This article originally appeared in the 2018 September/October issue of PARCEL.
In today’s freight market, savings are hard to come by. Carriers are continually looking to increase their rates; however, there are few things you can do as a shipper to mitigate increases. Among other things, carriers want to understand what they will be shipping, receive this info in an efficient manner, and have flexibility around being able to execute. Regardless of the size of shipper you are, if you can do a few of these little things right, it will go a long way toward enhancing your carrier relationship.
Let’s look at a few ways that you can assist your carriers to plan for each shipment and reduce their variable operating ratio pertaining to your account. If carriers can minimize their variable operating ratio moving your shipments, this allows carriers to move your freight at a lower cost. Here are a few items you can check off when evaluating yourself as a shipper.
While the daily management of a transportation management system (TMS) can be difficult at times, there is a reason that more and more shippers are investing in the technology. One of the largest benefits you’ll see with a TMS is being able to tender freight in a timely manner, prior to pick-up. Carriers will always want to understand exactly what they are picking up and where it is going prior to arriving, and the sooner they know this information, the better. If you are simply notifying a carrier that the trailer is full, carriers are only able to react to what they pick up when they pick it up, rather than being able to plan for the shipments coming into their terminals. Tendering with origin, destination, weight, class, and piece count allows a carrier to be proactive, not reactive. A TMS is not the only way to make sure to relay this information; several enterprise resource planning (ERP) systems (which would have your order details) do contain some transportation functions that, while limited, often go unused. Of course, emails and spreadsheets are the time-consuming fall back, but this process really needs to be looked at as a necessity as opposed to a courtesy.
Utilizing electronic data interchange (EDI) tendering is also a big help for carrier operations. Most carriers can accommodate email tendering and manual uploads into their system, but these manual processes tend to be cumbersome and time-consuming. Although EDI can sometimes be a painful process to set up, shippers and carriers alike will appreciate the low-touch tendering process in the long run. When a request for proposal (RFP) goes out, one of the first questions a carrier will ask is how tendering, shipment updates, and payments are processed. If a carrier knows they will need multiple resources handling tendering, uploading invoices into a TMS, or giving manual updates, this will not encourage them to be aggressive with their pricing. Since their operating costs on your account will be higher than an EDI-based account, they will need to account for this in their pricing.
Particularly in today’s freight market, the biggest assets for carriers are their drivers and their time. Therefore, anything that can be done by you, the shipper, to reduce time spent waiting by drivers or limiting unknown variables in their day is going to benefit the carrier and your relationship. For this reason, carriers typically cringe when they hear “live load.” This often means that an appointment will be required, and they will need their driver to hit your dock at a specific time. As a shipper, if you have the space to accommodate drop trailers, this can be a huge advantage when it comes to carrier pricing. If a carrier knows they’re able to drop and hook at your location, they’ll be afforded additional flexibility and be better able to plan for your volume. If it is a constant scramble to pick up your freight, this drives up the operating cost for the carrier, taking away any potential pricing advantages you would see from a consistent drop and hook at your shipping facility.
It’s important to constantly evaluate your supply chain, not only to see where you, the shipper, can reduce your own costs, but also to evaluate everything to make sure you’re being a solid business partner for carriers. In a carrier-biased market, it’s hard to find pricing that can reduce your freight spend. However, you can implement processes that carriers will find attractive about you as a shipper, which could then lead to lower rates. Not all factors discussed in this article are feasible for all shippers, and that’s understandable. It is important to look at your processes through the lenses of a carrier and evaluate potential pain points for carriers. If you’re able to tighten up on your end, it can go a long way in negotiations with carriers. Freight costs will continually rise, but if you as a shipper are able to implement processes on your end to minimize the carrier’s cost to serve, it is easier to exert downward pressure on your buy-side. Tendering freight with detail, utilizing EDI, and accommodating drop trailers are just a few examples of the many options you can consider in making yourself an attractive shipper — and helping you drive down freight costs.
Johnathan Williams is an analyst within enVista’s Transportation Solution Consulting group. He has a breadth of knowledge in the transportation industry, focused primarily on sourcing LTL, truckload, intermodal, and rail carriers. Prior to joining enVista, Johnathan worked directly for a carrier as a pricing analyst. His awareness of the carrier’s proposal process has proven very valuable to shippers identifying key factors that drive carriers to provide aggressive pricing and lead to savings.