How would you react to a transportation service provider’s scorecard of your performance as a customer?
Some providers are turning the tables on shippers in this way. It is even possible that the scorecarding of shippers by carriers will become a new industry best practice.
Whether you are indignant, inspired, or intrigued by the idea, examining your network from the carrier’s vantage point can reveal issues that previously went unrecognized. The revelations may be uncomfortable, but addressing them can benefit both buyer and seller in a number of ways.
Shippers have been scorecarding their transportation service providers for a decade or more. Why are carriers now wielding this powerful tool?
The broad answer is that in an uncertain economy companies generally are more selective about what type of business they accept – they have to be. An industry-specific reason is that tools such as transportation management systems (TMS) have the analytical capacity to measure shipper performance from the carrier’s perspective.
A tight market that favors sellers also puts carriers in a good position to evaluate shippers. However, even in a buyers’ market this fledgling best practice delivers value for both parties.
Carriers benefit by identifying cargo movements that are unprofitable. Perhaps the market has changed and certain lanes no longer fit into the provider’s network. Or maybe the business is simply more trouble than it is worth and the carrier can no longer afford to support such a loss leader.
Take, for instance, a major food products manufacturer that learned during a regular review meeting that a carrier wanted to vacate a handful of lanes. Unplanned accessorial surcharges had become so onerous that the loads were a drag on profitability and productivity. The provider backed up its case with a detailed scorecard analysis of the charges and time penalties it was incurring. It wanted out.
News like this may come as a shock, but an enlightened shipper can also see competitive advantage. By fixing the problems it can become a better and more efficient customer that is able to perform to a higher standard than less able rivals.
Call it winning the cargo beauty pageant. The most attractive players tend to draw top carriers; the ones capable of analyzing freight networks in the same way that leading shippers do. This mutual expertise provides a foundation for strategic relationships that take freight networks to the next level of cost efficiency.
In addition, carrier-centric shippers learn more about the cost to serve their end customers. They glean information from the carrier scorecards and use it to help them scorecard their own customers and sales methods.
This is not a new concept. Companies frequently segment their customer bases to identify the most profitable client organizations and allocate resources accordingly. And they use the analyses to find out how low-profit buyers can be turned into high earners.
Similarly, the best management leaders are not afraid to ask vendors what their organizations are doing wrong. The answers may not be palatable – or even on target – but usually contain enough nuggets to improve the business if acted upon.
Carriers are basically doing the same job when they scorecard shippers.. And the analyses could become more effective as the industry and measurement tools such as TMS solutions adapt to the practice. Further applications will follow, such as using the information to brief sales departments on how their resource dollars should be apportioned.
Whether the scorecarding of shippers by carriers will become a best practice is an open question. To a large extent it depends on the attitude of shippers. Some might treat these reports as a threat from service providers that are overstepping the mark; others will see an opportunity to collaborate with supply chain partners to achieve continuous improvement.
Which camp are you in?