Take two companies that trade independently with distinct clients, suppliers and other stakeholders not to mention corporate cultures and bottom lines, and bring them together to operate a complex distribution network as efficiently as possible. This, in essence, describes the relationship between a shipper and a carrier, and when framed in this way it seems obvious that there is ample room for damaging misalignments between the two parties. It is the job of a carrier management program to avoid such dislocations, and to create the optimum conditions for a mutually profitable relationship.
Still, it is easy to overlook the need for a formal, thoughtfully structured carrier management program. This is particularly true when shippers are dealing with many thousands of loads and numerous carriers. Establishing productive partnerships under these conditions is very difficult. Instead, working relationships tend to be managed in an ad hoc fashion, exposing networks to costly inefficiencies and sub-par service that can do serious damage to the brands of both carrier and shipper.
In this first of a two-part blog, we offer shippers some advice on how to create an effective carrier management program during the formative stages of a working relationship. In the second part, we will look at how to embed these programs in day-to-day operations.
Laying the groundwork for a successful carrier relationship management effort begins at the carrier selection stage. Devoting time and resources to designing such a program before you have even started working with the carrier(s) concerned might seem counter-intuitive, but starting early can pay huge dividends further down the road.
First, make sure that you understand the vertical market in which the partnership will compete. For example, if you are delivering homogenous loads to a mass market retailer there is less need to target carriers that can handle non-standard shipments. Or if you are a just-in-time manufacturer with low levels of safety stock and need direct-to-line deliveries, choosing a carrier on the basis of freight rates alone is a risky strategy that leaves you vulnerable to service failures.
Also, consider the importance you attach to each of the variables in the carrier selection equation. These include freight rate, service track record, and the value a carrier brings over and above basic requirements. Expertise and technology that helps you to optimize your network, and on demand dedicated fleets, are just some of the value adds that a carrier can bring to the table.
Make sure that prospective carriers understand which elements of a service contract you regard as high-priority items. Although these discussions can take place at any time, ideally they should start at the RFP stage. At this point you can delineate your network and distribution strategy, and start the process of comparing respective networks to ensure that there is close alignment. Give carriers the opportunity to realign their cost structures and operations where necessary; you are aiming to establish partnerships that are much deeper than unremitting, rate-based plays.
The importance of alignment is not confined to operations; each internal function, including finance, marketing and sales needs to be on board with your carrier selection strategy. Every one of these functions ultimately impacts relationships with carrier partners.
These decisions impinge directly on the effectiveness of a carrier management program because they shape the criteria you will use to keep the relationship aligned and to measure performance. The goal is to create a transparent partnership where the participants have a deep understanding of the other’s mode of operation and strategic goals. When creating a carrier management program not taking these selection factors into account at the outset is like planning to implement a process without any metrics.
The second part of this two-part series, How to Maintain Enduring Carrier Partnerships, by Brent Nagy will be published next week.