The inspiration for this track at our Surface Transportation Summit came from Jacquie Meyers, one of the speakers on the executive panel last year, who made the observation that shipper-carrier collaboration is not as prevalent as it should be. Many shippers seem to be RFP or price-driven. She decried the lack of true partnerships between shippers and carriers. Many people were very supportive of Jacquie’s comments in the post-Summit surveys. This encouraged us to create this track to address the issue in greater depth.
The panelists were:Jacquie Meyers, president of Meyers Transportation Services, Elias Demangos, president and CEO of Fortigo Transportation Management Group, Anna Petrova, associate director, supply chain, Ferrero Canada, and Susan Promane, director, supply chain, Whirlpool Canada. Truck News publisher and editorial director Lou Smyrlis moderated. Shaw Tracking sponsored the session.
Shipper-Carrier panelists from top to bottom: Susan Promane, Whirlpool Canada Anna Petrova, Ferrero Canada Elias Demangos, Fortigo Transportation Jacquie Meyers, Meyers Transportation
FE: Jacquie given you served as the inspiration for this panel discussion it seems appropriate we start the discussion with you. How do you define shipper—carrier collaboration? What are the most visible characteristics of a true shipper-carrier partnership?
MEYERS:I did indeed open this can of worms last year. I was very excited when I heard that you were putting together this panel because I think it’s a can of worms that needs to be opened. We need more open and honest dialogue between shippers and between carriers. I’m sure there will be different opinions up here today on ways we can do it better and the dreaded RFQ process. But I think by the end of it we will agree that there is a better way forward. Lou asked me, what’s my definition of Shipper-Carrier collaboration. It’s very, very simple. It’s a shipper and a carrier working together to improve service levels and drive cost out of the system. I repeat, together, working together. I would say it is the exact opposite of a poorly executed RFQ. I think everyone in this room probably knows what I’m talking about when I say poorly run RFQ. It’s a mass e-mail that goes to 101 carriers. You’re not supposed to speak to the shippers. You’re not supposed to speak to each other. The cheapest carrier wins.
I’m going to argue that is not the best way forward. There is a better way and I’m loving what I’m hearing that we are changing and we’re talking more about collaboration and that is the way forward. Getting back to the question, what are the characteristics of collaboration? The very basics are open and honest communication, trust between the partners, information sharing, joint problem solving. That’s all at the core. You need that for collaboration to work. Then I’m going to push for a little bit more today and I’m going to ask for commitment and investment.
We know those RFQs where you get a commitment of one year. I’m pushing you. Come to us, give us a real commitment of 2, 3, 5 years that you’re going to work with us. When we have that commitment, we can invest. We need you to invest and we can invest. I’m talking about management time and energy. I’m talking about I.T. integration, specialized equipment, specialized customer service solutions.
When you get to that step where you’re investing and committing together, the world is your oyster. We can conquer anything then. I don’t want my message to be skewed. I’m not anti-RFQ. I understand there’s a time and a place for a well-run RFQ. I’m talking where you invite core reputable carriers, you give them a legitimate seat at the table where we can provide solutions to you. Then the service provider is chosen on price and service.
Working together, collaborating, will save you far more money than a poorly executed RFQ that you do every year.
FE:Susan, let’s look at things from the shipper’s side. How would you describe relationships with transportation providers? How do those relationships meet the definition that Jacquie gave us of true shipper-carrier partnerships.
PROMANE:It’s hard to argue with Jacquie’s definition. Certainly I think everybody would say that’s absolutely how you would define a great relation, a truly collaborative relationship. I can say that, as with any strategy, usually where it falls apart is in execution. From a carrier perspective, a carrier who truly operates that way would differentiate themselves for sure because from my perspective there really aren’t that many who truly operate that way.
I can tell you how we define carrier management. My team has transitioned over the last 7 years to a more professional approach to carrier management. We make sure we articulate our business goals to our core carrier community on an annual basis. We are clear with what our goals are, what the service requirements are, how we’re going to measure them. We do measure them on a monthly basis. On an annual basis we look at a scorecard. We have an award for the best carriers. Could we do a better job? Probably but I think we’re pretty proactive.
We lock in for two years because reality is the world just changes too much to lock in for any longer term than that from our perspective. Now that’s not saying that after two years we look for a massive RFP but do we test the market? Yes. I would say we typically don’t have that many changes to our carrier base beyond that. But what we’re really looking for with carriers are people who want to work with us, who do what they say and when they can’t, give us notice that they can’t, which again doesn’t always happen. Being able to adapt to change is a real opportunity.
