While shippers face the difficult market conditions of tight capacity and increased consumer demands, they are also being challenged to find transportation cost savings and improve customer satisfaction. As shippers compete for capacity, many are asking what they could be doing to secure the best truckload performance and rates. Why do some shippers receive better service, and which best practices can others learn from them?
These are questions we posed to MIT graduate students for a research project that focused on service and pricing in the truckload market. The researchers examined more than 2 million shipments across 3 years of full truckload van moves over 250 miles in the lower 48 U.S. states to identify which attributes and best practices separate shipping “Leaders” from the “Laggards.”
To determine whether a shipper fell into a Leader or Laggard category, researchers measured three commonly-used performance metrics: on time pickup, on time delivery, and first tender acceptance.
They found that common attributes of Leader groups include:
- A rationalized truckload carrier base. Leaders receive better performance and price from carriers when that number is reduced to a finite amount. Research found that the two Leader groups worked with averages of seven and 30 suppliers, respectively, while Laggards worked with an average of 45.
- Select and use providers with focus. In the research, using transportation providers with focused roles in the route guide was one of the strongest indicators of performance. Leaders use fewer suppliers that highlight lane focus over a narrower geographic region. Carriers naturally have varying degrees of capacity in some lanes; some focus their efforts in a smaller geographical coverage area while others may have more national coverage. Matching their strengths with your service corridors leads to better performance and having a routine procurement process will ensure your carrier networks are aligned with your current demand.
- The right strategic blend of top performing providers. Researchers found that Leaders had certain freight attributes that worked together to improve freight performance. These included longer lead times, consistent load volume, geographic and lane focus, younger price ages, and the use of both asset carriers and brokers.
So how can you start adopting these Leader best practices? It all starts with having visibility and quality data around your freight operations and carrier performance. Look to a transportation management system (TMS) plus managed services provider to help. It’s extremely difficult to achieve proper carrier alignment, a strong execution strategy, and sufficient internal collaboration without the data a TMS can provide—domestically and globally—across all transportation modes.
Here are four key ways that you can leverage your TMS to gain the business intelligence and process optimizations to become a leader in your field:
Carrier scorecards and performance: Some TMS platforms have built-in business intelligence tools with carrier and supplier scorecards ready. This tool allows you to track and benchmark carrier performance to help narrow down your carriers to a dedicated core group and reduce freight costs. The data can be used to help facilitate negotiations with your carriers and drive internal process improvements. For example, with this business intelligence, you’ll gain visibility to delivery delays so you can better understand and address root causes for these issues by location, lane, and customer.
Network analysis: To maximize asset utilization and minimize costs, TMS power users can conduct route guide analysis and review carrier performance at the facility and lane level. A TMS can measure and analyze costly detention or delivery issues to find out where they occur, so you can implement procedures to reduce them. It allows for benchmarking your locations against each other, providing visibility into potential facility-level issues that wouldn’t normally show up in a blanket carrier performance review.
Mode and route optimization: Our research suggests that when you bundle low-volume lanes together, you can increase the density, allow carriers to optimize their networks, and make the lanes more attractive to serve. With your freight management centralized in your TMS, you can achieve savings through load consolidation and mode optimization. While this research project focused on truckload specifically, it’s important that your TMS can manage all modes of transportation so you can get a holistic view to manage your entire supply chain operation.
Order management and shipping planning: The more lead time a carrier has between the tender and the pickup day, the more likely the first carrier in the routing guide is to accept the load. Using a TMS, you can monitor and collaborate to drive date, quantity, and lead time compliance within all your locations.
The ability to utilize technology to drive strategy and data to improve performance—and ultimately creating financial value—are now imperative for today’s complex global supply chains. ARC’s survey-based research found that respondents reported freight savings of approximately 8 percent with the use of a TMS. Today’s TMS solutions connect the performance dots as never before, and—when used effectively—enable shippers to delve more deeply into the root causes of problems and implement optimizations to gain a competitive edge.
Click here to read more about our Leaders and Laggards research findings and how you can apply the insights to your supply chain.