More on Shipper-Carrier Collaboration and Freight Bids
May 26, 2013
May 26, 2013
In last week’s blog, I shared some ideas from the recent SCL – CITA annual conference on how to improve shipper- carrier collaboration. Various suggestions were proposed by a panel consisting of two leading shippers and two major Canadian carriers. Some other thoughts were expressed during other tracks that day.
The panelists presented some suggestions that came out of a joint meeting between the Ontario Trucking Association and the Canadian Industrial Transportation Association. Here is more of what they had to say.
Removing Waste from the Shipper and Carrier’s Operation
During the panel discussion it was suggested that it is through trust, communication and dialogue, rather than through an RFP, that opportunities to remove waste from a shipper’s operation can be identified, discussed and solved. The RFP process is typically too rigid to allow for a meaningful exchange of ideas and for the development of action plans.
Since the focus in an RFP is typically on rates and service, it doesn’t create a forum for dedicated problem resolution. Moreover, by not creating project teams, action plans and time lines to remove waste, the inefficiencies typically doesn’t get extracted. The shipper continues to perform the same functions, in the same way, with its existing and/or new carriers. Drivers continue to be pick up half full loads since opportunities to consolidate freight or change pick-up dates are missed. As one trucking executive mentioned, the savings generated from these types of initiatives can be much larger than the two percent saved as a result of the freight bid.
Similarly, the process often doesn’t allow for a thoughtful discussion of how a shipper’s prospective partners are employing their assets, where they have empty miles, where they have backhaul and/or the location of drop yards where they have a supply of assets. It doesn’t allow for engaging in a dialogue on where each business is going and how and what each company could do to make the marriage work more effectively, particularly over a multi-year horizon.
Carrier Site Visits
One carrier highlighted the importance in having shippers visit the premises of their potential carriers. The visit can allow for a review of their carriers’ customer service and IT capabilities, meeting key operational personnel and discussing equipment requirements.
One suggestion that has been made many times over the past decade is for shippers and carriers to conduct quarterly reviews. To make these meetings productive, the two parties need to meet on a consistent basis, set up appropriate KPIs that relate directly to the key problems or waste areas, and follow through to improve the results.
Performance improvements don’t just happen by themselves. They occur if both parties share information and speak openly about obstacles, both in terms of people and process. Carriers need to feel comfortable enough to offer ideas on their own initiative, even if these ideas lead to fewer but hopefully better shipments. Shippers on their side need to take action on suggestions that make good business sense for both sides. The scorecard should specifically contain a KPI for both carrier innovation and shipper responsiveness. If one side does not have a vested interest in generating or acting on cost saving opportunities, this will limit participation. On the other hand, carriers that come up with solid, actionable cost reduction ideas, resulting in quantifiable savings, should be rewarded. These rewards can take several forms such as reduced carrier operating costs, shipper rates and/or continued shipper support and contract extensions.
Finally, shippers should facilitate and look for “engineered” solutions. Carriers should be providing customized (rather than “cookie-cutter”) proposals for their clients. They should be highlighting that they are providing value-added solutions that demonstrate a superior way of serving the unique needs of their clients.
Please note that there will be a track on how to improve the RFP process at the upcoming 2013 Surface Transportation Summit (http://www.surfacetransportationsummit.com/conference/register/) on October 16. A “blue chip” panel has been assembled to address this topic. Register now and take advantage of the early bird rate.
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 transportation and logistics organizations to help them improve their profitability. All posts by Dan Goodwill