Shippers are mitigating the risk of failing to meet customer delivery requirements by diversifying their base of qualified carriers. Carriers have seen demand continue to grow and struggled to maintain acceptable levels of service. It is imperative that shippers have more carrier options to support their growing demand as these supply chain issues continue.Shippers who serve large retailers know it is more important than ever to have carrier resources that will protect them from delivery failures, which can be very costly. Under agreements that call for a supplier to deliver 95%+ on time — and to achieve a fill rate of 99% — these retailers have monetary fines that can eat away at the shippers' bottom line when not met.
While this risk certainly needs to be addressed, it is important to understand other risks when selecting and onboarding additional carriers.
The risk of bringing on a carrier who is not compatible with your needs — and that of your customers — is perhaps the most important thing to guard against. Also important is knowing the total cost of working with a new carrier, as opposed to only focusing on the carrier’s rates. Finally, in addition to the risk of having too few carriers, there is also a risk in trying to manage too many.
Here are six questions to answer to help you find the optimal carrier strategy and then use best practices to onboard them into your supply chain.
1. Where are the risks in your existing network? Develop specific contingency plans enabling you to quickly adjust capacity across a diversified carrier base. Ensure your carrier base is large enough to meet unexpected needs, but not too large for you to manage.
2. Are you getting the capacity you need? If you single source, it’s easier than ever to run into capacity constraints. Identify your lanes where your shipments can fill empty back-hauls. This opens opportunities to use multiple carriers that give your more options. Chances are, in today’s environment, you won’t have leverage to get what you need from a single carrier.3. Are your US domestic carrier rates market competitive? Carriers may be willing to lower rates with committed volumes. It’s imperative a shipper understands the resilience of capacity and rates when assessing these opportunities. Rates are only as good as the capacity behind them.
4. Are your carriers optimized for your distribution footprint? Each carrier has its strengths — as well as its weaknesses. Knowing where each of your carriers can be most effective for your supply chain profile gives you the ability to award volumes where they will receive the best mix of cost and service required to effectively serve your client.
5. Do you have a standard onboarding process? As you add carriers, it’s important that they be handled properly. By offering carriers a seamless experience when first working with you, they’ll be inclined to stay with you. In today’s hyper-competitive environment, carriers can walk away if their drivers aren’t treated well or are subjected to lengthy wait times when picking up your loads.
6. Do you have an effective performance review process? Evaluate the total impact of each carrier on your supply chain, rather than just comparing rates. The carrier that is charging you 10% less can be costing much more in delayed or missed shipments and ultimate customer dissatisfaction. When a major retailer finds it necessary to trigger underperformance penalties, that low-cost underlying carrier will suddenly look very expensive.
John Weber is Vice President of Sales for ODW Logistics.
This article originally appeared in the March/April, 2022 issue of PARCEL.