This Opinion piece appears in the May 23 print edition of Transport Topics. Click here to subscribe today.
By Preston Charles
Worldwide Advancement Consulting
While it is true that even the best dedicated-carrier fleets have been late at one time or another, most quality fleets deliver high-quality performance over time. The quality of the service is generally not the key reason that severs ties between buyers and sellers. For this text, we’ll just focus on three drivers for change.
First, there is the pressure to maintain or improve the existing service level while simultaneously reducing costs. Next, we should recognize the ascension of new management personnel who are ready to implement their unique vision of the business. In the final scenario, the scope of work has grown to a volume that necessitates more entrants to the market.
Many organizations are able to relate to the first reason for requiring a new dedicated-carrier fleet. The outsourced fleet is currently doing an adequate job and meeting the stated performance demands. The financial pressure, however, may be too much to endure, and your partners tell you they are not able to meet the cost demands of your business.
In the second case, the status quo is no longer an acceptable option because new organizational leadership is in control. The new team may bring a different approach to existing work processes. Even if the workload remains similar under the new management structure, the new managers may develop programs to bring in a team of tested associates who performed admirably for the managers during their past roles.
In the final scenario, the shipper’s demands simply outgrow the capacity of the current fleet. The requirements of more customer deliveries across a larger area may force the inclusion of new partners. This is no criticism of the incumbent fleet. Some may actually find relief when the new fleet is in place.
The problem lies in an important business question: Does management use its key resources to execute urgent daily processes, or does it use key resources for developing a future state that will pay dividends down the road?
There may be several valid reasons to sign a new dedicated fleet under contract, but there may be a lack of expertise to make the desired state a reality. For example, neither the procurement experts nor the logistics experts fully appreciate the subject-matter expertise needed to manage each other’s areas properly.
There is an opportunity to solve this problem, but there must be a climate that rewards long-term thinking. Ongoing improvement and education will build more skill and expertise in developing productive contracts. Long before the project kicks off, there should be an initiative to ensure people are prepared to handle the work.
One product of long-term thinking is the skill development of internal staff. A standard procurement class will cover building out a solid business case and understanding requirements. It should cover the approach to selecting a dedicated fleet and preparations for a vigorous negotiation.
Among many other things, the class should explain how to find common ground on the major terms and define success. The general procurement skills are very helpful when an organization understands what it wants but is not particularly skilled in getting clear commitments from partners.
Individuals can seek training or education on their own, as well. If a formal procurement certification program is beyond the reach of key employees in the short term, there are programs that provide a basic foundation for coordination of the function. There, they can learn to create a plan, understand and use a statement of work and decide on selection criteria. As more workers in the office become familiar with refined evaluation techniques, they become more useful to the team in the probing stage. The increased proficiency results in a more robust contract agreement.
Companies that work hard to define mutual success are much more likely to reach success together. Well-planned business requirements that take time and energy on the front end can tie companies to their suppliers for mutual benefit. Planning may seem like more work than necessary at first, but detailed planning and execution is an economical use of time.
In the long run, most managers don’t want to spend additional time cleaning up unnecessary problems after the implementation of the new carrier fleet. They want to reap the rewards and move on to the next initiative.
Competition frequently brings out the best in companies and their workforce. As dedicated fleets become more responsive to clearly defined requirements, they find themselves able to provide solutions that align with the needs of their business partners. Rivals who refuse to lose market share also will adopt the same practices, thereby creating a buildup of momentum across the industry. The customer ultimately benefits as “shared knowledge” grows in scale across the global markets.
Professional training leads to stronger, mutually beneficial relationships between logistics and procurement experts. Leading shippers become partners of choice and attract the best dedicated fleets because they have removed barriers to competitive pricing.
Well-trained leaders in the dedicated-carrier arena become more desirable partners to shippers because they are able to allocate the right resources to solve unique problems and eliminate hedging. The ultimate compliment is that the customer base can go back to ignoring the consistent performance of high-quality service, as they have adapted to the new partnership.
Charles has more than 20 years of experience with leading logistics and supply chain organizations. Worldwide Advancement Consulting provides strategic, operational and project-based support to clients.