To Jacquie’s point of a collaborative relationship, that doesn’t always mean winning every time, right? Sometimes you don’t win every time, but you shouldn’t lose every time either. Do we want the right price? Absolutely. I have a boss to answer to. But we’re not willing to put everything at risk in our network in order to have to get that short term.
FE: Anna let’s hear from you. From your professional experience, how would you describe the relationship with major carriers that you’ve dealt with in the past?
PETROVA:I don’t think you’re going to hear any controversial statements from me because I completely agree with both ladies. But I can tell you that from my professional experience, and I’ve been fortunate enough to work for major well-loved and well-established consumer brands, we have always taken the approach that the transportation company that we hire is an extension of our organization, is an extension of our brand. For me, I think what is extremely important in any relationship, in any partnership is alignment on the strategy. I don’t believe that we’re always aligned on the strategy, strategy being we all have the same customer.
Our customer is the retailer. The customer can fire us. The customer can fine us for poor performance. The customer can punish us and when that happens, it’s very important to stay aligned. Not to execute blame games and finger-pointing but to actually act as one. I agree it is easier said than done. It requires a lot of commitment on both sides, like any relationship pretty much. I would say that from the strategic alignment it’s very important to understand that we’re all in this marketplace because somebody is taking our bill.
Retailers measure us on two main KPIs. The case fill rate measures our ability to fill the orders. Then they measure us on the on-time delivery, which is pretty much your KPI since you are responsible for the transportation service. This is what aligns us in this marketplace and I think as long as we’re all on the same page, collaboration is certainly possible.
FE:Elias, I’ve heard a lot of comments here that really are impossible to argue with; they all make sense. But let’s be realistic, the reality is some relationships work better than others. In your experience and with your company you have to work very closely with your customers. What are the things that make a relationship work?
DEMANGOS:Like a marriage, communication and honesty. What I mean by communication is not irregular communication but regular communication, addressing issues real time as they happen. Don’t let them fester to the point where both sides have gone so far down a different track that it’s impossible to reconvene. Many of our partnerships with customers are multi-year partnerships. We’re fortunate in that sense.
But you have to be honest from day one. There should be no shortage of hard work. You don’t just get a customer and then push the button, set and forget. There’s a lot of hard work that has to go on to continue with that partnership.
Regardless of contracts you can lose a customer by not working hard. No one is perfect around the room, we all make mistakes. The key is how do you address the mistakes when they happen? Do you have this, “Ugh it happens” type attitude or do you say, “It happened, and here’s what I’m going to do to solve it.”
For me plan B is critical to how we plan the business. Everything has a plan B, an issue will arise, I guarantee it. Last winter with trucks not starting, that was a given. It’s not a surprise. Think of it a step further, backwards, driver’s car not starting on his or her way into work. That’s going to happen, so what are you doing?
An effort to truly understand both sides’ point of view and lastly, continue improvement—are attributes of a good healthy partnership.
FE: We’ve heard about what makes for a healthy relationship. Susan I want to hear from you, based on your past experiences, what contributes to a relationship going south, quickly. What’s enough to get you to say, “Maybe I should not be working with this carrier?”
PROMANE: I agree communication is critical. Communication has to be of some kind of substance too. A couple of examples, when you’re entering into rate negotiations. I understand the carriers have cost pressures but our business has cost pressures, so understand that. Just coming in saying, “My costs are up, therefore I need a price increase”—frankly it’s quite surprising for how many carriers that’s their approach. I understand that but I want to understand a little bit more. What are you doing yourself to try to take costs out and then drive the efficiency in your own organization? It shouldn’t just be a pass through. I want to understand that you’re taking it seriously, that you’re trying to get creative. It’s no different in my business. We’re in profit planning time as I’m sure everybody in the room is. I just presented my plan and I’ve got cost headwinds, for sure. I’ve got rate increases. But I have to find ways to offset that, getting creative and not on the back of security, but getting creative on how we are doing things smarter in order to offset those increases.
I think the other thing is, as we’re trying to drive change, is continuous improvement. That often times is met with resistance. If it’s outside the box of the partner, is it impossible or just hard? If it’s impossible, OK. If it’s hard, well let’s figure it out. At the end of the day, if it’s the right thing for us to do as a business and I articulate that well enough, then the carrier should support and win from a long term relationship.
We won’t try to drive cost out on the back of rate. We really don’t try to do that, we try to get creative on how do we ship differently to drive more efficiency in the supply chain. That’s the approach that we take. Again oftentimes, it’s met with resistance.
