximum value of a full load is $250,000.00 then don’t require $1,000.000.00. A carrier’s insurance premiums will reflect this practice.
Pay your full fuel surcharges. Don’t stretch out the formulas that determine fuel surcharges.
Respect drivers. Treat these professionals with respect. Provide them with access to rest facilities at your premises. Offer refreshments and communications capabilities to them as well. They are some of the best promoters of your company based on the treatment they receive when they are on the job.
These behaviors are already in place with the shippers that “get it.” But for others, they’re unwittingly creating non-productive expenses for the transportation provider and forcing them to consider adjusting your rates, or even worse, not allocating any available capacity to your use.
Subscribe to Logistics Management magazine
entire logistics operation. Start your FREE subscription today!