Guest Commentary: How to Become a Preferred Shipper (Strategies for the Coming Capacity Shortage)

Business has been improving for the U.S. trucking industry. The economy is continuing to regain momentum. Shipper demand and carrier availability have come back into balance after several years of excess capacity. But these positive developments are beginning to be overshadowed by concerns about the ongoing driver shortage:

  • CNN has reported there are currently 30,000 open slots for drivers
  • Estimates indicate carriers will need to hire 100,000 drivers annually in the coming years to keep pace with demand
  • The Bureau of Labor Statistics (BLS) projects the driver shortage will reach 330,000 by 2020

According to the American Trucking Association, the industry already faces an average driver turnover rate of 98% (2012), exacerbated by hiring and training costs of $3,500-$5,000 per driver. Since the most recent BLS statistics cite 790,000 “heavy and tractor-trailer” drivers in the U.S., that means trucking companies are spending well over $3 billion simply to maintain current staffing levels, never mind the gap left by the driver shortage.

On the surface, this sounds like a problem for carriers. So why should shippers be concerned? Freight companies are going to face severe challenges finding drivers to get shipments where and when they’re wanted, perhaps sooner than later. But there are a number of practical, immediately applicable ways to lessen the impact of fewer drivers and the resulting capacity crunch.

Understand The Carrier Perspective

To increase driver retention rates, carriers increasingly find merit in accommodating key driver concerns. Aside from increased compensation to attract and retain drivers, that includes trying to establish more consistent lanes, expediting pick-ups/drop-offs and getting drivers home more frequently. One challenge to this approach, however, is that many shippers focus exclusively on price when making their transportation decisions.

“Customers with a strict ‘procurement mindset’ overlook important factors like consistency, overall experience or past performance. So we end up with more churn, more idle trucks, lost investments in recruitment and training and fewer drivers who stay behind the wheel for the long-term,” explains Steve Gordon, Chief Operating Officer at Gordon Trucking, Inc. “Shippers who can act as partners in supporting a driver-friendly environment are a great value to us that goes beyond the rates they pay.” That can make a big difference when you have shipments ready to go and carriers have to decide which jobs to accept and how to deploy limited numbers of drivers.

Make Your Business Attractive to Carriers

You can protect yourself from any driver/capacity shortage by becoming a preferred shipper, a customer that carriers want to do business with. That requires building strategic relationships that benefit you, carriers and their drivers.

California-based Ventura Foods, which managed more than 127,000 inbound and outbound shipments last year, has a long history of building these kinds of strategic partnerships. Besides being an active participant in Driver Appreciation Week every year, the company has ongoing outreach programs to ensure driver facilities are clean, comfortable and well maintained, and that pick-ups and drop-offs are handled quickly and efficiently.

The result: Ventura has a 97% tender acceptance rate and scores much better than average on a wide range of industry benchmarks. The company has yet to experience any capacity issues and receives a half-dozen inquiries daily from carriers wanting its business.

“We don’t shop rates. We look for value and long-term partnerships. So even as our business has grown, I’ve never had to dial-for-diesel, begging someone to take my load,” says Dave Kodadek, Director of Transportation.

Practical Steps to Becoming a Preferred Shipper

Being a preferred shipper and developing a productive partnership with carriers is surprisingly simple and highly cost-effective. But it is important to be consistent and to ensure that everyone from the welcome center to the executive suite is part of your efforts:

1. Treat Drivers With R-E-S-P-E-C-T
How they are treated at shippers’ facilities was ranked #1 by more than 80% of drivers in a survey by Ventura Foods to determine the most critical factors in keeping drivers on the job. “Throughout the supply chain everyone has focused on efficiency, but they’ve overlooked the drivers,” says Dave Kodadek.

In addition to clean, easily accessible restrooms/showers, clear signage and available parking, it’s important to keep in mind that drivers get paid only when they’re loaded and rolling. Streamlined processing and accommodating their schedules as much as possible (even if they arrive early) go a long way toward building strong relationships.

2. Establish Trailer Pools
Work with carrier partners to maintain available assets on-site. This allows trailers to be loaded and unloaded without drivers being present and gets them back on the road faster. “Live loads,” on the other hand, run the risk of delaying drivers for hours, increasing the potential for triggering hours-of-service detention.

Providing trailers for the pool increases carriers’ asset costs but greatly enhances operational efficiency, which offsets the additional expense.

3. Leverage All of Your Carriers’ Capabilities
Understand the full range of shipping alternatives your carriers can offer. In addition to truckload, these can include intermodal, dedicated and brokerage services. Because the driver shortage is most acute in the long-haul truckload segment, taking advantage of other available options can help avoid capacity roadblocks on your traditional routes.

4. Provide Timely Communications
Whenever possible, keep carriers informed of anticipated changes in demand (inbound and outbound). This allows them to make appropriate adjustments to their staffing and scheduling. Optimization software solutions can help by sending out short-term freight forecasts with alerts about lulls and surges due to seasonal variation, special promotions, customer back orders, etc.

5. Support Carrier Compliance With All Current Regulations
Make sure supervisors and yard personnel alike are aware of all Hours of Service (HOS) and Compliance Safety Accountability (CSA) regulations. This ensures that drivers aren’t penalized for loading/unloading delays and that carriers can maintain positive safety scores. This kind of proactive awareness also clearly demonstrates your commitment to being a valuable partner and makes you a more desirable customer.

6. Negotiate Timely Payment Schedules
Many contract carriers are small/medium enterprises, especially those that provide specialty or niche services. These companies are essential to operations for many shippers, but often have more difficulty accommodating 60-90 days sales outstanding than large carriers. If possible, negotiate terms that are more appropriate to the scope and scale of their operations.

Act Now To Be Prepared

The steps outlined here are part of a straight-forward, common sense approach that benefits all sides of the transportation equation. This is important, since a prolonged driver shortage and squeeze on capacity ultimately affects everyone.

Steve Gordon says, “A shortage will change everyone’s behavior, even companies used to viewing transportation strictly as a commodity—especially when freight gets left on the dock.” He also points out that shippers who “walk a mile in the drivers’ shoes” will be doing more than helping carriers and the drivers. They will be building a competitive advantage that will serve them well under all circumstances.

Mike Mulqueen is Manhattan Associates’ Sr. Director of Product Management with responsibility for the company’s Transportation product line. Prior to joining Manhattan in 2010, he spent the last 20 years designing and implementing logistics-focused supply chain solutions. Most recently, Mike was with Accenture, where he served as the firm’s Logistics Business Area Lead for the US Postal Service. Prior to Accenture, Mike held transportation systems leadership positions with JDA/Manugistics, UPS Logistics Technologies and C&S Wholesale Grocers. Mike holds a BS degree from the University of Maryland, College Park, and a Master of Engineering degree in Supply Chain Management from the Massachusetts Institute of Technology.