The 2012 Surface Transportation Summit held in Toronto last week attracted over 200 shippers, carriers and industry vendors. The speakers and panelists discussed a wide ranging array of topics but one of the recurring themes was the need for shipper-carrier collaboration.
The Great Recession placed tremendous downward pressure on freight costs and freight rates. The industry is still in a recovery mode. Carlos Gomes, the Senior Economist from Scotiabank, the leadoff speaker at the Summit, expressed the view that the economies of North America will be in a period of slow growth for some time to come.
On the other hand, Maximizing Profitability and Reducing Freight Costs remain the two top priorities for shippers in the 2012 Transportation Buying Trends Survey, as presented at the Summit by Lou Smyrlis, Editorial Director of the Business Information Group. The carrier executives who spoke talked about the need for freight rates to increase to maintain the viability of their businesses. How do you reconcile these two disparate positions?
A number of shippers and carriers talked about the importance of communication and collaboration. This collaboration is taking several forms.
Brian Springer, the VP of Transportation of Loblaw Companies discussed the value of providing a company’s core carriers with freight forecasts. His company provides 6 month, 6 week and 24 hour forecasts of load expectations, thereby allowing his core carriers to better meet the Loblaw capacity requirements. This approach is particularly important since a number of carriers talked about the requirement to control investments in capital, specifically tractors and trailers, until there is a quicker pace of economic improvement.
Jim McKay, Director of Transportation at Wal-Mart Canada outlined their “WPP” or Wal-Mart Freight Program. Essentially what Wal-Mart is doing is allowing its vendors to use Wal-Mart’s carrier network to move their inbound freight. In other words, their vendors are supplying Wal-Mart’s carriers with backhaul freight from the store location areas. Wal-Mart matches each vendor with a particular store location. It then leverages its carrier network as a resource. The advantage to shippers is that Wal-Mart takes responsibility for delivery compliance and lets its vendors focus on their core competence, manufacturing rather than transporting products.
Mark Gallant, Director of Transportation at Home Depot of Canada outlined the major transformation his company went through. His company shifted 95% of their freight from LTL store deliveries to truckload shipments. Working with his carrier partners, Home Depot was able to take significant costs out of their system. When asked, Mark indicated that he was able to retain most of his carrier base.
Jack Ampuja, President and CEO of Supply Chain Optimizers, leads a company that specializes in packaging optimization. His company has done work for many of the leading shippers in North America. Jack provided one example of how his team was able to identify an opportunity to improve the packaging of a client’s freight and take forty percent out of their freight spend. Since the cost of freight is essentially the cost of the space occupied on a trailer or container, improving freight density can lead to significant cost savings. This is certainly an underdeveloped area where shippers and carriers, working together, can identify ways to improve cube utilization through improvements in packaging and loading.
The carriers who participated in the shipper-carrier panel expressed a similar view on collaboration. They are clearly tired of the wave of poorly designed freight RFPs that contain incorrect information. They very much appreciate shippers who treat them as business partners and who share information in an open and trusting manner.
From my own experience as a carrier executive for many years, a good trucking company can see many areas of inefficiency in shipper operations, where improvements can lead to cost savings. These can include such simple things as having the paperwork and freight ready on time, calling the carrier in advance of pick-up to advise of changes in the number of pallets tendered and providing carriers with appointment times, so as to reduce or eliminate waiting time or trailer detention.
Mark Seymour, President and CEO of Kriska Transport posed this question at the Summit. “Do you want a carrier or a partner”? In these challenging times, when high equipment and fuel costs and rising driver wages are driving up freight rates, shippers should engage their carriers in meaningful discussions and look for opportunities to share information on Best Practices and cost efficiencies. This is the time for true shipper-carrier collaboration.