January 2005 | Case Studies | Casebook

LTL Lowdown: Choosing a Regional Trucking Carrier

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By partnering with a regional LTL carrier that understood its goals, needs, and challenges, NCH Corporation achieved elevated service levels, decreased costs, and increased efficiency.

When Matt Ehlinger needs something done, he expects it done the right way. As director of corporate transportation for NCH Corporation, Irving, Texas, Ehlinger handles the company's shipments, which include various types of industrial maintenance products from insecticides to hand cleaners.

When the company's regional trucker's service became unreliable, Ehlinger knew it was time to find a trucking company he could depend on for complete coverage and service.

"We were having some challenges with coverage," says Ehlinger. "We needed to get coverage of all 50 states with one provider—all points, all places."

NCH Corporation selected FedEx Freight as its regional trucking carrier and has been pleased with the results.

"We evaluated FedEx Freight's services and saw that it offered the complete geographic coverage we needed," says Ehlinger. "It also had the delivery structure we wanted—next-day, second-day, and third-day capabilities."

But just offering the service and coverage NCH desired was not enough to seal the deal for Ehlinger, who did an extensive evaluation before making the selection. "You must have a balance between your own needs and the carrier's service levels," he explains.

Ehlinger says NCH's partnership with FedEx Freight is successful because of their relationship. "We have clear expectations regarding the service we need from them," he says. "Clear expectations are an integral part of our relationship."

Driving Efficiencies

NCH is a company that is demanding of all its service providers, says Patrick L. Reed, executive vice president and CEO of FedEx Freight.

"When we partnered with NCH, the company was having problems with its carriers on coverage, tracking and tracing, speed, and reliability. We offered our services as the company's primary less-than-truckload (LTL) carrier, as well as a solutions provider."

By understanding each other's business expectations, Ehlinger and Reed formed a strong partnership that contributes to NCH's success.

One of Ehlinger's expectations for the new carrier was that it play a role in helping NCH build its customer base. FedEx decreased the time it took NCH to get shipments to its end users, which resulted in inventory savings.

"Any time speed and reliability are increased, you can cut costs in the supply chain and increase the bottom line," says Reed.

Ehlinger's search for a regional trucking carrier may seem like a relatively easy one, but he is quick to note that the selection process can be lengthy. Finding a partner that matches your needs requires extensive planning, he says.

"Consider your company's needs, the type of service you expect, and the experience and professionalism of the carriers you are evaluating," advises Reed.

"Finding a cultural fit is also key for a successful partnership between shipper and carrier," he adds, recommending that shippers look for a carrier that focuses on their needs.

The carrier must also compare the customer's expectations with its own value proposition, and compare its own unit costs to those of the shipper, he says. This helps shippers work with carriers more effectively to cut costs and build efficiency.

Regional vs. National

Regional carriers are typically defined as those providing LTL service for shipments traveling fewer than 500 miles. Some regional carriers, however, offer a second-day reach of up to 1,200 miles. Most regional carriers specialize in next-day and second-day delivery of LTL shipments and are a good fit for companies that generate smaller volumes of freight requiring time-definite delivery.

While next-day and second-day capability usually costs more with a regional carrier than with a national carrier, depending on shippers' needs, the extra charge may be worthwhile for the increased service level.

"The operations model is a little different with regional carriers," says Reed. "Day-of-delivery service is more accurate with regional carriers. National carriers will often hold freight longer in an effort to build heavier loads and reduce their operating costs.

"National carriers will keep a trailer in Los Angeles, for instance, and load additional shipments to reduce their own labor costs," he adds. "This results in longer transit times and lower costs. We run every load each night, so we have more consistent service standards and shorter transit times."

Choosing a Partner

Looking to select a regional trucking carrier for your business? Getting the facts before choosing a provider is essential. The following tips will help you make an effective choice.

Know your needs. Examine your company's needs closely and make sure you are clear on what you want from your carrier. This first step should take place before you begin evaluating service providers.

"If shippers have clear expectations regarding their needs, they can look at different providers to see which one meets these expectations," says Ehlinger. If you are looking for a low-cost option, you will need to look at a different set of carriers than if you are also considering elevated service levels.

Conduct a test drive. A variety of services are available to companies choosing a regional LTL carrier. Shippers should test the service before they buy it.

"Give the carrier some business on a trial basis," Ehlinger says. "Agree upon a certain number of shipments for the next 30 days, and give the carrier a test run. At the end of the 30 days, discuss whether or not the carrier met your expectations." And if a 30-day stint isn't sufficient to shape your opinion, don't be afraid to opt for a 60-day trial, he says.

Avoid getting taken for a ride. Before signing on with a carrier, be aware of extra charges associated with shipments. Fuel surcharges, for example, can add up. Avoid any surprises by figuring out these types of charges up front. Tariff rules, extra fees for lift-gate capabilities, and charges associated with inside services are other expenses that may come into play.

Do some detective work. Find out as much information on the carrier as possible, such as on-time delivery status, delivery schedules, transit times, damage and claims ratios, and safety records.

Check out the carrier's equipment and facility—are they top of the line? Ask about the provider's financial stability. Check copies of the carrier's insurance and operating license. This information will give you a clearer picture of the carrier, and help you decide if the carrier's culture matches your own.

Get pricing in writing. Be sure to get a written copy of the pricing agreement. Whether it's a formal contract or a pricing structure, it is important that both parties have a written agreement detailing the cost of doing business. If you are dealing with a less-sophisticated company, a formal pricing structure may not be available. In that case, be sure to get a document specifying the agreed-upon pricing.

Consider your technology requirements. Another service to consider is technology. Does your company use RFID? Do you want a carrier that provides visibility of shipments, or tracking and tracing capabilities? Be aware of web site visibility issues. Does the carrier use a third-party to handle the outsourcing of customer input and tracking/tracing services? Look for a forward-thinking company that provides the most up-to-date technological capabilities for your freight.

Tap the grapevine. Don't rely only on what the carrier is telling you about its services. Find out what your peers are saying about this carrier. Are customers generally satisfied with the service they receive? Get testimonials from people currently doing business with the provider.

Make your relationship a priority. The most successful shipper/carrier partnerships are anchored in the art of give and take. By establishing a relationship built on mutual needs, you can expect better service from your carrier.

"NCH has relationships with FedEx Freight within all levels of the company from senior management all the way down," says Ehlinger. "This contributes to an understanding of both companies' cultures, and allows us to work together effectively."

"NCH's employees visit our locations, and we visit theirs," says FedEx's Reed. "They know our staff and understand our technology and equipment. We interact often so we can continually establish the needs of each company."

NCH's approach to carrier selection and partnership may sound uncommon, but focusing on the relationship contributes to the operational success of both the shipper and carrier, says Reed.

"Their aim is different from many other shippers," he says. "We don't have separate strategies and goals; we look at NCH's plans for the year and look at our own. Then we discuss how NCH's strategy fits with ours."

The approach seems to be paying off. "If I need service that's above and beyond in a certain situation, I can turn to FedEx employees who do what they can to make it happen," says Ehlinger. "Not every company can say that about its regional carrier."

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