THE NETWORK Ideally, the carrier’s network of trucks and lanes will match the shipper’s needs, so its trucks are already traveling the same regions as the shipper’s cargo. The eet should also be able to accommodate any special requirements, such as refrigeration. “There has to be a match on both sides,” says Milda Davis, vice president of logistics with GP Transco, a logistics services provider. Few carriers can take on every potential shipment. “We can’t just say we’ll do everything if the shipper isn’t offering consistent loads or if there isn’t a t with the volume or type of cargo,” she says. Taking on a lane that’s outside the carrier’s network can be costly, given empty miles, inef cient driver utilization, and possible service issues. “When customers and our networks overlap, we can provide better service, offer more capacity, and operate ef ciently and effectively,” Davis adds. At the same time, if a shipper can bring consistent volume and/or growth, some carriers will consider whether it makes sense to adjust their network and capabilities. CLEAR REQUIREMENTS Both shippers and carriers bene t when they communicate their requirements at the outset and address them in the contract. Among the provisions to include are service expectations, performance metrics, transit times, and any special handling requirements. “Contracts that don’t specify what happens if a load is late or if fuel prices rise can trigger problems later on,” Bouk says. Shippers may feel they’re being charged for services they didn’t agree to, while carriers may feel the shippers aren’t being fair. “It’s better to nail down everything in detail,” he adds.
“We can ’ t just say we ’ ll do everything. When customers and our networks overlap, we can provide better service to our customers, oer more capacity, and operate eciently and eectively.” —Milda Davis, Vice President of Logistics, GP Transco
Another risk when requirements are vague is that carriers may under- bid. If they realize after the fact that they can’t meet the requirements, some may default on the bid, or not accept the load. In some cases, when carriers aren’t sure about the requirements, they boost their rate to account for potential unforeseen expenses. Shippers then end up paying more than they would if they clearly stated their needs early on. SCHEDULES AND FLEXIBILITY Typically, the more exibility a shipper can provide when requesting shipment departure and delivery days and times, the better the carrier can price its services. “If a carrier can t a shipment in its schedule, it gives them more freedom to negotiate prices,” Jaehning says. Some carriers shy away from forced appointments, or those where they’re required to deliver a shipment to a dock at a precise time. The shipper requesting the delivery appointment may not understand the time required to travel to the appointment, given the regulations that govern driver hours. Similarly, when carriers take a rigid approach to contract negotiations, they may deter potential shippers and limit their business opportunities. Instead, exibility can be incorporated into the contract. For example, the contract may state that rates will adjust based on diesel costs, as listed by a third- party standard. Shippers get a fair rate, while carriers gain protection against cost increases.
A LONG-TERM APPROACH Taking a strategic, long-term approach can help both carriers and shippers build sustainable, enduring businesses. For carriers, this can mean turning down opportunities that don’t t—not always an easy choice, as few carriers want to forgo opportunities to make money. At the same time, a carrier needs to be thoughtful when assessing which shipments to take. The routes need to t both the carrier’s and shipper’s needs and turn a pro t. To determine which opportunities t, Davis and her team analyze information from GP Transco’s transportation management system. “It’s a lot of analysis and looking at the numbers,” she says of their method. At the same time, they’ll also consider the overall relationship with the shipper. For shippers, building strong relationships with carriers that are interested in working together on an ongoing basis often is more effective than focusing solely on cost. “Prioritizing short-term savings over contract adaptability can hinder responsiveness to market changes,” Reeder says. COMMUNICATION IS KEY In addition to understanding each side’s priorities, exibility and open communication are key to strong shipper-carrier partnerships. “Both
shippers and carriers often start negotiations with rigid terms that
prevent them from achieving a win-win situation,” Seran says. A exible mindset and the willingness to compromise on certain things can help avoid this. A commitment to communication can also create opportunities to address challenges and build partnerships. When problems arise, Jaehnig says, “Don’t get mad. Communicate.” n
“Prioritizing short-term savings over contract adaptability can hinder responsiveness to market changes.” —Shaun Reeder, Management Consultant, TBM Consulting Group, Inc.
130 Inbound Logistics • July 2024
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