Win-Win Operating Partnership with Carriers

Details: 25 November 2013; | Written by Franck Verchère

At a time when shippers are facing ever thinner operating margins, they can but only renegotiate their transportation rates, while carriers are forced to quote hardly sustainable low rates. Still, we see smart shippers resisting to the temptation of negotiating rates to the smallest levels, that carriers are willing to take, to stay in business and instead built long term relationsships with carriers in a win-win operating partnership. But what are the main ingredients to make smart collaboration with carriers work?

Collaboration for better Customer Service

Back in 2006 and early 2007, carrier capacity was the biggest issue facing shippers. Those were struggling to find capacity while fighting increasing transportation costs. Carriers were trying to maximize the amount of contracted freight while transferring the costs due to driver shortages and rising fuel prices to shippers. With the sharp downturn in demand for freight shipments in 2008 and sustained high price levels for fuel since then, many carriers were unable to get adequate demand from shippers to operate profitably and several have gone out of business.

When the economy turns around, there is indeed a risk of capacity shortages and higher pressure in prices. Long term collaborative relationships with carriers help shippers protecting themselves from the swings of the market. Another benefit of collaborative relationships is a better customer service. Because customer service becomes even more important in periods of tumbling demand, shippers should rely on carriers that perform in an efficient and timely manner to deliver goods without being damaged. Of course consistent quality often comes at a price and keeping carriers that perform to shippers' expectations is no exception to this rule.

Long-term carrier partnership to overcome challenges

Faced with a highly volatile operating environment, it is more important now than ever before that strong partnerships are established between all the key players of the supply chain and long term collaborative processes are implemented, to allow both shippers and carriers overcome all the challenges (capacity, rate and service quality) posed by the market, whether it's strong or weak.

Shippers can take some specific steps to build such long-term partnerships with carriers like:

Carrier's performance monitoring. By sharing this performance information with carriers, shippers provide an incentive for them to focus on customer service and establish firm objectives to work toward.
Non-value adding processes automation. Shippers should automate their processes to improve operational efficiency not just for themselves, but also for carriers. This can be self-billing, carrier self-service transport capacity or truck license plate registration, but also electronic interfaces that allow shippers and carriers to communicate electronically through both Electronic Data Interchange (EDI) and non-standard communication mechanisms such as e-mails.
Real-time exceptions capture. Processes should be put in place to allow carriers to create immediate notifications in case of unexpected events, enabling shippers to take corrective action and communicate with other players of the supply chain. Longer term measures such as over- or underprocurement of capacity should also be monitored as exceptions because they often have a large financial impact.
Exception management automation and carrier visibility into these events. Many exceptions in a typical flow of goods are unforeseen and therefore require manual intervention for resolution. However, a number of them, for example changes in freight sizes and routes, occur quite commonly and can easily be handled automatically. Providing carriers with near real-time visibility into exceptions and regularly scheduled events helps them react to any changes quickly. Similarly, the ability for carriers to provide real-time visibility into events occuring for planned pickups or in-transit shipments helps shippers synchronize their operations with the carriers and enables them to take advantage of continuous opportunities.

Advanced technology builds true shipper-carrier relationships

Economic volatility requires a closer partnership between shippers and carriers, but not one based purely on price. It leads smart shippers turning toward advanced transportation management solutions to build more collaborative relationships with their carriers. The most sophisticated solutions offer deep functionality to enable true shipper-carrier collaboration by providing:

A common operating platform that brings all key players in the supply chain together to provide visibility and operation event management across organizations.
Automation for all processes in the procure-to-pay cycle.
Alert management, event monitoring and critical change mechanisms.
Robust transportation procurement functions.
Advanced shipment planning and assignment capabilities.
Key performance indicator tracking by carrier.

Such true shipper-carrier collaboration generates many desirable benefits that help both parties gain profitability over the long term.