December 2004 | Commentary | 3PL Line

It's Capacity Crunch Time. Can Multi-Shipper Collaboration Help?

Tags: 3PL

 

Everyone knows a hot commodity when they see it—demand is high, supply is low, and price is no longer an object. So what is currently the hottest commodity in the motor freight industry? Capacity.

Forgive me for stating the obvious, but capacity is tight. Trailer and driver shortages, the uncertainty surrounding the new Hours of Service rules, and other factors have left shippers vying for over-the-road real estate.

Resources are limited, so shippers must become more resourceful. Now is the time to step outside of operations and reap the benefits of multi-shipper freight collaboration.

Multi-shipper freight collaboration is not a new concept, but it is one that warrants serious consideration. A successful multi-shipper initiative entails several vital components, which can be challenging to implement. But none of these challenges trump the win-win situation that collaborative programs create for shippers, carriers, drivers, and consignees.

Maximizing Assets

Through multi-shipper collaboration, various shippers—even competitors—leverage their collective freight activities to maximize asset utilization, save money, and meet delivery deadlines. This can be accomplished in two ways: co-loading and continuous move routing.

Co-loading entails multiple shippers combining less-than-truckload (LTL) freight to create full truckloads. As a result, participating shippers realize the financial benefits of mode shifting, while maximizing asset utilization.

Continuous move routing calls for multiple shippers to use their collective truckload (TL) shipments to create ongoing tours that reduce one-way movements, empty miles, and high-cost minimum charges. It transforms separate shipments into multi-stop trips to reduce costs and, once again, maximize assets for shippers.

Shared Benefits

Asset utilization is the timeliest benefit of multi-shipper collaboration. Of course, this tactic does not create additional capacity in the marketplace, but it does enable shippers to increase capacity within their core carrier bases. Most importantly, these tactics maximize motor asset utilization for the collective benefit of all shippers.

Shippers, however, are not the only beneficiaries. Carriers, drivers, and consignees are also impacted by the positive effects of collaboration initiatives.

For example, continuous move routing is particularly attractive to carriers. If carriers can get their equipment in and out of markets with little or no empty miles, their freight becomes more attractive to those carriers that can afford to cherry-pick routes.

This scenario also works well for drivers. Inherently, a continuous move route returns drivers to their origin. It also becomes a desirable route for owner-operators, especially as fuel prices continue to surge.

Consignees benefit from reduced transportation costs and improved, consistent service.

Components for Success

A successful collaborative program benefits participants equally—each shipper's safety, service, and financial needs must be met. To ensure these results, the program must:

Make sure participating shippers develop, and agree to, a set of rules. These rules establish payment terms, outline a process for settling claims, and establish transit-time parameters to ensure customer service requirements are met.

Establish benchmarks and formulas to answer vital questions, including: How are savings determined? How are costs allocated?

Implement web-enabled technology to interface with disparate systems—for example, via EDI. The technology needs to include logic that supports the multiple facets a collaborative program entails. This technology will use LTL and TL data from multiple shippers to identify collaboration opportunities, propose continuous move routes, and mode-shift freight from LTL to truckload. The system also must offer Internet visibility so shippers can accept or reject their portion of the co-loads and/or continuous move routes, and check shipment status online.

Recruit a third party to oversee the collaboration, execute shipping plans, ensure proprietary data remains confidential, and ensure costs are allocated appropriately.

While multi-shipper collaboration is a simple concept, the technology and requirements needed to implement it can be considerable. These requirements can, however, be easily met.

The technology is there, and the rules, benchmarks, and formulas—though they are operational parameters requiring some planning and negotiation—can be established efficiently using solid business practices.

The greatest challenge is changing how shippers use their resources. Will shippers continue to look within their operations? Or, will they venture further and become part of a larger shipper community?

For most companies, the latter is a big step. But capacity will not be in abundance for years to come—if ever. Now is the time to make the most of our industry's hottest commodity.