As the market settles down, you can and should take a more in-depth look of your LTL costing and service model. As carrier capacity pressure eases, now is a perfect time for clients to bring carriers to the discussion table to talk about price and shipping costs.
Josh DeKonick, General Manager of LTL Operations, tells us why the situation is ripe:
“For years, carriers were in charge, forcing clients to take heavy GRI (general rate increase) due to capacity and driver shortages. Carriers are now searching for potential clients and freight opportunities to add volume to their softened shipping lanes. As the pendulum swings back to the shipper side of the costing model, it's a perfect time to renegotiate tariffs and strengthen the relationships with the carriers providing the services they need.”
We have spent two decades fine tuning our carrier compliance program, so we'd like to share insights about what to look for when evaluating and discussing with your carriers.
A look at the key indicators
On-time performance (OTP) is a big topic. We have this OTP: The ins and outs tips sheet to help you understand what it is, how it’s measured and what you can do to help your carriers improve. So we won’t waste time talking about that here. For this article, you only need to know that OTP is the percentage of time your shipment arrives on time, taking both pickup and delivery efficiency into account.
When a carrier reports an OTP to you, how do you evaluate it? We suggest looking at three angles:
- Lane-by-lane. If a carrier has great on-time scores in the Northeast but you're located in Colorado, their overall score may be irrelevant. It’s time-consuming to get this granular, but necessary to fine-tune the carriers for your shipping needs.
- Trends over time. Which carriers have improved over the past few months, and which are losing ground? Maybe the top performing carrier a few months or years ago when you made your agreement is no longer the most efficient and competitive option.
- Benchmark against industry trends and other carriers, including ones you don't work with. 92% sounds fantastic until you realize the average OTP is much higher.
Lost and damaged shipments
Missing or damaged deliveries hurt customer satisfaction and strain your client services team. On top of that, submitting claims and re-shipping freight wastes valuable time and money.
For advice on managing claims, check out: Helpful tips for the Best Freight Claim Outcomes. To learn how to vet your carriers to reduce the frequency of issues, read on.
Here are some pointers to consider when determining a carrier’s suitability:
- Frequency. Loss and damage will happen, but the question is how often (compared to the volume of your shipments).
- Industry average: How does your carrier compare to other carriers and the industry average? As with any business, carrier efficiency and staffing changes may gradually erode performance.
- Ease of making claims: A 3PL can help you make claims and get a refund to save you the headache, but in the instances you had to undergo this process on your own, was the carrier responsive?
Capacity, rates and transit times
How often do you try to schedule a pickup with your usual carrier only to be told you’ll need to wait a day or two to ship? Perhaps the problem is capacity, defined as how much product a carrier can transport at one time.
Matt Tanner, Consulting Engagement Executive, highlights the pitfalls of not re-evaluating the playing field:
"How do you verify in today's market that you're getting competitive pricing, especially if you are using one carrier or the same one for a long time? When the market dramatically drops in rates like it did in March of this year, are they proactive in reaching out and adjusting those rates? Regarding location, has anyone run a report for you on how delivering to one specific customer's location affects your landed cost? How can order volume and shipping frequency be managed to benefit your bottom line? You need a solution that would align your freight cost to your average spend – it goes beyond just cost per pound or mile."
There are a lot of moving parts in this equation, but here are some things to consider:
- Is the carrier you’re using adding capacity or reducing availability for load pickups?
- Are you shipping in regions that are costing you too much and that a different carrier may be able to cover more cost efficiently?
- Is your agreement relevant? Is the pricing still competitive? The carrier landscape is constantly changing, and shippers who are fast to adjust can see actual savings and improved time to destination.
Your Accounts Payable team deals with an endless stream of invoices from carriers. These invoices need to be checked, matched to a PO, and paid. Inconsistencies cause delays and frustrations mount. A 3PL like IL2000 would have a dedicated auditing team to deal with all of this for you, but if you're flying solo, here is our advice:
- Invoice accuracy matters. Even if you find a cheaper carrier, if you lose countless hours dealing with additional billing errors you have yet to find the optimum solution.
