April 2014 | Sponsored | Knowledge Base

Access to Reliable Transportation Regardless of Transportation Market Conditions

Tags: Partnership, Risk Management, Transportation Management

Dan Dershem is President, LeanLogistics, 616-796-6400

Over the past 25 years I've been in Supply Chain, I've come to the realization transportation rates are difficult to forecast due to elastic variables (perceived or real) in the supply chain. Depending upon your role and point of view, rates could increase by low single digits or double digits over the next year.

You are probably asking yourself, "How can this be"? It's well documented the headwinds the carrier community faces: changes in HOS, rising equipment costs, and higher fuel costs to name a few. In addition, the winter storms that swept across the United States have caused equipment shortages in certain markets. Consequently, capacity is tighter than usual heading into spring retail season. The near term economic outlook is favorable for the trucking industry.

The degree in which shippers experience supply chain disruptions from both service and cost heading into the busy season depends on several variables; one of which I believe to be the most important is whether carriers view customers as a "shippers of choice" or a "transactional partner". The answer to this question will dictate how well organizations perform during uncertain times.

Averages simply do not work during times of supply chain uncertainty. Organizations that are viewed as "shippers of choice" are less likely to experience changes in performance levels during times of tightened capacity and will be on the lower end of the price increase spectrum. The inverse is true for those shippers who are viewed as transactional customers. These companies will more than likely see a decline in performance levels while paying higher rates to secure capacity.

The keys to becoming a shipper of choice seem basic, however seldom followed by organizations.

Key criteria to be a "shipper of choice:"

  1. Carrier Strategy— develop an overarching carrier strategy that is complementary to your business and takes into consideration different modes and partnerships to include: dedicated, intermodal, brokerage, and asset-based carriers, as well as national and regional partnerships. Align organization with relationships that are mutually beneficial for all partnerships. This will provide the foundation for sustainable relationships that provide business continuity.
  2. Transportation Visibility— ensure expectations are clear and understood by all parties. Set up TMS to execute on commitments and measure performance. Keys to success include establishing and managing to agreed upon performance levels that include the following criteria:
    • Routing guide compliance
    • Tender acceptance
    • Appointment scheduling
    • Loading and unloading times
    • On-time performance
    • Web-settlement (timely payment)
  3. Business Partnerships— successful relationships require consistent communication and commitment. Regularly scheduled meetings to review tactical and strategic initiatives are imperative to long-term success. Best-in-class partnerships have regular cadence of reviews that include:
    • Bi-weekly tactical meetings to review performance (include Analysts and Managers)
    • Monthly meetings to discuss forecast and review performance (Directors and Managers)
    • Quarterly Top-to-Top meetings—Strategic in nature to include (VPs, Directors and Managers)

The one consistency in transportation is the ever changing demands of supply and demand. The organizations that have a clear strategy around transportation management, processes and technologies in place to manage the business, and passionate and dedicated staff are the ones who will consistently deliver high levels of service at the lowest costs; regardless of marketplace conditions.