Download BEST-IN-CLASS CARRIER STRATEGY | eBook 2

Becoming a Shipper of Choice:
How to Thrive as a Shipper in the Capacity Crunch
BEST-IN-CLASS
CARRIER
STRATEGY | eBook 2
A CAUTIONARY TALE
When developing a strategy, it is crucial to solicit the thoughts of others to ensure that all priorities are documented and that
all parties “buy in” to your ultimate goal. Implementing a Shipper of Choice practice for your transportation strategy is no
different. However, it is possible to find one functional area within the supply chain group, or possibly a separate department
altogether is working diligently to support a strategy that conflicts with making improvements in the supply chain.
A great example of this conflict often comes from a department connected to the supply chain. A procurement group within
a commodities division had an initiative to maximize margins on the sale of their products, which is not an uncommon goal
for such a department. Profitability is the reason a business stays in business.
What this meant for the transportation team was that they were finding themselves challenged to manage a dramatic spike
of short lead-time orders, often same day. This ended up driving an increase in spot market utilization and over time was
eroding carrier relationships, which led to increased transportation costs and lower service levels. The net result:
The increased transportation costs exceeded the increased margins by procurement.
Overall, there was a huge negative impact on initiatives of the business. The Account Managers and CSR group
were focused on improving their customers’ experience but were unable to due to fluctuations. Procurement may have
increased margins, but it provided poor service and ended up costing the business’s bottom line.
When an initiative gets under way, everyone needs to be at the table.
Section 1
| WHERE DO
YOU START?
1. Develop Your Carrier Strategy
It all starts with a plan. Shippers that don’t have a carrier strategy don’t put in
the necessary time to align priorities to transportation, understand customers’
needs and carrier requirements. How do they operate, and are their operations
carrier-friendly? Treating an RFP as a carrier strategy is somewhat shortsighted.
Your carrier strategy is an opportunity to ensure that you are a desirable
business partner with the appropriate processes in place to review performance.
Section 1 | Where Do You Start?
When developing your strategy, a shipper should have a plan
around each part of the following checklist:
Contracting
Carrier Business Reviews
Carrier Vetting
Carrier Awards
Tiers of Carriers
Settlement
Capacity Planning
Service Requirements
CSA Scores
Performance Score Cards
Shippers of Choice need to have an answer for every one of these categories,
have them agreed upon by all internal stakeholders, and have them welldocumented for the carriers. This is a great deal of work, but once you’ve
identified how you handle all these categories, you can work with your
organization to identify priorities that your transportation strategy requires.
Section 1 | Where Do You Start?
2. Identify Priorities
What is priority #1 for your organization? Invest the time and resources to
find out. Engage internal stakeholders (e.g. sales, customer service, warehouse
operations, procurement, etc.) by requiring cross-functional discussions around
their specific goals and objectives and what those different groups are doing in
pursuit of those objectives (i.e. what strategies are THEY focused on).
You need the perspectives of those within your organization to assist in gaining a
better understanding of why they do things the way they do. Uncover which
business processes are in place and working toward those priorities and which
are not, based on each group’s unique needs. More importantly, you want to
make sure the goals and their supporting strategies are aligned across the
organization. Once understood, you are better prepared to assess what
opportunities exist and where change would be possible. By getting on the same
sheet of music, you are empowering all stakeholders to share in directly
supporting the broader organizational goals in their own way specific to their
functional area.
Section 1 | Where Do You Start?
It is then important to map out YOUR priorities and understand YOUR needs
(where you have surges in your business, “white-glove” customers, etc.).
Then, combining that with the needs of the organization, put a plan in place
on how to present your needs/customer classifications/expectations to your
carrier partners on upcoming bids or opportunity communication.
The top three priorities for my organization are:
#1
#2
#3
Section 1 | Where Do You Start?
3. Pay Attention to Carrier Needs
Carriers have their own set of challenges, and they are seeking solutions too.
How do your processes impact how your carriers view you? How do you tender
freight? What is your lead time? Are you getting the drivers in/out quickly?
These issues should be part of your conversations with carriers.
A major carrier recently remarked that utilization of the driver hovers around 60%.
That is the percent of time the drivers log driving, and improving that number
means utilizing already-hired drivers and already-owned equipment.
Improving processes and increasing utilization of drivers and assets
would simply do more with the capacity that is currently on the
marketplace.
Section 1 | Where Do You Start?
Let’s do some quick math:
•
•
•
At 60% drive time, this forces the carrier to turn down more than 12,000 loads
a month.
At 78% drive time, the carrier could add an additional 8,000 loads.
8,000 additional loads (assuming $1,000 freight value per load) would mean
an additional $8M in freight could be moved each month.
$8M in additional freight moved each month, by just one carrier.
Now think of how much more the drivers would earn,
therefore attracting and retaining talented drivers.
Think about how that could impact the capacity crunch.
