Commentary: Four steps to becoming a "shipper of choice"
With high demand, tight capacity, and a continuing shortage of drivers, trucking companies can afford to be choosy about which loads they take. Here's how to make yours more appealing.
Today's freight transportation landscape is more challenging than ever before. Demand from shippers is increasing as the digitization of retail drives the need for faster and more frequent shipments. At the same time, carriers are facing a capacity crunch as they battle the demand-supply imbalance and an ongoing driver shortage. According to The Washington Post,America had a shortage of 51,000 truck drivers at the end of 2017, a number that rose from 36,000 in 2016.
For shippers, the challenges around moving product to distribution centers, stores, and customer locations are forcing them to improve their freight's reputation and "carrier-friendliness." For carriers, the increased demand and reduced supply has resulted in increased freight rates and greater shipper scrutiny. Carriers evaluate a number of factors when selecting shippers, including visibility and forecasting of freight demand, delivery and pickup conditions, appointment flexibility, and driver amenities. To that end, here are a few recommendations and tips to help you become a "shipper of choice" in today's logistics marketplace.  Â
1. Help carriers better utilize their assets and optimize their routes.
Carriers want to maximize use of their assets and operate efficiently. Shippers who unload efficiently and on a timely basis help carriers avoid poor trailer utilization or excessive trailer inventories. In this capital-intensive industry, carriers prefer to work with "preferred shippers" that optimize their "rolling stock" and keep it moving. In addition, shippers who are able to optimize shipment routing and facilitate efficient "one pick, one drop" loads, thereby eliminating multiple stops and time-consuming routes, are highly appealing to most carriers. In fact, smarter asset utilization and route optimization benefit both shippers and carriers through improved service levels and lower overall transportation costs.
2. Align your network to theirs and provide better freight visibility.
Shippers looking to make themselves more attractive to carriers should also consider the value of aligning their freight to a carrier's preferred lanes and backhaul needs. Carriers with a balanced network can realize significant increases in operating efficiencies and cost savings with consistent volumes, minimization of empty miles, and improved driver productivity. Moreover, shippers who provide full visibility into their current and forecasted freight demand give carriers more choices and opportunities to ensure their trucks are in the right place at the right time. In return, carriers will reward efficient shippers with enhanced service levels and reduced freight costs.
Network alignment is a good example of how shippers and carriers can work together to move their relationship from a purely transactional basis to a strategic level by creating an atmosphere where both sides realize tangible and sustainable value. Shippers that adopt holistic, carrier-friendly business practices and policies will benefit in increased freight coverage, lower transportation costs, and lasting loyalty from their carrier partners.
3. Offer contract flexibility.
The unprecedentedly tight trucking capacity is also driving shippers and carriers to rethink the terms and conditions of their freight contracts. Typically, most shippers bid their network annually. However, given current market conditions, some are adjusting the lengths and terms of their contracts. For example, many shippers are now requesting volume guarantees, two- to three-year contracts, price protection tied to the Consumer Price Index (CPI), or fixed year-over-year price increases to secure rates and stabilize capacity while maintaining control over transportation costs and avoiding exploitation in the spot market. Shippers can obtain preferred status if they utilize contract flexibility or "expressive bidding" during bids and rate negotiations.
For example, requests for proposal (RFPs) and requests for quotation (RFQs) generally contain a predefined network of lanes by mode, which the carriers are asked to bid on as discrete or independent lanes only. Therefore, with inflexible RFQs and RFPs or negotiations, carriers are not able to price in possible synergies by bundling lanes or offering alternate modes that would optimize their existing networks and result in a more competitive rate or overall lower freight spend for the shipper. In an environment of tight carrier capacity, more flexibility in RFP and RFQs and negotiations benefits both the carrier and the shipper from a cost and service level perspective. This "flexible" approach maximizes a carrier's ability to highlight and articulate their strengths and abilities and enhances their "shipper of choice" mindset through all carrier-shipper transactions.