FE:Listening to all of your comments, trust seems to be the key word here. How does the carrier trust the shipper? How does the shipper trust the carrier? I’ll assume that’s a particularly challenging one if it’s a new carrier that you’re dealing with. Anna I want to take that question over to you. How do you build that trust when you’re dealing with a new carrier?
PETROVA:First of all I think it’s very important for us as shippers to be very particular and very clear with regards to our specializations. What are our expectations of service and Susan made the great point that we might actually agree on the strategy but when it comes to execution, this is when everything fails. Even with rates, it takes only so long to agree on the rates. Then you have a year, two years, three years, whatever is the duration of your contact, to cohabitate in the hopefully successful marriage. That can only be ensured by corporate service levels. If this first step is not addressed correctly, there is room for grey areas. I think it is very important to not only express what your expectations are, but to also perhaps formalize them in a document.
In my career I’ve seen it called a service level agreement or a carrier operations manual—it has many names. But it’s very important that your list of expectations is written down. How would you like the pick up to be executed? What is your expectation for customer service support? Do you want to dedicate a CSR for the account. What type of reporting would you like that dedicated CSR to generate and send your way to make sure that you are in the proactive mode managing your customer’s needs rather than being reactive. So all those need to be clarified and they need to be very transparent because transparency is one of the key rules of trust.
The next important part of trust is accountability. We keep making comparisons to marriage, assuming that everyone is ready for marriage right? There’s a whole bunch of people who aren’t. But when you’re entering into a shipper-carrier relationship, which requires commitment, it means that as a shipper we have to ensure we are providing volume numbers, we plan ahead our capacity, we pay you on time. You also have some obligations in that relationship as the carrier. If you promise us to be 98% on time and the rate that we’re paying you is actually contingent on that number, we would like to see people walk the talk.
I think that walking the talk is probably the number one component of that trust along with open communication and transparency. That is how we build trust. By demonstrating mutual respect, by treating each other fairly, by being open with each other and cherishing that partnership that hopefully results in the best possible service for the rate that we’re paying.
FE: Jacquie looking at this same question from the carrier side, how do you go about demonstrating to your customers that Meyers Transport is a company that can be trusted as a partner? In return, once you have that partnership, what do you expect back from your shipper clients?
MEYERS:It’s pretty basic. Assuming that we are ready for marriage and we’re moving forward. The very core, obviously, don’t ever lie to your customers. I know that if my dispatch lies to you, I will not last as a supplier and my dispatch knows that if they lie to you they will not last as a dispatcher. Lying makes for very uncomfortable co-habitation, I would say. But beyond that, and I already mentioned it a little bit, transparency, giving visibility. We’re very open with our customers.
If they want to come in we will open our books to them, talk about where our costs are growing, how the driver shortage is affecting them, load balance, etc. We’re open with where our costs are increasing but then coming back to Susan’s point as well, we’re also open with what are we doing to improve our efficiencies, to improve our service offering. We’re very transparent with all that. Then I would say the final step where I find true trust is built is when we can actually come forward to you and offer cost savings solutions or service improvements.
A very quick example, let’s say I’m running a dedicated run for a customer, and it’s only half full. It doesn’t matter to me. I’m making the same dollars day in and day out, it doesn’t matter to me. But it’s imperative that I bring that forward to my customers and say, “Here’s how you’re spending money and I don’t think it’s the best way. Is there a better solution?” Could we run it every other day? What does that do to your customers? Could we merge you with another customer without impacting your service? Should we be using a different equipment type? It’s imperative that I bring that forward to say, here’s how you can save money. Because my best partners, my best customers are happy, healthy and profitable so I need to do everything I can to make sure my customers are happy, healthy and profitable. What do I expect back? Openness, honesty, transparency everything that Anna really said.
PETROVA: Can I add to that? One of the things that I like about Jacquie’s style and what she’s saying is positive leadership. I attend a lot of transportation conferences. Probably less now because they all tend to have that cloud of continuous complaining. We all have our challenges, right? We just don’t spend the majority of our energy on complaining. We try to create some positive leadership also for our teams. I personally spend a lot of time on that concept because when I run my meetings I want to also focus on wins.
I’m pretty sure that every transportation company in this room has had great achievements, best practices, great results, so why aren’t we hearing about that? Why do we always hear about problems, challenges, costs? It sounds to me like it’s some sort of a rehearsal for coming for a visit and asking us for more money again, right? Positive leadership is something that transforms a relationship into a partnership, because it comes with initiative. It comes with a desire to upgrade the current situation. It comes with ideas for the transformation from a commodity supplier to an innovation driven, quality-driven service provider that we would love to embrace. I think that the transportation industry has all the capacity to be that. We’re hoping that that culture of positive leadership will become a little bit more visible, which by the way in return will attract talent. Because working for an industry that’s always on the defensive is not very attractive, as you probably would appreciate. Also I can tell you from my perspective and I’ve been engaged with the transportation industry pretty much for over 20 years now, here and in Europe, very often it has been that we had to drive the innovation. It wasn’t the transportation company who was coming forward and offering solutions and offering fresh thinking and making us, giving us some improvement suggestions.
