And Why that should matter
The other day I was listening to a podcast on business issues in the booming economy of the USA and they mentioned the capacity issues in the transport sector and how it was difficult for customers to engage companies with sufficient capacity to carry their goods. I thought that’s interesting and something that we haven’t really seen in the Australian market over the last few decades.
Christmas Transport Peak
Of course, every year we face the pre-Christmas peak which certainly stretches the service standards and capacity of the industry, but it only lasts for a season. Also, there has always been transport companies that have limited themselves to certain freight profiles in order to avoid costly mismatches between a customer’s freight type and their systems. The most obvious example of this is carriers that have invested millions of dollars in automated sortation systems who would like to avoid any type of freight that is not conducive to these systems.
Transport Industry Workforce vs. Transport Workload
We may face similar capacity issues as the USA because in Australia its predicated that the growth of the transport task is set to double between 2010 – 2030 and triple by 2050 and yet we are now experiencing an aging of truck drivers. (Figure from Trade & Logistics Industry Skills Council – TLISC).
According to an online survey recently conducted by Australian Industry Standards (AIS), 80% of employers reported a skills shortage particularly with regard to truck drivers, and an ageing workforce.
Transport Safety Laws
Truck safety has also been under increased scrutiny here in Australia with new rules regarding driving hours and fatigue and even maintenance and safety requirements potentially limiting the trucks and vans available. Whilst we might not yet have as significant general freight capacity issues like the USA, we think that it is still worthwhile exploring the notion of what it might take for shippers to make themselves more attractive to the higher quality providers in the express freight market.
Online Shopping, Last Mile Delivery
Let’s explore why that would even be a worthwhile exercise. The industry has a long history of competing vigorously for market share and this will always remain, however with massive growth occurring in the parcel delivery market, fuelled by online retailing and new levels of complexity through automation, many shippers are realising that well performing transport companies are even more critical to their overall service levels and performance than ever before.
Shipper of Choice
Hence shippers wishing to grow and to dominate their industry must have the ability to partner with leading transport providers to achieve their goals. In this environment the old adage of ‘the lowest price wins’ is not always the best choice of transport partner.
What makes a quality carrier want to do business with you? How can you avoid making a carrier either walk away from your business, or more likely, provide an inflated price in order to compensate them for dealing with a poor shipper?
Accurate Freight Labeling
In this day and age, everyone would think that labelling is a given and it should be, but we still see issues with some shippers not producing a clean and accurate label with the correct barcode and full address details, (including special instructions), on the consignment note. The higher quality parcel carriers long ago moved to scanning items through the delivery chain. Nowadays they are introducing 2D barcodes that provide even greater information for superior sortation and tracking.
In the bulk environment, carriers are now moving to scanning the larger items in and out of depots, so it’s important for all shippers to label each pallet with scannable labels. However, some shippers are reluctant to move to the new standard leaving benefits on the table and thwarting the carrier’s attempts to improve their service.
Data Transfer, EDI to Carriers
Manual con notes and labelling comes with a heavy penalty in both cost and service, and therefore carriers insist on data transfer to prime their invoicing, operational and sortation systems. Time and time again we see shippers that send data with address errors, invalid characters or format, missing out on the benefits that the carrier offers.
Many shippers use carrier systems for data transfer, but for those that use either a third party or their own inhouse systems, it’s critical that the transfer of the data is accurate and timely, otherwise freight can be left aside, misdirected or incorrectly invoiced. Shippers that consistently cause problems with data transfer become painful to deal with and will inevitably receive a price penalty for that inefficiency.
Warehouse, Packing and Shipping issues
An oldie but a goodie is poor freight packaging, communication and organisation. Some examples:
- Not having the freight ready in time causing demurrage; not providing easy access to your dock, or dispatch area.
- Having freight that needs to be re-packed on a pallet because the cargo has moved; or because it is leaking. Having freight that needs to re-delivered or diverted, because you haven’t provided special instructions, for example.
- Providing timely and accurate information on amount of freight to be picked up, especially when you need a larger truck than usual.
These are the types of issues that reduce carriers’ operational efficiencies, elongating transit times and increasing their costs; which inevitably is paid for by you, the shipper. Getting your act together with regard to how you pack and ship your goods is a great sign that you are organised and a good partner to work with.
Yes, the ‘elephant in the room’. There is nothing like late payers or shippers that pay the wrong amount; short pay or have poor claims, (without the proper documentation for proof) to put carriers off; making them think twice about a continuing partnership with the troublesome shipper. Often these same shippers demand that the carrier meet their performance standards in terms of timeframes and quality and yet they don’t reciprocate by paying on time and accurately. This is not a conducive to a respectful partnership.
Data Quality for Carrier Rates and Cost Modelling
One of the most underrated aspects of dealing with a carrier is the quality of data that the shipper can provide to a prospective carrier or a third-party logistics company. This data is used by the provider to model what your freight profile is and how it will impact on their business and therefore what prices they can offer.
We recently had a large prospective shipper tell us that they were looking to do a review and would be asking carriers to quote on their business. They were complaining because the carriers were ‘constantly asking for data’ and so he said, ‘No, you give me your quote and then I will look at whether it’s worth providing some data because I don’t want to go to that trouble.
We were surprised at this attitude and thought this company is just ‘cutting their nose off to spite their face’. Without any doubt this shipper will receive a quote that is a higher price than they would otherwise get if they were willing to provide this key information.
Many shippers either can’t supply properly formatted data, can’t be bothered, or rely on incumbent carriers for this. If you can’t produce an independent report; (in Excel/csv file), that shows your consignment history with all the relevant facts i.e. date; carrier; destination; descriptions; service; cube; weight; surcharges; and special instructions, then you are not putting your best foot forward.
Carriers love it when they know exactly what they are going to get. Gone are the days when you can greatly exaggerate what you spend in terms of transport and then hope you can bluff your way through to getting and keeping attractive rates. Carriers build in contingencies when they don’t know what they will get and so these contingencies are doing you a disservice. If a provider can model exactly what you have to offer as a shipper, then you will eliminate contingencies and get the best offer available from the provider.
You should do all that you can to avoid this mistake. If you can’t get this data, then you should get assistance from a specialist that can help you.
Freight Consultancy Partnership
If you want to have a provider that helps you to create value in your business, then treat them like a partner. This doesn’t mean you have to stay loyal to them regardless. It means talk with the carrier, (or freight consultant), set up KPIs, and let them know what you are doing in your business and what issues are critical to you.
Also listen to what the transport providers need to make their business a success. If you work together in a win-win environment, then you can create a true partnership and grow together. It also means that, if things are not working, then they know what they need to do to keep your business. If they can’t, or are not willing to do that, then there should be no ill feeling if you try another provider.
It’s a small list, but certainly one that I hope you find thought provoking. While transport buyers will likely always be in a position of leverage over sellers, it can only serve you well to understand what helps to sell your business to the carrier, thereby maximising the freight cost reduction potentially available to you, whilst improving your service in the eyes of your customer enabling you to profitably grow your business.
If you feel that you are struggling with any of the issues explored above, or you are concerned they might be impacting your rising freight costs, then we would be happy to consult with you on how to improve in these areas.