4. Make your facilities and practices "driver friendly."
Today, many carriers are evaluating shippers by how well they accommodate drivers with desirable facilities and efficient shipping and receiving docks. Carriers prefer to work with shippers that offer clean and welcoming amenities, like parking, restrooms, and break areas. Moreover, streamlined processes for yard check-in and check-out, flexible appointments with broad delivery windows, and driver-friendly drop-and-hook freight all make a shipper more attractive to carriers.Â
The pressures of today's hypercompetitive logistics marketplace are putting a strain on the working relationship between shippers and carriers. However, this doesn't have to be the case. Forward-thinking shippers that provide carriers with improved visibility and establish a more collaborative and flexible relationship will be rewarded with increased business and more loyal customers.
J.B. Hunt President and CEO Shelley Simpson answers a question from the audience at the Tuesday afternoon keynote session at CSCMP's EDGE Conference. CSCMP President and CEO Mark Baxa listens attentively to her response.
Most of the time when CEOs present at an industry conference, they like to talk about their companies’ success stories. Not J.B. Hunt’s Shelley Simpson. Speaking today at the Council of Supply Chain Management Professionals’ (CSCMP) annual EDGE Conference, the trucking company’s president and CEO led with a story about a time that the company lost a major customer.
According to Simpson, the company had a customer of their dedicated contract business in 2001 that was consistently making late shipments with no lead time. “We were working like crazy to try to satisfy them, and lost their business,” Simpson said.
When the team at J.B. Hunt later met with the customer’s chief supply chain officer, they related all they had been doing for the company. “We told him that we were literally sitting our drivers and our trucks just for you, just to cover your shipments,” Simpson said. “And he said to us, ‘You never shared everything you were doing for us.’”
Out of that experience, came J.B. Hunt’s Customer Value Delivery framework. This framework, according to Simpson, provides a roadmap for creating value and anticipating customer needs.
Framework for Excellence
J.B. Hunt created the above framework to help them formulate better relationships with customers.
The framework consists of five steps:
Understand customer needs: It all starts, according to Simpson, with building a strong relationship with the customer and then using the information gained from those discussions to build a custom plan for the customer.
Deliver expectations: This step involves delivering on the promises made in that custom plan.
Measure results: J.B. Hunt believes that they are not done when freight makes it to the destination. They also need to measure how successful they were versus what the customer expected from them.
Communicate performance: This step involves a two-way exchange, where J.B. Hunt walks the customer through their performance and gets verbal agreement on whether or not they have met the customer’s needs.
Anticipate new value: Here J.B. Hunt looks at what they are hearing from their customer today and then uses that information to derive what the customer may be looking for in the future.
Simpson said the most important part of the process is the fourth step, communicating performance (perhaps reflecting the piece that went wrong in that initial failed customer relationship).
Not only can this framework be used to drive excellence in a company, but it can also be adapted as a model for driving personal excellence, Simpson said. Instead of understanding the customer needs, the process starts with understanding yourself: what your strengths and interests are. This understanding helps drive a personal development plan and personal goals for the year, which can be measured and assessed. For example, each year, Simpson gives herself a letter grade on each of her personal goals and communicates her assessment back to her boss. She has also found it helpful to anticipate where opportunities lie beyond what she is personally doing.
Confronted with the closed ports, most companies can either route their imports to standard East Coast destinations and wait for the strike to clear, or else re-route those containers to West Coast sites, incurring a three week delay for extra sailing time plus another week required to truck those goods back east, Ron said in an interview at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
However, Uber Freight says its latest platform updates offer a series of mitigation options, including alternative routings, pre-booked allocation and volume during peak season, and providing daily visibility reports on shipments impacted by routings via U.S. east and gulf coast ports. And Ron said the company can also leverage its pool of some 2.3 million truck drivers who have downloaded its smartphone app, targeting them with freight hauling opportunities in the affected regions by pricing those loads “appropriately” through its surge-pricing model.
“If this [strike] continues a month, we will see severe disruptions,” Ron said. “So we can offer them alternatives. We say, if one door is closed, we can open another door? But even with that, there are no magic solutions.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.