The easiest way for a company to get in over their head and lose control over processes and procedures is to grow too quickly. More specifically, to grow too quickly without the proper foundation to build upon. This plays a major role in what outside partners, vendors, suppliers or other 3rd parties are willing to do within the relationship. Costs can spiral out of control as decisions are made at a reactive level instead of proactive approach. A major business unit often effected the most by this kind of chaotic way of doing business is the Supply Chain. One of the biggest concerns a company has is any disruption to the supply chain. A common area where disruption can take place is within the logistics/transportation network.
So how can a company help to prevent disruption within their network?
A relationship with a carrier is a two way street. A company wants to be able to ship their products in a timely manner, for the lowest cost possible resulting in a secure, damage-free delivery. A carrier wants a shipper to set them up in the best way possible to achieve those goals. Becoming a shipper of choice is becoming an increasingly important part of the logistics practice. The days of just beating down carriers to get the lowest price possible, whether its LTL, FTL, Parcel, Ocean or Air Freight, are long gone. The transportation industry hasn’t always taken advantage of what it is they truly offer but they are slowly coming around to the times. They now understand that what they have is a valuable commodity and finding the best shipper to partner with to utilize that commodity is very important for maintaining a good operating ratio.
What is the commodity a carrier possesses?
Space. They have the space in a container, in a truck, in a trailer, in an airplane to move your freight from one place to the next. Their goal is to be as efficient as possible with that freight. Think of that space as a 3D puzzle. How does your freight fit into that puzzle? If a shipper has developed bad habits over time and does not take the time to think about how their freight is going to enter the transportation network, carriers will begin to do one of two things; either drop you as a client or raise your prices to accommodate the ineptitude.
This idea needs to be transmitted throughout an entire organization. Procurement and finance will tend to only look at the numbers. What can be done to drive down cost? Sometimes it requires a look from within. A carrier will be more willing to reduce cost if a shipper pays more attention to detail when freight enters the supply chain network. If a company’s internal resources are properly trained in how to effectively label freight, safely and adequately package freight, provide accurate descriptions of the freight, use standardized dimensions when possible, use quality pallets, provide ample lead-time when possible, be flexible on your end while remaining consistent in your process, and provide a clean, safe and overall attractive driver facility, carriers will be fighting over the ability to pick up your freight.
Relationships with carriers are critical. In order to help reduce the risk of supply chain disruption, companies should be looking at as many ways as possible to be considered a shipper of choice. Carriers will appreciate the consideration and will be more likely to work with a company on the cost element. Expecting to pay less simply because it’s been 12 months and it’s time to release a RFP is a dangerous approach. Using properly timed-out RFPs to help build relationships with the carriers and to gain more knowledge of how you can improve as a shipper in order to achieve the best price is a better foundation from which to build upon.