- Freight disputes happen. When they do, what is it like to try to dispute a freight charge (such as reweigh charges, liftgate fees, residential access fees or dozens of others) with your carriers? If the carrier is challenging to deal with, it can add extra pain to the process. (Check out this blog if you want tips on How to resolve freight charge disputes without going nuclear.)
The intangibles of working with a carrier are just as important as the metrics you can track. Simply put: do you like doing business with them?
Cody Duvernois, Operations Account Manager, offers his perspective:
"From my experience with clients, I see more focus on the customer support aspect of a company's services as time goes on. With communication developing and regularly changing in this modern world, having a reliable, centralized resource of accurate information is important and should encompass all facets a client needs. If you can't get in touch with someone who has answers for you about your product, your operation, or your inquiries, who will help get you that information?"
If you’re not enjoying dealing with your carriers, let’s look at possible reasons why:
- Scrutinize your negative bias. Is one incident seared into your memory? Does a minor personal conflict overshadow an otherwise good relationship?
- Are you “old news?” Businesses work hard to win new customers, but they can forget about you pretty quickly and everything they promised, including responsiveness, goes out the window. Are they living up to their promises?
- Do the key players still work there, or have you been shuffled onto a more junior team or someone who doesn't understand your company’s shipping?
- Ease of using their website. How easily can you navigate the site, book an order, and track your shipment? Clunky sites can waste time and get under your skin as the weeks pass.
When to review your carriers
The most crucial part of any carrier compliance program is frequent measurement. Knowing what to look for doesn't mean squat if you're making decisions by the seat of your pants, or too infrequently to keep up with dynamic market shifts.
If it’s been years since your last deep dive on carrier performance, our advice is that you’re well overdue. If you measure once a year, you're losing out on the potential to optimize your shipping and streamline costs over the months. IL2000 reviews our clients’ shipments every quarter and walks through our recommendations for further cost savings and improvement.
When it comes to putting your valuable shipment into the hands of a carrier, there are many factors to consider. Plowing through the data and making educated decisions can be daunting. So, where do you start?
Brooks Wise, VP of Sales, offers some insights on how a 3PL could help:
“From my experience, many shippers do not have a true benchmark or measuring stick to evaluate the competitiveness of their rates and carrier OTP. This seems to be especially true with those that utilize a one-carrier solution or have been with a provider for numerous years. At IL2000, our Logistics Engineers utilize years of industry knowledge, pricing expertise, and an extensive amount of market data to perform a complete transportation analysis. This includes lane analysis, regional metrics, cost per lb. comparisons, mode optimization, and center of gravity studies -- to name a few. Being carrier agnostic allows us to provide a fair and accurate evaluation of how competitive your current rates are against the market and identify pricing strategies for cost reduction.”
Brooks didn't even mention the best part. Our analysis is at no charge and obligation free. We have the answers. Contact us if you want to see how your carriers stack up.
Make the cut
Once you've done your due diligence, don't shy away from making the cut. Put top-performing carriers on your preferred list and others on your no-call sheet. With partners you want to continue to work with, renegotiate your agreements. Know where you stand in terms of rates and performance.
Riley Creps, Operations Account Manager, recaps the most critical indicators to consider when reviewing your shipping partners:
"There are many different factors that any customer looking to ship their products needs to consider. Paramount amongst these are reducing cost, protecting the quality of their product, and ensuring reliable transit times. The sourcing of reliable and consistent carrying capacity at the lowest possible cost can make drastic differences in the operating margins of a business. Any customer focusing on driving their profitability should immediately target these factors."
But most important is to review your compliance criteria and carriers continually. The market can change quickly as new players emerge and others disappear altogether. Prices rise and fall. Your business requirements may shift regarding regional versus nationwide distribution (read more about how a Center of Gravity study can help pinpoint the optimal location for one or more distribution centers).
You may be surprised at what a deep dive into your shipments shows and what carrier compliance should look like. If you’d like us to review your transportation, request an analysis now. That's why we're here: to manage your carriers and turn your shipping into a competitive advantage so that you can focus on the next best thing for your business.