Shippers are being squeezed by rising transportation costs due to the lack of drivers, capacity issues and the electronic logging device (ELD) mandate. It’s been a common theme in earnings announcements in the past few months from many of the nation’s largest companies, especially retailers.
So, what’s a shipper to do? Two shipping experts discussed some ideas and explained how their companies approach their transportation spend during a panel on Monday at the 44th annual Transportation & Logistics Council meeting in Charleston, SC.
“Right now, we are seeing a lot of pressures and we don’t have a lot of answers, so we have to be creative,” said Jeffrey Meyer, group transportation manager for Nestle Purina PetCare.
Meyer said that Purina spends $350 million a year on transportation, moving 3,900 shipments per day (800 full truckload, 2,900 parcel and 200 LTL). Through the years, the company has learned a few tricks, perhaps the most important being that it all comes down to relationships.
“We want to forge a long-term relationship with our carriers,” he explained, adding that the company will work with any size carrier – it has one carrier partner with just 15 trucks and another that has been with the company since 1982.
“If you get our business, it’s yours,” Meyer said. “Some guy may come along and say, ‘I can do that lane for a quarter cheaper,’ [but we won’t change]. We want that long-term relationship. If you are providing the service, we value that and will stay with you.”
Meyer detailed some of the “perks” of working with the company, including payments within 15 days, no regular bid cycles and evergreen contracts. “When we negotiate a rate with you, that will stay as long as it works for both of us,” he said. “Hopefully, we get a year out of it, sometimes 18 months, and in today’s market, maybe it’s 8 days.”
Nestle also works on behalf of its carrier partners, Meyer added. “We’ll be your advocate for detention times or drop trailers. We won’t always win, but I can tell you they are starting to listen.”
Within its own operations, Nestle offers 90% drop trailer operations on pickup and 70% drop trailers to customers. It also opens its drop yards 24/7 to allow carriers to pick up or drop off carriers at schedules that work for them. It seeks out zero deadhead miles, requiring carriers hauling loads into its facilities to take loads out.
Most Nestle facilities allow drivers to take their DOT-mandated breaks on company property and when possible, scales have been installed so drivers can be sure they are legal before they leave a facility. “We do load heavy and we don’t want drivers 15 miles down the road [when they find out they are overweight],” Meyer said.
Cookouts and small gifts are common for drivers, especially around Driver Appreciation Week, and the company regularly holds “safety blitzes” onsite with local law enforcement, not to catch drivers, but to inform them of current rules so they don’t get caught on the road. Finally, Nestle offers 24/7/365 access to freight, allowing companies to pickup and drop off on weekends as it fits into the schedule.
“We know that drivers are the first point of contact with our customers, so we want that to be a positive experience,” Meyer said.
Meyer also noted the company’s use of data to help make better decisions, touting Fourkites software and the use of predictive on-time monitoring of loads. The company is also using Power BI and will be rolling out PINC Yard Management later this year and into 2019.
Julie Thuston, assistant vice president-operations and account management for Unyson, a multi-modal provider within the Hub Group, then relayed some data the company collected from a recent carrier summit it held. The summit featured 30 mid to large truckload asset providers and the results of speaking with these carriers found four common themes emerge. The fleets were all concerned about driver utilization, fewer stops, dedicated lanes, and shipper of choice programs.
On driver utilization, Thuston relayed that carriers believe drivers will quit before driving an unfavorable lane. That turnover and the resulting recruitment and training of new drivers leads to higher rates. That means some shippers should rethink lanes that are not attractive to drivers and work to ensure carriers can build more attractive lanes.
To do this, Thuston advised providing more lead time to carriers, offering quicker load/unload times, and offering online scheduling tools. “It’s really about rescheduling,” she said. “As capacity tightens, carriers are calling saying, ‘I’m trying to get in to get your freight, but the shipper doesn’t have any available docks.”
Another trend to emerge was the dislike for multi-stop routes. The surveys found that these increase rates “because it kills driver utilization,” Thuston said.
Unyson was having this issue with some bids and the solution was to remove the LTL freight from the bid process and send it out for a separate bid. The result was the truckload freight rate came in at half the original bid. She said involving the customer in discussions with the carrier can help them understand the impact of their requirements on freight rates.
Many carriers like dedicated operations because it provides routine. “From a shippers’ perspective, they get quicker transit, increased performance and more static rates,” Thuston said. “From the carriers’ perspective, they gain better driver recruitment and retention, higher driver acceptance, and improved planning.”
However, there are times where dedicated operations can cost more, but understanding the network demands can help lower those costs. Thuston noted an example of a shipper that had a dedicated lane, but the carrier was charging a higher rate because there was no return freight on the lane. That was due to the requirements of the shipper, which had strict delivery windows. But loosening those windows by a day or two on either side allowed the carrier to find return loads and resulted in a lower rate for the shipper.
Finally, Thuston admitted that a few years ago, the concept of “shipper of choice” seemed destined to disappear. However, it has become a significant push by shippers as they work to build better relationships with carriers.
Among the tips Thuston shared to achieve “shipper of choice” status are:
- Provide flexible shipping/receiving hours
- Keep facilities on schedule to avoid wait times
- Provide easy rescheduling options
- Offer drop and hook programs
- Offer a driver’s lounge
- Hold Driver Appreciation Week activities
- Treat drivers like you would a customer
“Carriers are not going to allow mistreatment of their drivers [anymore],” she concluded. “Times have changed and we need to change.”
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