Shippers need to become more “Carrier Friendly” to Minimize Freight Rate Increases
The muted demand for freight services has not put undo pressure on truck capacity; rate increases have been limited in recent years. This may be about to change. The net result of the improvements in technology is that small parcel, LTL and truckload carriers can be much more accurate in tailoring their freight rates to the “carrier friendliness” of their clients. How can shippers become more "carrier friendly”? Here are a few items to consider.
August 31, 2017
by Dan Goodwill
As the long, slow recovery from the Great Recession continues, shippers and carriers have become used to modest economic growth. Demand for freight services has been steady but not robust. The muted demand for freight services has not put undo pressure on truck capacity; rate increases have been limited in recent years. This may be about to change.
Regulations have placed constraints on the management of trucking companies, particularly full load carriers. The Hours of Service regulations coupled with the ELD (electronic logging device) mandate are placing limits on the number of hours that a driver can legally operate a truck. These directives limit truck capacity. The difficulties in finding quality drivers and the high turnover ratio among current drivers provides additional challenges for many truck fleets. To address the potential erosion in capacity, truckers are applying a variety of technologies.
Good quality transportation management systems are allowing truckers to better manage their routes and balance their lanes. Dimensional scanners are helping LTL carriers manage the space available on their trailers by matching freight rates to cube utilization. ELD technology provides carriers with information on how long their drivers and equipment are held up at customers’ facilities. The net result of the improvements in technology is that small parcel, LTL and truckload carriers can be much more accurate in tailoring their freight rates to the “carrier friendliness” of their clients.
How can shippers become more “carrier friendly”? Here are a few items to consider.
This is an often overlooked or under-managed item. There is a defined amount of cubic space on a trailer or straight truck. Since each company’s product mix changes over time and since many products are condensed in size over time, packaging should be revisited periodically. Part of the process should include a study of pallet and product dimensions, product packaging and loading processes. Since poorly designed pallets create empty space on a trailer, improvements can reduce freight costs.
Production and Administrative Processes
It is maddening for carriers to come to a shipper’s dock and find that the bills of lading and/or the freight itself is not available at the time of appointment. This is a reflection of sloppy manufacturing and/or customer order processing and fulfillment processes.
Dock and Yard Management
Trailer detention is a “killer” in the era of ELDs. A lack of dock doors, inefficient yard management processes and some of the issues outlined above can create congestion. This can result in higher rates for those shippers that are consistent offenders in this area.
This is another critical item. Are trailers dropped in your yard? Is your freight “live loaded”? Are you using a process that is the most efficient and cost effective for your business? If trailers are dropped, how long do they sit in your yard and why is this happening? These processes should be audited from time to time to make sure they are as productive as possible.
Good communication is fundamental to every strong relationship. In this year of technology, it is easy for machines to take the place of human contact. Some people have the habit of hiding behind their communication devices. Voice mail, e-mail and text messaging are all great forms of communication. However, it takes people to set up working communication systems with proactive alerts and emergency response processes. An overdependence on technology can undermine the success of a shipper-carrier relationship.
Moreover, the evolution of eCommerce, particularly the Amazon model, and Walmart’s OTIF (“On-Time, In-Full”) program, are placing considerable pressure on carriers to provide speed to market and to meet tight delivery windows. Shippers that impede the smooth operations of carriers will face higher than normal rate increases and in some cases, will find their business de-marketed.
As a first step, shippers should set up face-to-face meetings with their core carriers. They should inquire as to what are the “pain points” in their freight operations. They should then embark on fixing these pain points to become “Carrier Friendly” shippers.
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Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to investors, vendors to the trucking industry, transportation and logistics organizations. All posts by Dan Goodwill