Carrier Relationships: Core Carrier, Long Term, or Bid?
Shippers must understand their supply chain, capacity challenges, and customer requirements before deploying a carrier management strategy.
With today’s volatile markets and ever-increasing consumer demands, a reliable, cost-effective carrier network is more important than ever. Developing collaborative relationships with at least a handful of highly aligned carriers will often result in better service and rates; however the right mix of carrier relationships will look different for every shipper.
Maintain Service Levels with Core Carriers
Building strategic partnerships with a select group of core carriers can be an effective way for shippers to deliver on customer expectations. Core carriers can help shippers maintain consistent service levels, reduce complexity in the supply chain, and maintain company standards regarding safety and quality. Because core carrier relationships are performance based, shippers can often improve quality by holding carriers accountable to agreed-upon KPIs. What to think about:
- Closely match shipping needs to carrier strengths including equipment type, trailer pool usage, customer service capabilities, etc.
- Ensure data integrity and reporting tools are in place to accurately analyze carrier performance.
- Commit internal resources to building carrier relationships and optimizing execution.
Mitigate Insecure Capacity with Dedicated Operations
Dedicated operations provide consistent capacity and give shippers more control of service levels. When capacity is tight or volatile, contracted capacity allows shippers to hedge against extremes in the market. While dedicated operations can be more expensive, often costs are stabilized, and levels of service are generally higher and more consistent. As shippers and carriers collaborate, additional opportunities to increase efficiency often materialize. What to think about:
- Conduct a detailed cost/benefit analysis. If your company faces significant OTIF penalties or plant closures due to delays, a reduction in penalties can significantly outweigh the cost of dedicated operations.
- Carefully evaluate volume consistency to avoid expense for unused capacity and to optimize contract terms.
- Discuss backhaul gainshare programs with partner carriers to improve cost effectiveness.
Identify Synergies with a Strategic Bid Process
A strategic bid process gives shippers the ability to evaluate all potential carriers against the same criteria and identify the best-aligned providers. Like carrier relationships, a bid process can take on a variety of forms. Bids sometimes include an entire portfolio of business, but more often focus on a single region or include exemptions for parts of the business with satisfactory performance. What to think about:
- Assess the effectiveness of current carriers. Evaluate current carrier performance, understanding that onboarding new carriers can cause temporary supply chain disruptions.
- Be strategic. Bidding an entire portfolio at once can cause radical change within a supply chain. Assess how much change your supply chain can handle and use bids like a scalpel not a sledgehammer. Understand that changes you make can cause major disruptions to carrier networks as well.
- Gauge your ability to analyze bid data. There is significant room for error when evaluating bid data, especially when a bid file includes thousands of lanes. Ensure data integrity to avoid errors and resource waste.
Before deploying any kind of carrier management strategy, shippers must have a deep understanding of their supply chain, capacity challenges, and customer requirements. An optimized carrier portfolio will provide stable capacity, deliver on customer expectations, and improve cost effectiveness. No matter the market conditions, strategic carrier management makes good business sense.