Planning should start with where drivers get delayed.
For many carriers, their request is simple: keep assets
moving. The wins are threefold: better service, more
available capacity, lower costs. Bottom line? This can
make you a smart, fair and desirable business partner.
Section 1 | Where Do You Start?
Section 2
| WHAT INFORMATION
DO YOU NEED?
1. Seasonal Data and RFP Comparisons
Data removes the emotion in supply chain decisions. Does the data support the
general assumptions of your transportation strategy? Are the pain points and
challenging times of the year real or perceived? Look at the data for the times of
the year where seasonality exists, but also look at the times of the year when the
volume increases are geographical. Do you have different seasons where you see
an increase in product category and, therefore, a region with increased capacity
needs? Good forecasting can help carriers understand how they can better
support you in those regions or during those peak times.
1010000101100110110
0110000101101000011
1001101100001011001
1010000100101010110
Section 2 | What Information Do You Need?
The second half of checking assumptions is comparing the current volumes to
your latest RFP. Are you showing annual volume only, or are you providing monthly
estimates to account for seasonality? If providing annual only, carriers will always
assume that the volume is to be spread out evenly throughout the year (if you
show 12, carriers are going to assume 1/month). Once you have reviewed the
outputs by a facility during peak season, review that with your facilities to ensure
that the daily outputs are aligned with the facilities’ capacity. By getting everyone
involved and understanding the data, you will be in a better position to
formulate the solution to the problems.
Most have a lot of data, but those who are successful can take the data and
make it mean something. What can you take from your data to paint a clearer
picture for your partners? If your partners have to guess, your rates or their overall
commitment will be impacted.
It is better to have an informed partner choose not to bid on a lane
than to have them bid and then walk away when they learn the rest
of the story.
Section 2 | What Information Do You Need?
2. Carrier Grouping
Based on characteristics such as spend, coverage areas and performance history,
group your carrier network into “Partner Carriers”, “Core Carriers”, and “Niche Carriers”.
Leverage these groupings to create engagement strategies. Your engagement
strategy guides how you interact with your carriers based on what groups you have
placed them in.
CORE
NICHE
PARTNER
Section 2 | What Information Do You Need?
Here are a few examples of how you could use this:
A. You touch base casually every other week and have routine
quarterly reviews with your “Core Carriers”, but the frequency of
these touch points might be on demand with a “Niche Carrier”.
B.
You may protect a lane from going to market and accept an abovemarket rate on a number of lanes from your “Partner Carrier”,
but you set the expectation with your “Core Carriers” that every
awarded lane must be earned considering both service and cost.
Carrier groupings will vary from organization to organization, but
segmenting your carriers will help you more effectively drive your
carrier strategies.
BONUS: What Data Your Carrier Uses
It should be no surprise that carriers use their own data to decide how to service
their customers (meaning YOU). Carriers pay very close attention to unloading
reports by customers to set pricing and/or avoid some customers/facilities
altogether. Carriers do not avoid Shippers of Choice; rather they are a desired
partner.
Help your carriers increase the utilization of their drivers and equipment. For one
carrier, they had a large receiver that only unloaded 31% of on-time loads in
fewer than two hours, and that same receiver took more than four hours 36% of
the time. For shippers that ignore that data, a carrier would make the following
guarantees:
• Poor service - how does your carrier plan their next load?
• Less capacity - sitting at dock, not driving = drivers quit
• Higher rates - poor behavior that costs money
Want to avoid those three guarantees? Ask your carrier how they are
measuring you.
Section 2 | What Information Do You Need?
RECAP
Here’s a checklist of the components of Best-in-Class Carrier Strategy:
Carrier Contracting
Service Requirements
Carrier Vetting Process
Carrier Groupings
Expectations
Communication
Capacity Planning
Procurement Strategy
Routing Guide Design & Maintenance
Carrier Safety Program (CSA)
Market Conditions Insulation Strategy
Industry Data & Outlook
Data-Driven Decisions
Strategic Planning
Section 2 | What Information Do You Need?
Carrier Business Reviews
Cadence
Content
Format
Carrier Awards Program
Carrier Settlement
Average Days to Pay
Quick Pay Program
Performance Score Cards
LeanLogistics is a global solutions provider of true
software-as-a-service (SaaS) transportation
management technology and supply chain services.
As the first transportation management system to be offered on
a true SaaS platform, LeanTMS® continues to be one of the most
innovative solutions in the supply chain industry. With years of
transportation expertise combined with scalable technology and
services, LeanLogistics provides many Fortune 1000 companies
the assurance they need to improve business processes and reduce
costs while building better supply chains together.
For additional information, contact LeanLogistics today.
LeanLogistics
1351 S. Waverly Road
Holland, MI 49423
www.leanlogistics.com
P 866.584.7280
A Brambles Company
Section 1 | Where Do You Start?