Chris Reeves | Chief Commercial Officer, AGX Freight
We often get asked what shippers can do to contain costs and navigate the volatility in shipping rates during a tight market. In this article, we’ll review the top 5 best practices that shippers can leverage in their business that will return competitive rates and the highest probability of insulation from market volatility.
When the market gets as hard as this, there is a tendency to want to adapt to the market, which could inadvertently conflict with your organizational principles. We think it’s better to have a process that works in any market, and a tight market is as good as any to analyze your process for strengths and weaknesses.
The conditions that have led to this market certainly are unique, that’s for sure, however the current driver shortage is no surprise to anyone. Any observers of the trucking industry have known this for a long time, in fact, here is an article dated January 28, 2000 declaring the arrival of the driver shortage: It’s Official: The Driver Shortage Threatens the Economy. It’s astounding how little has changed in the last 2 decades with respect to the driver shortage, and yet the industry continues to persevere.
While some things remain the same, we’ve seen more than our share of unexpected challenges recently. The supply chain has been rattled in ways we never could have predicted, including a global pandemic, extended closing of the Suez Canal and the Colonial Pipeline attack. Combined, these events have resulted in labor fluctuations, ships drifting offshore California ports, fuel shortages, rail line interruptions, LTL carrier embargoes and more.
Throw all of these conditions in with an economy beginning to heat up and the result is a market wreaking havoc for shippers looking for any semblance of predictability. We’re convinced the best protection from market uncertainty is a disciplined and consistent process.
This brings us to our top 5 best practices every shipper should apply in their business:
1. Start sooner
We can’t emphasize this one enough to our customers. Don’t wait until the last minute. Teach your sales and service teams to encourage customers to order products earlier when possible. The sooner you can get data to your logistics coordinator the better. More time equals greater flexibility and allows the chain to creatively adapt to your requirements. Some companies are not sure what proactive planning looks like, if you are unsure, reach out to me and let’s have a conversation about it. It’s probably a lot simpler than you think. There is an inverse correlation between time and cost, the more time we have to arrange your freight, the lower the cost.
2. Manage expectations
Our best customers have a good sense regarding the complexity of the market. They appreciate the challenges associated with moving their freight and they set expectations accordingly. That means knowing when carriers have leverage and when they don’t when booking freight. It also means communicating within your organization to make sure everyone on your team is working with the same expectations, especially your client-facing staff. Great communication of expectations leads to better decision-making. The more intelligence you can acquire through your broker and available technology, the less likely there will be any surprises.
3. Protect your reputation
Yes, your reputation. Most shippers don’t realize it, but your warehouse or distribution facility is scrutinized thoroughly by drivers, dispatchers, and 3PL’s. Do you know how long your load and unload times are? How about the quality of interactions with your facility staff, including security guards? Are they making it easy for drivers to do business with you, or are they creating issues? Chances are good that if there are common problems, drivers are sharing it with one another through various message boards and at the truck stop, which could hurt your reputation. Having a great reputation for loading and unloading is something every facility manager can control. Some things to keep an eye on include: unnecessary detention times, disorganization, overloaded trailers, poor packing, lack of assistance with loading and unloading – these are all simple things to pay attention to that will improve your reputation with drivers. The better your reputation, the more competition for your freight and ultimately better rates.
4. Avoid the churn
We always recommend developing a relationship with a logistics professional and giving them first right of refusal for your freight business versus canvasing the market. If you are just starting out with a freight broker/carrier, or having trouble with one you have been working with – try setting up a grading system and holding them accountable to your expectations. Actively listen to what your providers are seeing in the market. Just churning loads in the marketplace creates a lot of inefficient work for brokers, agents, and carriers and ultimately drives up cost for everyone. Your best bet is to select a company that has assets, a strong network of carriers and an excellent track-record of communication. Even when capacity is plentiful issues are going to come up in this business, it’s unavoidable, therefore it is critically important to know who you are working with.
5. Embrace safety
Finally, no discussion about best practices is complete without highlighting the importance of safety. The reality is we are in a business that has significant consequences when there is accident. It is incumbent upon all of us to be vigilant and exercise discipline in our risk management process. Do you know what that process looks like for your transportation providers? Perhaps now is a good time to have that discussion with them and find out if there is anything you can do to help them adhere to their safety protocol.
It is always our goal to be our customers’ first choice for their freight and we welcome the opportunity to earn the right to be yours. Taking a relational approach, rather than a transactional one, is far more cost and time effective. Let us know if we can assist you with your freight business.