Managing a large and complex transportation network is difficult. Securing capacity and service, tendering and dispatching freight, and managing carrier relationships while keeping costs down is no easy task.
The process often begins when shippers hold regularly-scheduled transportation RFPs and award contracts to carriers for a given time. Once awards have been announced and a new routing guide is created based on the transportation RFP awards, the expectation is that freight will be tendered to awarded carriers in expected quantities.
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Yet even with the most tenuous planning and preparation, this plan often falls apart immediately after going live. Shippers unequipped with the necessary data, the right level of visibility, and a defined process to resolve areas of non-compliance find themselves in this situation. Most shippers would agree that routing guide compliance is a key opportunity for improvement in their transportation operations because of the incurred cost implications associated with it.
Where Does Non-compliance in Transportation Begin?
Non-compliance is caused by any number of network disturbances, including the naturally changing nature of a shipper’s volume, lane mix, and seasonality, as well as carriers’ gradual realignment to a shifting customer base throughout the year.
While these market factors may have an influence on compliance metrics, the reality is that often shippers lack the capabilities or operational discipline to ensure adherence to their transportation RFP awards.
Applying high-level strategy defined through sourcing down to the tactical level is challenging. Dispatching and transportation management teams first and foremost have the responsibility to meet daily pickup and delivery requirements. On the ground, few resources and information are made available, introducing human error into the transportation value chain. Oftentimes, adhering to the plan falls by the wayside in favor of doing whatever is necessary to move the freight off the dock. In some cases, shippers are not equipped with tools that provide strategic visibility to their entire transportation teams or they use systems that have limited functionality to ensure compliance. In other cases, the routing guide is loosely defined or used only as a suggestion.
This results in shipments being tendered to carriers outside the routing guide for a given lane, or the over or under-allocation to specific carriers, even if they are considered primary awarded carriers. Before long, the carrier mix on those lanes is permanently out of balance and any efficiencies or cost savings identified through the transportation RFP have evaporated.
While shippers must look closely at their tendering activity and operating practices, it’s equally important to track carriers’ tender responses to understand where carriers’ performance is not aligned with routing expectations. Are carriers routinely accepting a high percentage of the loads being tendered to them on awarded lanes? Are recently-added carriers responding to the tender requests being sent to them? Have there been any trends in the past several weeks? Having these metrics on hand enables transparent and data-driven carrier relationships in which both parties agree on capacity expectations and best fit.
Non-compliance on the carrier side may stem from supply/demand imbalances of their equipment. Even if awarded a contract, carriers’ equipment might be pulled elsewhere by freight from other shippers making the awarded lanes a poor fit for their network and forcing non-compliance. Carriers also vary in size and technical capability and may be making sub-optimal tender acceptance decisions due to a lack of visibility or planning.
Both types of non-compliance are equally likely and can cost shippers hundreds of thousands of dollars annually in unexpected incremental transportation cost. Fortunately, the root causes of non-compliance can be identified, and a plan of action can be implemented to address these cost drivers.
How to Execute Effective Transportation Compliance Management?
With so many variables to manage, it can be challenging for shippers to keep track of how their networks are performing. Maintaining and adhering to a routing guide, and active compliance management are critical to transportation management success because they enable better shipper-carrier relationships and optimize transportation cost.
With Breakthrough’s Compliance & Performance Management program, shippers gain full visibility to each transaction taking place in their networks and interactive dashboards that show the performance of each carrier and lane. With this, comes the reassurance that shippers can focus on day to day execution while Breakthrough provides in-depth analysis and weekly targeted action items. We help shippers resolve areas of non-compliance, reduce costs, and strengthen partnerships between shippers and carriers.