What Shippers Want In A Carrier Relationship
As someone who has managed a variety of large-scale international supply chains for some of the most recognizable brands in the world, I am proud to have identified and maintained relationships with carrier partners that have travelled with me as my career progressed. What I have in common with Daycos is the value I place on the status of a partner. A true partnership between shipper and carrier provides mutual benefit when built on mutual trust and respect.
Just as in yoga- a strong core brings balance
All large shippers should create strong relationships with a core group of carriers. I typically target 80% plus of the cargo that I manage to be in this type of relationship. Attributes of a partner include regular updates on lane forecasts, providing insight into growth opportunities for the partner to grow with us, and very open communication about performance.
It is important as a shipper to be able to package your business in a way that works for your partners over the long term. It is also important to take the long view, as pricing power moves from one side of the other on a cyclical basis. Having a strong, fact-based partnership with your core providers can survive in either scenario and benefit both parties.
Shifting your focus can deliver value for both partners
I joined an organization to lead logistics about 10-15 years ago during peak season. This organization had very transactional relationships with their large truckload partners, driven from their very favorable off-season pricing and their expensive, unpredictable peak season pricing. As we analyzed the business to reinvent this volatile model, we created a core group of carriers that could handle our base business reliably and provide us a pre-defined surge capacity at a base rate. While the rate we landed on for the base business was slightly higher than what we had in the routing guide before, we drove significant savings in our annual freight spend.
If you can evolve your focus to total cost instead of a paper rate, you often find a basis for much better levels of service and save money in the process. You will need to take the time to create a quality forecast for your core providers to accomplish this objective, but the benefit far outweighs the investment.
Short-term thinking can have long-term negative relational impacts
If you have the right relationship with a partner, there should really be no surprises that impact their coverage relative to the freight they have been awarded. Let me share an example where that was not the case.
Several years ago, the company I was with had a very large truckload carrier de-commit and end the relationship with our company. We received notice of their intent at the worst possible time- in the middle of peak retail season. We were paying competitive rates and offered favorable payment terms, so this decision was not a matter of profitability for that provider.
Fortunately, we negotiated an orderly transition and some of our other partners stepped up to fill the void left by the provider in question. The way this issue was handled by that provider left an impression on our entire supply chain management team- one that remains with me and will be very difficult to change.
If only carrier partners knew how critical this is to a shipper…
…Honest feedback. Our partners are often in the best position to help point out our weaknesses and inefficiencies. The best relationships are ones in which both sides work to make the other better. To do this well, you need to be candid and honest. Let’s focus on the inefficiencies together so that both parties win.
I can’t emphasize the importance of open, data-driven communication at a senior level between shippers and their core logistics providers on a regular basis. I always ask my providers to bring fresh ideas to the table that will make us better, which we incorporate into these meetings. I also suggest finding ways to tie traditional supply chain metrics to the impact upon your customer. As more and more companies adopt metrics like Net Promoter Score (NPS) and in-stock (store or DC) at a corporate level, we have an opportunity to tie supply chain and transportation metrics to those metrics as leading indicators. Understanding the impact supply chain execution has upon your customers really elevates the conversation and creates a true- and lasting- partnership.
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Bill Hutchinson, contributor
About the Author
Bill Hutchinson is the Executive Vice President of Supply Chain Operations, HSN, Inc. In this role, Bill works to address current supply chain needs while developing a strategic plan to meet evolving customer and business needs.
Bill has over 20 years of global supply chain transformation experience in a number of Fortune 500 companies. His career has spanned multiple industries, having spent time in retail with Sears, Best Buy and Rite-Aid, in technology with Dell and in the industrial sector at Anderson Consulting. Additionally, he has been involved with two start-up companies, giving him the experience of building from the ground up.
During his time as President and Chief Supply Chain Officer of Sears Holdings in Chicago, Bill was responsible for all aspects of the supply chain including global transportation, trade compliance, distribution center operations, supply chain enablement, strategy, and global sourcing, home delivery and installation. He and his team led a large transformation of the Sears and Kmart supply chains during his tenure with the company. The Sears supply chain team was recognized at the 2014 Council of Supply Chain Management Professionals (CSCMP) annual conference when they received the runner up award for Supply Chain Innovation.
Bill has also been recognized as a “Supply Chain Thought Leader” in 2006 and a Supply Chain Rainmaker in 2013 by DC Velocity Magazine. He serves on the board of the Executive MBA program at the University of Tennessee and is a past board member of the United Way of Williamson County.
Bill is a graduate of the MBA program at the University of Tennessee with a concentration in Supply Chain and holds a B.S. degree from Clarkson University with a double major in Economics and Finance.