Sage Advice: Location, location… does it really make a difference?

An article in our local newspaper lamented the plight of individuals who live in the suburbs and rely upon bus service to get them to work, often at odd hours. Poor ridership has caused some towns to question the need for increased taxes to subsidize the service, while the metro transit authority cites insufficient revenue.

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An article in our local newspaper lamented the plight of individuals who live in the suburbs and rely upon bus service to get them to work, often at odd hours. Poor ridership has caused some towns to question the need for increased taxes to subsidize the service, while the metro transit authority cites insufficient revenue.

Without the needed increase in ridership, fares, or additional taxes, all or which is unlikely, the transit authority will soon suspends service and dependent riders will be left without a means to move about.

Carriers are often faced with a decision to limit or abandon a shipper or receiver when an area, that had once been rich with daily inbound and shipments, has shriveled while the center of opportunity has moved to a different geographic area.

So, how attractive is the area where your plants and distribution centers (DCs) are located?

While fair and compensable rates are of paramount concern to both parties, carriers continue to look for opportunities to minimize deadhead miles and time between movements. If your company is able to provide closely timed inbound and outbound moves for your carriers and their drivers, then you’re temporarily exempt from this problem.

If you don’t provide your own inbound capacity, then you need to be assessing the strength of your proximate area to attract inbound freight—or at least have a plethora of outbound freight using the same transportation modes. Being surrounded by less-than-truckload, reefer, or dry van shippers and receivers provides no value to a flatbed shipper, for example.

In addition, the availability of your freight is also a big factor. If you’re in an area where the predominance of companies receive and ship at times that differ dramatically from yours and the predictability of your movements are sporadic, then you’re becoming “unattractive.”

So, what can you do? First, recognize and accept that the world does not revolve around you. I thought it did until I woke up to the fact that the distribution point for a major metropolitan area had shifted. While I had good outbound volumes, there was no inbound to my area; meanwhile, carriers were taking the opportunity to generate more revenue in new distribution pocket 60 miles away.

Second, ask your carriers about the companies that ship and receive with the same modes that are within a 10-mile to 15-mile radius of your operation.

Third, talk to metropolitan developers and see where they’re planning future distribution complexes—and which of the big box operations are opening or planning to open any new distribution centers and where they’ll be. 

Fourth, pay close attention to the hours that are kept by the logistics operations with which you’ll be competing for capacity. If your DC or plant can’t unload or ship when driver capacity is available, that capacity will move immediately to a more flexible customer. Plants and DCs need to recognize that they share responsibility for being a viable and service-effective shipping and receiving operation. They must change their operating practices, and where practical, move their locations to areas that can successfully compete for transportation capacity.

Fifth, do not allow “greenfield” evaluations to be hijacked by controllers who see tax abatements, low interest construction loans, and low cost of labor as the sole driving factors in where to place new operations. Placing a facility in the middle of nowhere will not attract cost and service effective transportation.

Last, if you can’t generate enough of your company’s inbound, consider collaborating with another company who may need compatible distribution support—their inbound may be just enough to help appear more attractive to carriers.

Everyone must realize that, for the foreseeable future, carriers will not be expanding their fleets and they will be looking to find a way to serve more than one of their good customers on the same day. So, take steps now to make sure that you’re not standing alone in the cold at a “truckstop” that’s being considered for elimination by your carriers for lack of consistent, timely, and profitable ridership.


About the Author

John A. Gentle
John A. Gentle is president of John A. Gentle & Associates, LLC, a logistics consulting firm specializing in contract/relationship management and regulatory compliance for shippers, carriers, brokers, and distribution centers. A recipient of several industry awards, he has more than 35 years of experience in transportation and logistics management. He can be reached at [email protected]

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November 2012 · Transportation · All Topics
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