The current squeeze on truckload capacity is affecting some shippers more than others. For shippers who are really feeling the pain of lower service levels and higher costs, let me assure you that this is a cycle that we have seen many times in my 40-plus years as a shipper and 3PL operator.
While tactically scrambling for coverage, shippers need to begin now to strategically build relationships that will sustain competitive cost and service metrics over many years. There are three common strategies for tight markets. I refer to these as confrontation, conciliation, and collaboration.
These three strategies also refer to the tactical stages of adjustment for shippers, 3PLs and brokers who have been acting poorly in their buying methods with carriers.
When the market turns tight, domineering shippers move from surprised and angry at spikes in costs and delays in shipments to being friendly and conciliatory and then finally being open and “vested” with service providers with an eye to building and sustaining a healthy, collaborative relationship over many years.
To avoid the pain, my suggestion is to think long-term up front and pick the right strategy:
The response to the shipper of an open disclosure is that the carrier explains how they make money and the ROI needed to sustain their business. The shipper explains how much they can spend on freight and still be competitive. This is an eye-opening exercise, as it opens the door to a business model where the two sides become collaborators.
In this case, the collaborators agree on a pricing model for good times and bad. They agree to govern themselves as partners with a long-term view of the relationship, and neither party has to absorb unnecessary costs or service interruptions. When the market for either shipper or carrier becomes more challenging, they work to innovate their way through it.
The shipper adjusts hours to allow carrier time to turn trucks faster, while carriers help shippers understand their customers, the freight market and where the shipper can save money. Again, trust is key in this scenario. When collaborative partners are faced with tough times, they stick together to get both parties back to a place where they can meet their business objectives.
How we act now when there’s stress in the market sets the stage for our relationships in the future.