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The relationship between shipper and carrier is like a seesaw that’s rarely in perfect balance. Changing economic conditions tend to favor one side or the other at any given moment. For a number of years, when the economy was in a slump, it was shippers who held the upper hand. Carriers would offer a slew of concessions just to get the business. Now, however, the balance of power is shifting back toward the carrier. Economic conditions are improving, and capacity is tightening, giving carriers the luxury of choosing those accounts that are most profitable. Suddenly, shippers have to think about ways in which they can make themselves attractive to their service providers. In this interview, conducted at the 2014 Shipper Symposium of Transplace in Dallas, Cubitt offers advice on how to become a “shipper of choice,” thereby assuring access to capacity.
Q: What does it mean to be a preferred shipper today?
A: Cubitt: It’s one of those things where you see a lot of talk, and less action. So we had our customers come to us last year, and ask us to talk to the carriers. They asked us to try to identify what it means to be a preferred shipper, or shipper of choice. So we designed a survey, and went out to a large number of carriers. We would get six to eight of them on a conference call with myself and a couple of our customers, and just throw around ideas. You really had to push the carriers for information, but with each call it got a little bit easier. I think we got good information from it.
Q: The shippers just came to you out of the blue and asked you to do this, or did you invite them to participate?
A: Cubitt: We have an advisory board at Transplace made up of our strategic customers. At a meeting last year, we were talking about initiatives, things they’d like to see us do, and they suggested that.
Q: What did your research reveal, in terms of the most important factors by which carriers evaluate shippers?
A: Cubitt: We tried to look at it across multiple dimensions. We looked at things like rates and accessorials, how carriers are dealt with, how drivers are treated. One of the critical questions was what would cause you to give or withhold capacity. We know lots of shippers have carrier scorecards, and we got some samples from carriers who keep them on shippers.
Q: I doubt that they share those with shippers on a regular basis.
A: Cubitt: I don’t think they do. Most of them are for internal use.
Q: So what were some of the criteria on those scorecards?
A: Cubitt: What’s the financial attractiveness of the customer? Do they pay good rates? Do they have a fair accessorial and fuel surcharge? Do they pay on time? After that, it was more about the profile of the freight: Is it desirable? Does it match the carrier’s capabilities? Then it came back to more questions about how the shipper treats the carrier. One of the interesting questions was, do they give us more opportunities? Most carriers these days have multiple offerings – they may have over-the-road, dedicated, intermodal, possibly brokerage.
Q: There have been a lot of changes in regulations in the last few years, related to Hours of Service; Compliance, Safety & Accountability; and the like. How have they changed the way in which carriers rate shippers?
A: Cubitt: To me, that was the most interesting finding of the survey. I went into it with the idea that we’d find out a lot of things about treating drivers better. What we really found out was that because of Hours of Service, electronic onboard recorders, and the driver shortage, you need to understand what drives carriers’ efficiency. Do you have flexibility in your tender and delivery times, so that you don’t call the carrier to pick up a load, only to keep the driver waiting for twelve hours?
When it comes to drivers, they want to be treated with respect – that came through clearly. When a driver arrives at a facility, are you helping him to keep moving? Are you loading and unloading? Can he park on the facility? If the load’s not ready and he has to go thirty miles down the road to a truck stop, he’s lost time. What are you doing to make him and the carrier’s network more efficient?
Q: But a lot of that isn’t within shippers’ control. Their loading docks might be small, or they might not have a place to put a driver who arrives early. Yet the shipper is getting dinged for it.
A: Cubitt: Your point is well-taken. But look at the environment we’re coming out of, where shippers had so much leverage, rates were pushed down and the market was out of balance. Shippers could say, my facility might not be the most friendly, but if you want my load, come pick it up.
What we’re seeing now is, if you want to be a shipper of choice, and if you want access to capacity, you need to look at these things. It may require investment – when a truck arrives, do you have a hose where it can fill its tires? If you inspect a trailer and find something minor, do you make the carrier leave and deadhead out with the trailer? Or do you have a service that can do simple repairs? Are you making that truck and driver non-productive? The reality is that we have a shared responsibility to make this supply-chain network efficient, and we can’t ignore the carrier.
Q: Give me some best practices that shippers can put into place, in order to make themselves more attractive to carriers.
A: Cubitt: Start with the facility. A shipper of choice will have the lot laid out correctly, with instructions about where to park, information about whether the load is ready, and a way to update the driver. From the moment the driver arrives, there’s a commitment to being efficient. There are rest rooms and access to vending machines.
The other thing to look at is tender times. A proactive shipper will ask when it should tender loads for shorthaul and longhaul lanes. It’s becoming very valuable to be a 24/7 shipper – if your facility can ship around the clock, seven days a week, that’s a tremendous asset to the carrier. Now that driver can get a load on Friday afternoon and keep moving. He doesn’t have to lay over, and wait for a facility to open again on Monday. If he gets a load on Friday that’s going 1,200 miles, he can get a lot of hours over the weekend.
Q: How can benchmarking accessorials help the relationship? And which ones should shippers be benchmarking?
A: Cubitt: We have an active project to benchmark accessorials, to look at fuel surcharges, stop charges, detention, etc. It’s very important for shippers to know whether they’re competitive in that area. Are they in the mainstream? If you have a very aggressive accessorial that’s counter to what the market’s doing, then that could cause them to lose capacity. If capacity does get tight, carriers are going to start looking at that.
We all expect rates to go up if the market gets really tight. You’ll also see some carrier pushback on accessorials. We talked earlier about hours of service – right now almost every shipper allows two hours of free time, and then it starts with the detention charges. Carriers need to manage that better. You really need to have an incentive and a requirement to load the driver within two hours.
Q: I suspect that this is going to be more and more of an issue in the future, as companies talk about customer segmentation – realizing which ones are more and less attractive. Do you agree that this is something that shippers need to pay more attention to?
A: Cubitt: Absolutely. Carriers are definitely going to look at shippers and decided which is preferred freight, which fits their network well, and whether this particular shipper will meet with them. Sometimes it’s as simple as that: Do you meet with your carriers? Do you really try to understand what their network efficiencies are?
Shippers have gotten used to going to carriers and saying, we need help from point A to point B. But they don’t go to the carriers very often and say where do you need help? Where do you have empty miles? What’s the single biggest thing I could do to drive more efficiency?
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