Executive Briefings

One Way Shippers Can Improve their Transportation Programs

One way shippers can improve their transportation programs is to make themselves more attractive to carriers. Dawn Salvucci-Favier, director of solution management for Rockville, Md.-based Manugistics, said at the vendor's San Francisco seminar that carriers' load acceptance rates are declining. As fuel costs soar and the nationwide driver shortage worsens, carriers become more selective about whose freight they will handle. Salvucci-Favier cited a recent evaluation of one shipper's transportation network by the Massachusetts Institute of Technology. No single carrier was performing poorly, she noted, but one in four loads was being declined by the primary carrier. The result was a 2 percent incremental cost increase for the use of less preferred vendors. The situation was also seriously affecting order cycle times. Forty-two percent of rejected loads took an additional two to three days to get covered by the secondary carrier.

The driver shortage threatens to become ever more acute, Salvucci-Favier said. Industry turnover in 2004 was 121 percent, with many employees lured away by more lucrative jobs in construction or other industries. If the current trend continues, she said, the driver shortage will worsen by 34 percent within five years.

Adding to truckers' woes are new regulations on maximum hours of service by drivers. So far, the HOS rules haven't turned out to be as damaging as many industry executives feared. They had predicted a 19 percent drop in productivity; according to a recent Manugistics white paper on carrier capacity management, the actual loss is now pegged at 2 to 4 percent. But things could get worse. The HOS regulations were suspended earlier this year, and a revision due in November is expected to impose even stricter guidelines, possibly requiring the installation of on-board monitoring systems. The re-written rules will cause a productivity loss of 5 to 8 percent, Manugistics predicted.

Again, said the vendor, shippers' best defense against these trends is better collaboration with carriers, especially in the area of capacity planning. Technology can help as well, said Salvucci-Favier. Improved visibility tools can boost on-time performance by 20 to 40 percent. Supply chain integration, including systems for collaboration, event management and data warehousing, can reduce lead time and order cycle time by 25 to 75 percent, while increasing customer fill rates by 20 to 30 percent. A system for calculating true landed cost can improve profits by 3 to 5 percent, while reducing the cost to serve by 5 to 10 percent, she claimed.

One way shippers can improve their transportation programs is to make themselves more attractive to carriers. Dawn Salvucci-Favier, director of solution management for Rockville, Md.-based Manugistics, said at the vendor's San Francisco seminar that carriers' load acceptance rates are declining. As fuel costs soar and the nationwide driver shortage worsens, carriers become more selective about whose freight they will handle. Salvucci-Favier cited a recent evaluation of one shipper's transportation network by the Massachusetts Institute of Technology. No single carrier was performing poorly, she noted, but one in four loads was being declined by the primary carrier. The result was a 2 percent incremental cost increase for the use of less preferred vendors. The situation was also seriously affecting order cycle times. Forty-two percent of rejected loads took an additional two to three days to get covered by the secondary carrier.

The driver shortage threatens to become ever more acute, Salvucci-Favier said. Industry turnover in 2004 was 121 percent, with many employees lured away by more lucrative jobs in construction or other industries. If the current trend continues, she said, the driver shortage will worsen by 34 percent within five years.

Adding to truckers' woes are new regulations on maximum hours of service by drivers. So far, the HOS rules haven't turned out to be as damaging as many industry executives feared. They had predicted a 19 percent drop in productivity; according to a recent Manugistics white paper on carrier capacity management, the actual loss is now pegged at 2 to 4 percent. But things could get worse. The HOS regulations were suspended earlier this year, and a revision due in November is expected to impose even stricter guidelines, possibly requiring the installation of on-board monitoring systems. The re-written rules will cause a productivity loss of 5 to 8 percent, Manugistics predicted.

Again, said the vendor, shippers' best defense against these trends is better collaboration with carriers, especially in the area of capacity planning. Technology can help as well, said Salvucci-Favier. Improved visibility tools can boost on-time performance by 20 to 40 percent. Supply chain integration, including systems for collaboration, event management and data warehousing, can reduce lead time and order cycle time by 25 to 75 percent, while increasing customer fill rates by 20 to 30 percent. A system for calculating true landed cost can improve profits by 3 to 5 percent, while reducing the cost to serve by 5 to 10 percent, she claimed.