UPS Freight chief offers up insights at eyefortransport 3PL Summit
July 01, 2013
Listening to smart people speak about topical items in our industry can be viewed as a “perk” of journalists like myself. I recently got a chance to cash in on that by listening to Jack Holmes, president of UPS Freight, the less-than-truckload subsidiary of UPS, speak at the eyefortransport 3PL Summit in Chicago in late June.
The UPS Freight boss touched upon a wide range of topics, including the dynamics of customer relationships, the freight market, and in industry regulations, among others.
“If a customer has a good experience, they come back,” explained Holmes “If they don’t have a good experience, there are just too many other choices out there with logistics companies and 3PLs, asset-based companies, software companies, and providers of various services. There are too many options not to do it right—and not just the first time but the first time every other time.”
Holmes said it is commonly understood that when you look at your customer base your current customers will operate better than your perspective customers, noting that is just the nature of it in terms of what it takes to get a new customer tomorrow. But at the end of the day, he said you may be able to work with them and through time and expand your margin but your current base will typically operate better than your prospective ones and that needs to always be top of mind.
Taking that a step further, Holmes stressed that you also need to keep in mind really who is the customer and it is not always simple to do that.
“In the old days it was the shipper and an asset-based provider and the shipper as a customer,” he said. “Now you have software providers/3PL/asset based provider with a shipper as a customer and the 3PL might be my customer and the shipper might be a customer as well. It is more complex in terms of the partnerships and interactions among those groups.”
Regardless of the partnerships and interactions, Holmes noted that there are a lot of freight companies that still to this day “mutter” about 3PLs and all of that conversation does not matter. What happened, he said, was you had a lot of asset-based companies that had customers with very healthy margins and were frankly too healthy.
“If you are carrying freight for a customer with a 55 OR, you are begging for someone to come in with a better solution on the price side and the question then became so now if the customer is at an 85 or more OR is that still good enough?” Holmes said. “The answer is yes—so if you sit and gripe about this third party coming in or you can analyze the way you do business and if you have those situations and are making excessive margin on customers freight you make a conscious decision to get away with it for as long as you can or to keep a third party coming in between what you consider you and the customer and that has been one of the focus areas for a lot of companies and should be for all companies out there.”
And in a nod to the new HOS regulations taking effect today, Holmes said that the voices of the industry were frantic about pausing implementation of the new rules and taking a look at it.
These new rules, he said, will absolutely have an impact and it will be felt more from time-sensitive shippers and manufacturers, and refrigerated carriers.
“If you think about where you might have your distribution networks around the country, they are typically set up on reach, it might be a two-day reach, with a warehouse in Harrisburg, Pa., where you get a two day reach into the majority of the northeast,” he said. “With HOS there are limitations on that and now there is not the reach that you previously had which will be a factor. Shippers need to work with their carriers and engineers to figure out what to do whether that you upcharge to a more expensive service which will cost more and affects the consumer or do you look at your entire network based on these new rules and find that all your warehouses are in the wrong places. The competitive disadvantage could be that you have a competitor 50 miles away that can have service in two days where you can do it in three and it will cost you 25-to-30 percent more to get it there and meet their standards. If you are in that business and it impacts you, you need to go through that exercise and make some decisions or otherwise you may get caught in a bad spot.”
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