Creating Good Logistics Provider-Shipper Alignment to Gain Market Advantage

From the global enterprise to the small company that’s managing a single dis­tribution center (DC), the pressures of today’s transportation environment are mounting and not getting any easier to manage. Fluctuating fuel costs, capacity issues, driver shortages, and carriers that abruptly go out of business can all take a toll on a shipper’s ability to get the right products to the right customer within the right timeframe.

Over the last few years, the buzz around good alignment and becoming a “shipper of choice” has gotten a lot louder. That’s because all players in the supply chain have come to realize that they are truly operating as a single entity, and not individual, siloed parts.

The bond between shippers and their logistics providers must be particularly strong, for example, and characterized by good communication and effective collaboration. With everyone working from the same playbook, the fulfillment, shipping, and deliv­ery processes are able to run more efficiently and effectively.

In this Insider Q&A, Chris Hoffmeister, Hub Group’s Executive VP of Account Management, discusses current challenges in the transportation industry, the impor­tance of becoming a shipper of choice, and the benefits of good provider-shipper alignment in today’s supply chains.

Q: What freight transportation trends are you tracking right now?

A: We’ve seen a very interesting environment in 2019. Where 2018 threw everyone for a loop and came with its own set of challenges (e.g., tight capacity, rising rates, etc.), 2019 has been challenging in different ways. For example, customer expectations continue to change and have created a very dynamic situation in the freight market. This has presented tremendous op­portunity for companies to examine their supply chains and figure out how to best meet those customer demands.

So where 2018 was the year of the capacity crunch and driver wage inflation, this year the focus has been on how to align with your transportation providers in order to be more efficient in transportation and better meet changing customer expectations. From the logistics provider standpoint, we’ve also seen some of our own customers driving changes in the transportation network. We’ve been able to grow relationships with these customers by getting more creative with our solutions and with helping them figure out how to best meet the changing needs of their customers.

Q: What challenges does this environment create for shippers and their logistics providers?

A: It’s really all about staying ahead of customer demands. Just a few years ago no one was really using (or expecting) free 2-day shipping, but now it’s what customers expect. And when they don’t get what they want, they shop elsewhere. It’s up to the shipper to stay ahead of these shifts and to be able to meet those expectations. This, in turn, is driving a higher need for trans­parency of information and better supply chain visibility.

We’re all operating in an era where end-to-end visibility is critically important, which is a con­cept we’ve spent a lot of time developing our technology investments around. This visibility is far more than just letting consumers know when their packages will arrive; it’s about benefitting from a complete vision of what’s going on at all times and the levers that the provider can pull to avoid delays, keep inventories at the right levels, position assets where needed and more.

We’re trying to stay ahead of these shifting needs and making sure demands are met or exceeded. At the same time, shippers have to be flexible. That could mean shifting to different modes, moving capacity up or down based on customer demand, or taking other steps to ensure the best possible customer experience. There’s no more “Hey, we need to do this over the next 18 months,” for example, it’s now all about “What can we do over the next two weeks to adjust to this change?”

Q: What role does that end-to-end visibility play in the transportation environment?

A: It’s about being able to track products throughout the lifecycle of the supply chain. So, depending on the client and the relationship we have with that company, we’ll have multiple touchpoints on the freight, including bringing it all the way from a manufacturer to the DC, or taking it from that location to a retail store or right to a customer’s house. Those touchpoints give us high levels of visibility throughout the entire lifecycle of the load.

This is vital to being able to make decisions and then adjust based on what’s going on in the lifecycle. For example, the volume of ecommerce purchases continues to grow and so do con­sumers’ expectations. When someone orders a package, they’re getting a much narrower deliv­ery window than they were just five years ago. That’s what the retail customer, in particular, has just come to expect.

The only way to meet that demand is by using technology, data, and touchpoints to accurately track the product throughout its entire lifecycle and provide more accurate ETAs. These in­sights to the cycle allow for better planning and give flexibility when circumstances change.

Q: We’ve been hearing a lot about “shippers of choice” lately. How does this apply in today’s transportation environment?

A: Shipper of choice became a very popular conversation again in late 2018. To us, a shipper of choice is a company that’s willing to work with its transportation provider and engage with the solutions those companies are providing it. Working with shippers of choice is very import­ant to us because it means that we have a very good understanding of what our customers’ challenges are.

Understanding customers’ needs allows us to create optimal solutions to meet those demands. We’ve found that there are customers out there who are willing to give us the information and data transparency that we need, and then agree to have us act on it.

By being open with us about their forecasts, supply chain issues and more, we can collaborate on better solutions together. When working with these types of shippers, we know that these companies are looking at the logistics solution not just as a way to solve a specific transportation problem, but to align and advance strategically.

Q: Why is this so powerful?

A: Alignment with our customers allows us to do a lot for our customers. We have a very dynamic organization with many service offerings, so we don’t want to pigeonhole our­selves into a single mode of transportation. We have an entire suite of services, and when a customer is willing to be transparent about what they need, we can work up better-in­formed plans and the optimal mix of services for them.

Having a better understanding of what our customers need, combined with the wider pic­ture of what’s happening in the field that we’re capturing from thousands of data points, enables us to work even more effectively on behalf of our customers. This helps create a longer-lasting engagement with that customer, and they, in turn, can better tap into our technology, our people, and our business as a whole.

Q: What’s the secret to good shipper-provider alignment?

A: Understand that it doesn’t just happen overnight; it takes time. For example, we have a contin­uous improvement team that’s always coming up with new ways to drive costs and inefficiencies out of our customers’ networks. We’ve also invested heavily in technology. For example, by using paperless cab technology, we’ve been able to reduce paperwork needs, eliminate missed invoices, and reduce accessorial charges.

Our investments in in-cab technology and GPS units in trailers have also greatly improved our end-to-end supply chain visibility and enabled more effective equipment utilization. In 2018, for instance, as trucking capacity got tighter, we turned our equipment faster. That produced a net benefit for our customers and for our company; it was a real win-win. There are many ways to gain wins by collab­orating and continuously refining processes with our customers and third-party carriers, including cross-docking and other new approaches to inbound and outbound management.

Q: How can shippers and providers work to collectively bring more efficiencies to their supply chains?

A: Together we can drive efficiencies through technology and visibility. So, it’s not just about “did the load arrive on time?” It’s also about getting the data and analytics and taking proactive steps to make sure customer needs are met not only today, but also in the future. Having that analytical data then drives forecasting models, which we spend a lot of time refining and honing. Because we know our customers’ organizations and challenges, and because we can leverage our in-cab data, we’re able to have good decision-making and make sure we’re in the right place at the right time and with the right piece of equipment. This ultimately increases supply chain efficiency and helps our customers gain market advantage.

Q: When it comes to shipper-logistics provider alignment, how far does the industry still have to go?

A: We need to get to a point where these engagements are focused on long-term goals versus just short-term gains. This is a big challenge in an environment where speed to market counts and where customer demands are literally changing daily. These dynamic elements are creating pain points for shippers and pushing them to think more short-term. A shipper that works with us for the short-term might make small, incremental gains over a month or two. The shipper that puts the time into the relationship will see significant wins over a much longer time span, particularly when it comes to navigating the up and down swings of modern-day transportation markets.