Are you a Preferred Shipper?

When capacity is tight and rates are high, to get the best deals, it pays to be a Preferred Shipper. But what is that, and how do you become one? (Photo: Shutterstock)

When capacity is tight and rates are high, to get the best deals, it pays to be a Preferred Shipper. But what is that, and how do you become one? (Photo: Shutterstock)

Why can’t I find fair priced trucks?

Supply and demand balance is actually a fairly simple equation and the tilt of that relationship at any point in time brings with it positive or negative effects to either side. One can look to the current and recent trucking market to see exactly how this interplay works and how predictable it can be in application. Just last year, shippers were receiving multiple contacts a week from brokers and asset providers looking for business connections to begin shipping freight. As happens with every progression, they start as only a few requests and hit a groundswell then a peak as was seen in early 2017. But come spring of 2017, the tide began to shift. The calls were less frequent and less desperate. In parallel, the spot market appeared to become a little tighter on capacity and higher in cost for very high volume, dynamic shippers. The hurricanes and ELD enactment of late 2017 only amplified the already growing change.

Just as providers were all but begging for business in late 2016, the middle of 2017 brought the swing which is now exhibited by shippers desperate for trucks. This swing is predictable in most supply/demand relationships and history has shown us it frequently happens in transportation. The mystery is always “when” it will happen, not “if.” When the pendulum is in favor of the shippers, they attack the market like sharks, pushing out the weaker providers and allowing their procurement groups to dig their teeth in with less regard for long-term relationships or solutions. Alternately, when it swings back to the providers, the first reaction is to publicize that rates are going up so that when they actually ask for the increase, the shipper is already resigned to the fact that it is happening. Neither is rarely driven by true cost considerations or collaboration but mostly by supply and demand dynamics.

For some shippers, finding capacity is even more difficult in these tight times and they struggle to understand why they are not getting the trucks they need at competitive prices in comparison to their peers. Many times, this is a direct reflection of the relationship they have built with the market during the times when they held the upper hand. This goes well beyond the relationships formed around the procurement and execution of the freight. For instance, some shippers will claim to be driver friendly offering restrooms and WiFi at their sites, but most don’t go far enough to become a Preferred Shipper for their partners.

What does it mean to be a Preferred Shipper?

It may be hard to put an exact definition on a Preferred Shipper, but it is easy to define what it is not. It is not a company that is inflexible with pickup and delivery times. Do carriers have to bend over backwards to fit your crowded dock schedule, wasting driver hours just trying to fit in? A Preferred Shipper does not have lines of trucks in front of facilities on a regular basis causing delays and more lost driver time in addition to a reduction in service to your end customers. Do you take more than 45 minutes to load a truck from gate in to gate out? Just in Time (JIT) sounds like a great inventory concept but it many times becomes Not Quite in Time for loading trucks on schedule and quickly. Do you penalize the driver by requiring them to pay a fine on the spot for a fine they did not cause? Using fines to drive delivery behavior is a contentious topic but forcing drivers to carry cash causes unneeded stress and possible security issues.

All of these characteristics and many more result in drivers and carriers avoiding facilities or at the very least, charging a premium to service them. There is a large percentage of spot market freight that is supported by owner-operators through brokerages and they make decisions on this basis much more frequently. Every time a driver or carrier refuses to service your site or charges a higher rate to do so, you are exposed to these extra costs and the tie in to your Preferred Shipper status usually goes unnoticed because you don’t even get a chance to see the better rates. This goes beyond issues under your direct control and also applies to customer or supplier locations you service with each issue adding to the overall cost of the freight.

What most shippers do not realize is that there are many actions that can be taken to overcome these costs. Yes, some will take investments of time and effort, but most can easily generate positive business cases where costs in facility, labor or process change can easily be compensated for by savings in a tight market. Some improvements could include increased simultaneous loading capability per hour, speed of the check-in/out process, reduced loading times and movement of shipping fines to a centralized corporate level. There are different possible solutions but innovations such as automated check-in and automated skid loading or basic improvements such as extra dock doors, forklifts, loading resources and improved efficiency can make dramatic impacts. By thinking across silos and cost buckets, a shipper can easily find the opportunity areas to make an impact and become a Preferred Shipper.

Are you feeling the constant push and pull on rates with your freight providers? Maybe it is time to step back and lay the foundation for better results in the future. Investments made today to become a Preferred Shipper can reap rewards in both tight and loose freight markets of the future.

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