The term “core carrier” is used widely in the freight industry, but the way it’s used is not consistent. The definition can vary from company to company. It can even be argued that very few companies have developed a true core carrier program that is aligned with strategy and built on best practices.
Adding to the confusion is the absence of a standard template for managing this specific relationship between a carrier and a shipper. Yet, core carrier programs have a profound influence on network efficiency.
Given these inconsistencies, let’s take a deeper dive into the core carrier concept.
What is a Core Carrier?
A broad definition of a core carrier is a set of carriers that a shipper organization has identified as business partners that execute on mutually agreed performance and price commitments.
These providers are brought into the shipper’s corporate fold by aligning their networks and entering into a close collaboration driven by continuous improvement. In return, they are more likely to see volumes on selected lanes, gain access to privileged commercial information, and receive first refusal on new business opportunities.
But, a more rigorous definition of a core carrier program is one that is based on components such as the following:
- Alignment with transportation management strategy.
- Alignment with procurement, contracts and scorecards.
- Measures of success based on targeted KPIs and metrics.
- Consequence and awards programs.
- Managed expectations through a Welcome Packet and training support.
- Well defined carrier satisfaction measures.
- Links between program criteria and contractual, procurement and scorecarding practices and incentive schemes
Understanding the Core Carrier Program Strategy
Understanding the strategy around a core carrier program is just as important as how it is defined. Let’s look at a few different ways to look at core carrier strategies.
1: Derive More Value from the Network
A primary goal might be to derive more value from the network. One mechanism for meeting such a goal is to assign a dollar figure to the value of a dropped trailer versus a live load. It can yield hidden cost savings. For example, a live load that is $50 cheaper than the going rate might actually be of less value in network terms than a carrier that streamlines the work flow by dropping a trailer at a key location.
Keep in mind that although these factors are always a high priority, the level of criticality attached to them varies. For instance, in an economic downturn, being rate-competitive will almost certainly carry more weight than in boom cycles when capacity is at a premium.
For more on the counterintuitive dynamics of freight contracts and the impact on carrier rates and relationships, see Kevin McCarthy’s blog series “Cutting Through the Fog of Freight Rate Predictions” and “Avoiding the Two – Year Carrier Contract Pitfall”.
2: Differentiate Scorecards
Another important component of a core carrier strategy is how the terms “core” and “non-core” are defined in relation to the shipper’s service goals and scorecard evaluations. Laying out these expectations in a clear fashion makes it easier for core carriers to align with the shipper’s strategy and for the shipper to ensure that the route guide is updated in line with network and market changes.
Scorecards should highlight carrier performance on core lanes as well as for movements of non-core or unawarded surge freight. With this level of detail, both shipper and carrier can pinpoint when a provider goes beyond the call of duty to help its customer with surge freight, short leads, and/or expedited/unplanned shipments. Core and non-core carriers should be scorecarded differently and the ratings reflected in the way loads are awarded.
Without guidelines such as these, surge demands can undermine a core carrier relationship. A primary provider might shy away from an unplanned, last-minute move – particularly one that involves unfamiliar lanes – for fear that handling the load will compromise the service and volume commitments that define its status as a principal carrier.
Building transparency into the relationship helps to avoid such issues. Indeed, this is one of the advantages of a core carrier program, in that by definition, such relationships are based on collaboration and very specific deliverables.
Value of a Transportation Management Solution
A transportation management solution (TMS) can maintain a high level of visibility at all times. The technology combines robust processes with business intelligence tools such as carrier scorecards. Moreover, a TMS is neutral; it delivers performance data and analytics without bias to either party.
Accurate and timely data is essential when monitoring and validating the commitments that make up the core carrier agreement. Often, these commitments can get lost in the day-to-day challenges of managing a distribution network.
For example, the carrier takes the relationship seriously and forgoes other business opportunities, but the shipper client is not providing the volumes it promised. It is important that both parties use an unbiased source of facts and figures to benchmark the arrangement and take corrective action when necessary.
A Successful Core Carrier Program Benefits Both Parties
A core carrier program that has strayed off course can be costly. Poorly performing networks tend to incur cost penalties such as customer fines; manufacturers can lose market share, particularly in make-to-order environments where there is minimal inventory to make up for missed or late deliveries.
And let’s not forget that carriers also benefit from a well-run, clearly defined core program. Knowing what the shipper’s performance targets are, how these goals are measured and evaluated, and what the incentives are for delivering on these promises, make it easier to work with customers and turn a decent profit.
Most shippers are intimately familiar with the idea of a core carrier, but such programs require deep thought, careful planning, and the support of robust processes and technology. The partners need to be aligned strategically and operationally, and there should be a feedback loop between the performance evaluation and awards elements of the arrangement. Do your programs fit this profile?