It just so happens that for the most part it was always us. I think it would be really 21st century thinking and 21st century experience for us to work as equal partners and hear each other out and see you lead us because we certainly are not perfect. There are certain areas where we could get better.
We would like to hear more of that from you. So let’s stop complaining and let’s build our future together.
FE: Speaking of being positive, Elias with your company offerings of dedicated service, you may be dealing with clients that already have a private fleet that’s handling some of the business. It’s safe to assume there is a vested interest in maintaining the status quo. How do you work around that? How do you ensure that the vested interest in maintaining a private fleet doesn’t have an impact on the partnership that you’re trying to form?
DEMANGOS: Good question after Anna’s comments. Quick little quote from a guy by the name of Mark Twain. “He would choose heaven for the climate and hell for the society as each has its own advantages.” Status quo, serves a certain purpose in my mind for certain customers. Certain things, like potentially keeping the drivers the same, keeping the logos and the branding the same, are important for the customer that we’re on-boarding. In that case, status quo makes sense. But there are other things that we should be bringing forth as ideas. Some of them would be very, very easy wins. Why don’t you expand your shift a bit longer every day because it will do x, y and z and it’s going to save you money.
It’s not just simply lower the hourly price or the kilometer price that’s going to drive the cost reduction. What’s going to help to get your cost reduction now is working together. With our customers we talk daily. We get into the granularity of did we optimize every cube on every trailer on every truck that went out? Where were the delays? Were the delays because of snow? OK well today let’s make sure it’s snow plowed there. It’s that type of little stuff that overall if you keep adding them all together they will bring cost reductions. It’s cost reductions which ultimately is what we all want. I agree. Those lines of communication need to be more open. That involves more than yearly contracts and truly having a partnership, truly wanting to work together.
FE:Sometimes relationships do sour. Carriers don’t perform where you expect them to. I want to hear from our shipper panelists on this. First of all, how do you measure performance? What do you share with your carrier partners? If one of them is not meeting expectations, what do you do then? How do you bring them back into the fold or is this the case of if you don’t perform, you’re gone? How do you handle that situation?
PROMANE:We measure our carriers on a monthly basis and as I said, we report out to the larger carrier community on an annual basis. We measure on-time performance, that’s obviously key, and on-time performance is carrier controllable. We also measure safety. We also measure what I would call, compliance to admin functions—EDI compliance, billing accuracy are key. We have a formal process if there is a service issue. We have a transportation management provider that manages our carriers based on a day-to-day basis. Incidents are written up and we need to see corrective action in a particular time frame. We don’t have knee-jerk reactions. I can’t think of any incident where something happened and the next day the carrier was gone. We just don’t operate that way. We work with the carrier to correct the situation but if it continues over a long period of time we’ll be forced to make a change because we just can’t afford service issues that happen over a long period of time.
PETROVA:I’ve always measured carrier performance on a monthly basis. I think what is also very important, before you hire a carrier, you need to be 99% sure that you’re making the right choice. It’s sort of very similar to the recruiting process. I think it’s very important to ensure the right fit.
If there’s no right fit, you probably would know about it as a buyer because although I heard a lot about of bad RFPs, there are also good RFPs. It’s a tool. What makes it good or bad is the criteria that people use in awarding the business. It’s very clear that if everything is simply based from the price, there will be repercussions and then you might be forced to go to the more expensive carrier because the ones that you chose unfortunately are not able to perform.
The process of a carrier selection is a very complex process and it always starts with service at least for every organization that I’ve ever worked for. Because if you’re choosing a person who promised you a lower rate but can only give you one truck a week, and that truck is likely late, that’s not the type of marriage that you want to be looking at. In terms of monitoring on a regular basis and in terms of corrective and preventive actions, I found myself in my career sometimes a little bit too involved and almost infiltrated into the carrier structure and into the carrier organization trying to understand who are the best people to speak to.
Who are the decision makers? Who is the one who enforces a high standard of operation? Once you figure that out and you talk to the right people, hopefully things will improve. If things don’t improve then chances are, if you’re looking at a horizon of poor performance, it’s time to make a change.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis