BY MIKE REGAN, CO-FOUNDER OF TRANZACT
CONNECT ON LINKEDIN
This is the time of the year when I get to run up miles in my United frequent flyer program as I attend conferences and get to meet with C-Level executives from some of the largest truckload and LTL carriers in the country. This week, I attended the Food Shippers of America Annual Conference. Next week I will be speaking at the Journal of Commerce’s TPM22 Conference that focuses on trans-Pacific and global container shipping.
Through conversations with carrier executives at these events and others, I’ve asked these carrier executives if they had some advice for shippers who were going to be conducting sourcing events in the foreseeable future. Boy, did I get an earful. Interestingly, the following three tips are ones that virtually every carrier agreed could help shippers get the best possible results from their sourcing events:
First, understand that most if not all major carriers have networks that are operating at or near full capacity. Consequently, they don’t have to chase freight that is marginally profitable. Put quite bluntly, the carriers aren’t worried about how shippers will react when the “market turns” and shippers have leverage in their negotiations. Right now the carriers have the leverage so their rates will reflect their operating ratio requirements. Several carrier executives noted that while relationships are still important and loyalty still matters, what is also critically important is how your freight fits in their network.
Second, carriers have great data and sophisticated costing models that they use to determine how much it costs to service an account. This helps them to focus on their more profitable business. When a great carrier like Old Dominion announced in their recent earnings report that their Operating Ratio (OR) decreased to 74% for 2021, and that they were determined to get their OR into the 60's, it sent a very clear signal to the market: We have trucks. You need trucks. We will price our services accordingly! Make no mistake, other carriers are watching and learning, and will follow suit when they can.
Third, shippers need to know how their business impacts carriers. One thing that really stood our from my numerous conversations with carrier executives is that most shippers have a “blind spot” when it comes to their carrier relationships. As one CEO of a large truckload carrier told me during lunch at the FSA Conference: "Shippers have the time to give us a 'Report Card' on how we are performing, but never take the time to ask us for our Report Card about their performance. In short, they really don’t want to know about how their decisions and practices affect our cost structure and our ability to serve their company." Unfortunately, I had to agree because based on experience relatively few shippers understand their own docks or the docks at their suppliers or customers. But make no mistake about it: Your carriers know who is on their "naughty and nice list” – and they are pricing their services accordingly.
If you really want better results from your transportation sourcing events, almost every carrier we talked to agreed that one of the first things you should do before conducting these events is to do your homework. And one of the ways you can do your homework is to take advantage of our Carrier Yield Test. Send it to your carriers and ask them to score you based on the various attributes that affect those carriers. It has proven to be an invaluable tool that can help you come to the table better prepared for your negotiations.
After you send out the Carrier Yield Test, why not take the time to learn more about carrier pricing issues by listening to some of our interviews with senior executives that highlight the issues that are critically important to their companies. For example, in our interviews with David Ross, EVP at Roadrunner Freight, Rob Estes, CEO of Estes Freight, or our recent webinar with Darren Hawkins, CEO of Yellow, Eric Fuller, CEO of U.S. Xpress, Dave Yeager, CEO of Hub Group, and others (which are all available in our Resource Center), there are some valuable insights that can help you achieve better results in your transportation sourcing events.
So if you are looking for some fresh insights or support in finding the right carriers for your business or anything else, we encourage you to get in touch.
