I was watching video of the Shipper Carrier Collaboration panel from our latest Surface Transportation Summit the other day – because that’s what editors do on their time off. Collaboration with shippers – or lack of it – has been a growing issue with carrier executives, particularly since the increased use of RFQs in recent years.
Listening to the discussion, which I had moderated last fall in front of 400 shippers and carriers, I was struck, yet again, by the wisdom of Jacquie Meyers’ comments. Jacquie of course is the president of Meyers Transportation Services and it was her observations from a previous Summit which prompted us to delve deeper into shipper-carrier collaboration. Jacquie, like many other trucking executives, had decried the lack of true partnerships between shippers and carriers and the fact that too many shippers seem to be RFQ and price driven.
Jacquie explained that her definition of shipper-carrier collaboration is actually very simple, as most good working relationships are: It’s a shipper and carrier working together to improve service levels and drive cost out of the system. That requires honest communication, trust between the partners, information sharing and joint problem solving, according to Jacquie. The emphasis is on working together. Yeah, it sounds like mom’s apple pie type of talk, yet when you think about it, how many strong business relationships aren’t based on exactly those characteristics?
Jacquie is not anti-RFQ. Instead she is pushing for a better thought out and run RFQ process, which includes reputable carriers and allows for legitimate discussions on how best to provide transportation solutions. She is pushing for an RFQ process where price is not the main determinant of who gets the contract.
And Jacquie is pushing for a bit more. She is pushing shippers for a real commitment beyond the usual one year. Our research shows that about two-thirds of truck transportation contracts are for a year or less. Yet for carriers to be eager to invest management time and energy into projects that deliver tailored solutions – IT integration, specialized equipment, specialized customer service solutions, etc. – shippers have to be willing to invest in contracts that are two to five years in length.
I’ve heard many carrier executives cast the blame for the deterioration in shipper-carrier collaboration in recent years on the RFQ process. This is usually followed by calls to do away with the process altogether and hopes that tighter capacity will force shippers away from the RFQ process. I don’t think that’s realistic.
Speak regularly to shippers and you quickly discover they have no plans to abandon the RFQ process for a variety of reasons – pressure from executive management, compatibility with the practices of their US parent company, greater documentation and visibility into the transportation purchasing decision, the belief the process helps reduce pricing, etc. Nor is the Canadian economy growing robustly enough to generate the freight volumes necessary to make capacity a significant pain point for shippers.
RFQs are not going away. So Jacquie’s approach of working towards a better RFQ process is the more realistic approach.