For shippers, one of the keys to good transportation planning is having a strong carrier selection process. Common freight carriers vary in size, regionality, and key capabilities that will dictate carrier performance what freight they are best suited to move. Like any good investment strategy, shippers should strive to choose the right logistics partner, not always the low-cost option, to optimally serve their transportation networks and mitigate risk.
Determining the right carrier mix is challenging, and shippers often find themselves wondering, ”what does a healthy, balanced carrier portfolio look like? How do imbalances in carrier selection put me at risk? How could that risk hurt my shipper-carrier partnerships in the long run?”
The logistics division at manufacturers and retail organizations must first and foremost bring goods to the market to meet customer demand. That is why many teams focus the majority of their time and energy meeting operational requirements. Unprecedented levels of disruption have complicated the supply chain landscape in 2020, forcing transportation teams to pivot their freight procurement solutions.
Whether capacity deviates from plan or shippers are seeking freight services in an RFP, strategic carrier procurement will vary from organization to organization. Some shippers rely on a pricing strategy – looking for low-cost carrier options, while others leverage experienced carrier relationships built over time.
When vetting out carriers in the procurement process, shippers should reevaluate how they allocate freight to their partners. Is your routing guide balanced and diverse? Have you selected carriers that demonstrate positive carrier performance metrics on these lanes?
Whatever carrier strategy you subscribe to, using data to evaluate carrier partnerships will help address inefficiencies and added costs hiding in your network.
Four tips to find more strategic carrier partnerships for your network:
1. Re-evaluate Long-Standing Relationships for Carrier Performance
Many shippers have a group of core carriers who handle most of their freight. In theory, fewer relationships to manage means added simplicity and an opportunity to forge strong relationships and trust. Conversely, this creates an inherent risk.
Both shipper and carrier networks are ever-evolving. No matter how deeply rooted the allegiances between shipper and carrier may be, when networks change, network alignments are in jeopardy.
If the shipper’s volume on a lane increases suddenly, as was the case throughout the COVID-19 pandemic for nondurables shippers, existing carriers may not have the capacity to meet that increased demand. If a carrier is awarded freight from another shipper that pulls their trucks into a new freight flow, they may not have the capacity in regions they were contracted for. A solid routing guide requires depth, but if those tried and true relationships are based solely on past experiences, shippers can experience mixed cost and service as a result.
Long-term relationships are beneficial to both shippers and carriers because they can choose partners who align with their network patterns strategically, which is heightened in times of disruption. But, like any supplier relationship, these agreements must be consistently evaluated to ensure network fit endures and service requirements are met.
2. Look Beyond New, Low-Cost Carriers
On the other hand, shippers can introduce added risk to their networks when they become overeager to award freight to low-cost network newcomers. When low costs take precedence when making truckload freight procurement decisions early on, it can be easy to overlook inefficiencies being introduced to a network.
As easily as a longstanding carrier partner can shift out of network, brand new capacity will ebb and flow, and may not be an optimal fit from the beginning. Service tends to be one of the first areas where your network performance will suffer.
Awarded lane volume could fail to materialize. The carrier was unaware of special requirements at a facility. The transportation team did not get the carrier properly set up for payment. Any number of challenges could arise, and when the footprint of the shipper and the carrier don’t align, they both experience negative network performance.
Optimal carrier selection means that the shipper’s core carriers—with established expectations, performance, and relationships—are supported by a segment of identified growth carriers and brokers that are actively managed and measured. Additionally, cost will be weighed equally in the procurement process as service, regional operations, and unique freight requirements.
3. Ensure that Reliance on Brokerage is Balanced
A shipper’s usage of brokerage is another key area where inefficiencies can develop. Brokers play a key strategic role in providing shippers with reliable routing guide depth, quality service, and an immediate solution to unpredictable disruptions. Even on planned and recurring lanes that travel to undesirable locations, require long stints of deadhead, or fail to provide natural turns in a carrier’s network, a brokerage can be a viable solution to secure on-demand capacity.
But the convenience of brokerage can become a crutch for shippers that have more systemic misalignments in their capacity contracts. As misalignments with contracted carriers endure, spot market solutions, like brokerage, begin to emerge as the norm on those lanes.
In these instances, when contract freight has proven unreliable and the routing guide has evolved to a degree where brokerage is being used heavily, re-contracting a new carrier would be far more favorable. Many shippers defer new freight procurement solutions until their annual RFP, but this process can be done on a regular cadence on select lanes.
Shippers should carefully examine where they use brokerage most frequently and determine whether there are opportunities to contract a stable rate with an asset-based carrier or they should maintain brokerage presence on difficult to cover parts of the network.
4. Find National and Regional Network Alignments
A misconception some large shippers have is that only national carriers are properly equipped to handle the size and scope of their freight demand. This is easy to misconstrue when comparing a full-network map of a shipper with that of a national carrier, but if you drill down to a localized level, more granular optimization opportunities emerge. National carriers may have a wider reach, but even if they service a certain lane, it may not fit into their network naturally.
Small to medium-sized carriers with a focus on regional service are often a good fit because they have very active networks that surround a handful of key lanes. National carriers may be willing to send trucks to these areas, but this often comes with added costs to pull a vehicle out of denser network volume.
The right small or medium-sized regional carrier is more familiar and more present along these lanes and can more effectively service a shipper’s freight without the additional cost of non-compliance, deadhead, or other inefficiencies.
Favorably matching the right partner to the right capacity and lanes allows carriers to play to their strengths, while shippers reap the benefits of knowing their freight moves according to plan.
The Right Transportation Strategy Requires More Strategic Carrier Procurement
No matter what carrier selection strategy is put in place, it must be continuously monitored and adjusted as shipper and carrier networks change. Understanding the common pitfalls and oversights that occur throughout the carrier selection process is the first step to forging a strategic plan that makes the most optimally functioning transportation ecosystem a reality.