My prediction for 2010 is that the big story will be the ‘Inability to Execute’. This will be due to the excessive bidding occurring today simply to take advantage of market rates. Many carriers will not survive, and those shippers that switched carriers to get a better rate are really just buying themselves execution problems. Carriers that don’t understand the freight will undercut those that do understand the freight. Lower rates are often not really lower, they’re just not realistic.

A procurement event is the right thing to do, but carrier selection needs to focus on ALL objectives: Capacity, Price, long term Carrier Relationships, Ability to Execute, Service, etc…. If a shipper doesn’t go to bid now, and the market does turn around, they will not have secured the necessary capacity for the upturn. When things turn around, a carrier is more likely to raise rates on the shippers they currently haul for, rather than to switch shippers. So shippers do still need to secure that capacity.

Simply put, a carrier that has empty trucks in the vicinity of a shippers pickups will not only be able to offer better pricing (less deadhead and a better network fit), they will, in practice, give better service (better on-time percentage, and better accept/reject ratio). This is the whole idea behind ‘Network Alignment’. If a carrier understands their network, they can offer more realistic pricing. Where their network is a good fit to the Shipper’s network, their pricing should reflect that.

Almost all shippers I work with tell me that they consider more than just price when procuring transportation. There is, however, always disagreement around the edges on how much it counts, how to make trade-offs, etc. A major limiting factor here is the data the shipper has to actually make decisions. One key reason why a shipper might select only on price and compare to the amount paid in the past is that that is often the only information they keep. Very very few shippers capture (and even fewer archive or mine) the operational data such as: waiting time, time to load/unload, etc. Getting level of service data is even harder – tracking on time, within window, etc. might be recorded at time of the incident, but it is rarely rolled up and matched to the other transactional data elements.

Interestingly, in some recent studies that I have run with a shipper that actually collects very detailed on-time and temperature performance (all reefer) I found that there is next to no relationship between price and level of service. No matter how you define it or measure it, we found little correlation between service and cost. In fact, when we did find any relationship, it was negative – implying that better service costs less!

While this appears to be counter-intuitive, I think it is explained by the gap between the carrier’s pricing team and their operational execution team. This also could explain why the “carrier friendly” actions a shipper undertakes (that may help the operational folks) does not translate into different behavior by the pricing team on the next bid. And this gap, of course, resides in many shipper’s organization when the central procurement team runs the bid rather than the transportation organization.

1) Pay on time (As you stated). This is a MUST DO
2) Due to volatility (not necessarily actual price but the incredible volatility) of fuel prices, adjust fuel surcharge weekly. Don’t have the carrier have to wait for a 13 week adjustment to get their money.
3) COMMIT to primary carriers when you award a bid and put systems in place to ENSURE every lane that is awarded is actually TENDERED to the carrier who won the award.
4. DO NOT “spot price” every day. If you committed in the bid to tender freight to a particular carrier, follow through on that commitment.
5. Have awards programs and scorecards which are very objective. Keep the “I like ….. ” out of it.
6. Be driver friendly at the point freight is picked up and delivered – things such as driver lounges, easy access, pre-loaded trailers ready with paperwork ready to ensure quick turnaround etc. are all vital.

Those are just a few things. You have now got me thinking and I am going to put a complete list together. Perhaps your readers will help. Thanks Adrian!!!