Progressive Shippers Value Carrier Relationships

Smart shippers are looking to deal with carriers on a more relationship level to help them improve productivity, says one logistics expert, especially as they focus on concerns such as new federal regulation for trucking, risk management and sustainability.

In a conference call sponsored by Stifel Nicolaus Friday, John Gentle compared the developing relationship between shipper and carrier to dating, with phases developing from the casual date up through a "marriage" where you demonstrated real commitment and teamwork through action, word and deed.

Gentle has come to this relationship-based approach through a long career in the logistics business, including as global leader of the transportation practice at Owens Corning. He now operates a consulting firm that serves Fortune 500 shippers.

Gentle said while he believes there is a place for bidding, calling bids "a good way to test the marketplace from time to time," he said the strung-out, extremely competitive bidding programs some shippers use are not the best way for a shipper to go about getting the best carriers. Such programs may give shippers the lowest rates, but low rates don't mean anything if the carrier can't deliver what the shipper needs.

"The astute shippers really understand what it means to make sure they have consistency of operations," he said. "It's pretty embarrassing if you have to stand up and say, 'I tried a new carrier and it didn't work out.'"

Just as in dating, he said, there has to be a "wow factor" for a shipper when he's choosing carriers -- a meshing of "values and vibes," he explained, "something that makes you think, 'I want to talk to this person some more.'"

Complex Supply Chain

It's becoming more and more important as the supply chain becomes more and more complex, he said. "Years ago, my boss would say the only thing you have to remember is to get the right product to the right place at the right time." That may be been true 10 or 15 years ago, Gentle said, "but today, the supply chain has become far more complex."

Today, he said, transportation teams are constantly looking at network redesign, with distribution centers being added or closed or relocated, changing customer service requirements such as delivery minimums and unload time, looking for ways to minimize stops and out of route miles, looking at plants and distribution centers for ways to reduce driver waiting times and idling costs, and more.

Sourcing and distribution networks are constantly changing. If a flood, for instance, requires a shipper to take a major warehouse out of the system, the transportation and supply chain has to be adjusted quickly in order to get materials and products where they need to be on time. "Regardless of all these things in flux, the transportation team has to continue to meet its goal. There really is no forgiveness."

To deal with all this, Gentle said, progressive shippers must build a carrier relationship program, based on shared guiding principles and core values. For instance, he said, carriers should be able to expect honesty and integrity, have defined expectations about things like safety programs and payment, regular carrier performance reviews, etc.

Shipper Concerns

Gentle also offered some insight into what shippers are concerned about these days, beyond the ever-important issue of productivity:

* Carrier well-being. If carriers are not in good financial shape, a shipper's transportation program is at risk.

* Customer-managed freight. "With a lot of big companies and big-boxes now taking control over their inbound freight, this is starting to wreak significant havoc" in shipper supply chains. (Think Wal-mart and its recent demands on shippers.) It can create inefficiency at plants and backhaul challenges.

* Hours of service. "Customer demand and cycle times won't change. When you go to the store for a gallon of milk, you want it there on the shelf," Gentle said. But if we see major changes in hours of service rules, such as a 48-hour restart instead of 34, or 8 or 10 hours of driving time instead of 11, shippers will have to rethink things like the location of distribution centers, use of intermodal, and other factors.

* Regulatory issues: Beyond the hours of service issue, Gentle said shippers worry about carrier survival with increasing regulations and new enforcement systems (CSA 2010) from the Federal Motor Carrier Safety Administration.

* Legislation. "We're worries we don't have a new highway authorization. We're worries about congestion."

* Sustainability. Shippers are looking at EPA Smartway participation, idling time, changing packaging or pallet design to ship more product on fewer trucks, looking at deadhead miles and working on backhauls.

* Planning for 2011. Shippers are currently in the process of planning for next year, and looking at things such as productivity goals, trying to figure out whether or not they will do bids, what the size of the carrier base is going to be, and whether they have enough carriers to sustain and grow their businesses.