Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Strategic Shift: Carrier Relationships

TMS technology and truck driver relationships

After deploying a TMS + managed services solution, shippers can often shift their focus from tactical execution to more strategic initiatives. An example of such an initiative is improving carrier relationships and overall performance.

This is an area of freight network management that can yield huge benefits. The performance of transportation service providers is critical to the efficiency of the network. A TMS combined with managed services can identify opportunities for improvement that were not apparent prior to the system’s implementation.

There are a number of reasons why managers who do not have the support of TMS technology can find it difficult to keep up with the strategic demands of their networks. They might lack the in-house resources needed to work on these issues, or are simply too busy with tactical, day-to-day management tasks to spend time on logistics strategy.

The problem gets worse when the network is reconfigured in response to major changes such as a shift in the direction of the business. When this happens, the tactical workload often increases putting even more distance between in-house transportation managers and strategic issues that need their attention.

One of the issues often neglected is poorly performing carrier relationships. Here are some ways in which this type of service failure can damage a freight network.

Tender acceptance rates too low. A shipper may be largely unaware of unacceptably high load rejection rates in the network. The lack of attention can be costly. Take, for example, a situation where freight volumes are peaking and the shipper has short lead time orders. Carriers in the route guide decline the business and the shipper has to resort to the spot market where they pay top dollar for capacity.

With the implementation of a TMS, managers have the ability to shift their focus to developing route guides that reduce rejection rates and lower costs, even during spikes in volume.

Declining route guide depth. Freight managers are going lower and lower in the route guide to find capacity, but do not have the time nor the level of visibility to address the issue. Perhaps the rates offered by the top carriers when they first won the business are no longer valid, and these transportation service providers are going elsewhere for loads.

With the benefit of a TMS solution, the managers can realign the route guide. They can weed out the carriers at the top of the route guide that are not accepting tenders, and avoid using low-tier providers that are more expensive and less efficient than first-choice incumbents.

On time delivery slipping. Consider a situation where customers are complaining that on time delivery rates are below agreed levels, and want to impose fines for the shipper’s sub-par performance.

A TMS + managed services solution can help in a number of ways. For example, the TMS can reduce the shipper’s reliance on anecdotal delivery information that may or may not be accurate. Also, with the benefit of reliable data on deliveries as well as root cause analyses, the shipper is able to respond to the accusations  much more authoritatively.

Planning for seasonal peaks. As mentioned above, capacity is often scarce during peak demand seasons. Finding trucks during these periods is even more challenging for shippers that have failed to effectively manage their relationships with carriers.

TMS solutions can help shippers to plan for spikes in demand by, for example, identifying carriers that may be open to the possibility of more freight in return for assisting when capacity is in short supply.

Aligning with service providers. When carriers and shippers are not on the same page, the result is often miscommunication and a lack of transparency.

A TMS can help to keep the parties in synch by providing common performance data. This is particularly important when there are multiple carrier locations for single customers, and the flow of information between carrier and shipper is complex.

Challenging industry. In some cases the nature of the business is not conducive to the close monitoring of carrier performance. Take, for example, a shipper in the mining equipment sector, where customers are widely dispersed and only require a handful of shipments per year. It is difficult to develop rich data sets on transportation service providers when shipment activity is low and confined to a few lanes.

Although a TMS solution will not change a low-volume business model, it will enable the shipper to better manage the carriers they use and to develop analytics tailored to their network.

Outside of these key performance areas, shippers that adopt a TMS + managed services solution can get creative in the way they spend time on strategic areas of network management.

One shipper wanted to find out how they were perceived by service providers. The company saw strategic benefits in being viewed as a preferred partner by carriers (for more on this see Carrier Friendly Policies – A Savings Boost?). Over a three-month period they surveyed truck drivers on practices such as the reliability of delivery appointments and the duration of delays at facilities. The lessons learned from these surveys drove opportunities to improve carrier relationships.

The potential for developing solutions like these becomes greater when managers have the time, the data, and the analytical support to focus on strategic issues. A TMS + managed services solution provides these resources.

We plan to publish further posts on the strategic initiatives that shippers can tackle with this type of support.