The 2:00 Minute Warning

Uh Oh! Whenever we send out a Two Minute Warning that highlights what is going on with freight rates, we hear from people. If we highlight that rates are going up, we hear from shippers who want to know how they can be a "Shipper of Choice" and work with the carriers. Whenever we highlight the fact that rates are going down, we hear from carriers who tell us they see a big increase in shippers expecting the carriers to automatically lower their rates.

In last week's Two Minute Warning, we talked about the impact that the current freight recession is having on freight rates - they are going down. So I wasn't too surprised when a very smart carrier executive sent me a note and in essence stated:

“We are seeing tremendous pressure on rates...  the “Great Reset” for shippers is here, and they have a real chance to reduce their costs immediately if they are smart." 
 
What is the "smart" way to source your transportation and why is it so important? Because the carriers are smart and they will provide better rates and service when things are done the right way versus the "wrong" way. In short, from a carrier's perspective sourcing events are a clear indication whether a shipper has a strategic versus a transactional orientation in working with their carriers.

If you take home just one point from this Two Minute Warning, it is that the carriers know the shippers that act strategically versus transactionally. They all want to work with strategic shippers; but they know that they have to live with transactional shippers who may be "here today, gone tomorrow" when the market turns.

What's the difference between acting strategically versus transactionally? Strategic shippers have a long term perspective and understand the importance of cultivating a long term partnership/working relationship with their carriers. Transactional shippers are basically looking at the carriers to do one thing: Give them the lowest possible rate if the carrier wants to keep their business.

Over the years, we've conducted billions of dollars in sourcing events for our customers. As sourcing experts we've made it pretty clear, as noted above, that right now shippers have an opportunity to lower their rates while being strategic in the process. That means they will act to lower their rates while protecting their relationships with the carriers. For the carriers, it means that they will provide "fair" rates, be responsible in allocating their capacity and work with you to keep your supply chain running when capacity once again becomes an issue.

According to the carriers we have surveyed, strategic shippers have a long term perspective and look at these three factors BEFORE sending out their RFP's/RFI's.

Accurate data - A lot of shippers issue RFPs with vague information. If you want your carrier’s best possible rates, be as specific as possible in order to get the lowest possible rates. In our Resource Center, we have numerous interviews with carrier CEOs and they have consistently noted that carriers can provide better rates when you give them more accurate data about your freight and your requirements. As the CEO of one major LTL carrier told us: When we have to guess, our rates are higher to protect ourselves.

Network alignment – Carrier networks are changing all the time. That's why strategic shippers look at how their freight aligns with the carriers that are being asked to bid. Right now it’s especially important for carriers to control costs by finding shippers who have freight that aligns with their networks.

Reasonable requirements – As we’ve stressed before, any request that increases a carrier’s costs will likely be reflected in your rates. If you are wondering what this looks like, we encourage you to check out this blog with a great list of practical ways shippers can lower LTL costs that Geoff Muessig, EVP from Pitt Ohio, shared with us in a webcast we hosted with CSCMP.

And if you really want to understand what is going on with the economy, how it is affecting the freight markets and other important information to know BEFORE you conduct a sourcing event, I encourage you to listen to our interview with Scott Group, Managing Director and Senior Analyst at Wolfe Research. This interview isn’t for public distribution, but as a member of our Two Minute Warning audience, you can request this by sending us an e-mail.

And if you’re ready to get started with conducting a sourcing event and could use help, please get in touch with us.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
CONNECT ON LINKEDIN