This story appears in the June 1 print edition of Transport Topics.
With tight capacity compelling carriers to get more selective about the freight they’ll haul, shippers are working to strengthen relationships with the companies that deliver their goods.
“They realize that if they are flexible, the probability of getting a carrier and a better rate increases,” said James Winton, director of central operations for Houston-based Trimac Transportation Inc. The unit of Calgary, Alberta-based Trimac Group ranks No. 40 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
That flexibility can come in the form of small but meaningful changes that can help cut costs, such as reducing dwell time or changing pickup and delivery times.
“Most partners realize it is getting harder and harder to identify a good driver candidate, and they’re much better now than they used to be on their own scheduling,” Winton said, noting that many shippers today are far more flexible than they were, say, 10 years ago.
“They work with the carrier and say, ‘You want to make a profit, we want to move it economically. How do we work together?’ ” added Dave Durtsche, a senior partner with Elmhurst, Illinois-based TranzAct Technologies Inc., which operates logistics and brokerage companies. “What are the business practices we might have to change so we can keep that asset moving?”
Christopher Thornycroft, vice president of carrier operations at Chicago-based Redwood Multimodal, said this kind of collaboration boosts long-term business. “When you really develop a relationship is the ‘stickiness’ factor,” that can help sustain an arrangement, he said.
To help shippers and carriers find those ideal business partners, freight marketplace DAT Solutions provides a company review system.
“Just like you might go to [online review website] Yelp to read a review on a restaurant, you can come to our site and read reviews on a carrier you’re considering using,” said Michele Greene, director of product management for DAT. “Price is nice, but if the carrier doesn’t show up or perform in a reliable manner, they’re no good.”
Norbert Dentressangle, a Lyon, France-based company that also operates a U.S.-based over-the-road fleet, a brokerage division and a freight management division, uses pricing information from DAT and software provider TMW Systems to determine how to best move freight and find the right solution for its customers.
“We try to take advantage of those markets where there are a considerable amount of loads, because that drives the price up,” said Sean Wilson, senior director of operations of carrier and customer services for Norbert’s transportation logistics services division. Wilson said that 98% of the company trucks are under contract, but he noted that the company is flexible. He said that if market conditions and pricing change, Norbert will honor the linehaul rate but will charge a deadhead rate on top of it when extra capacity is needed.
Norbert, which ranks No. 25 on the Transport Topics Top 50 list of North American logistics companies, uses proprietary software to examine its historical profitability per lane and run what-if scenarios, which Wilson said can help Norbert’s carriers meet their goals.
“If I know Joe’s Trucking wants to go west and Sam wants to go east, we can help a carrier develop its network. At the end of the day, we’re trying to build reliable capacity for our customers,” Wilson said.
Redwood Logistics uses a proprietary system to look at profitability by lane and frequency of lanes and uses the information to create carrier pools and create relationships to secure capacity, said Bryan McAnally, the company’s senior director of carrier relations and procurement.
“Our bread and butter is bringing that visibility to our customer,” he said. “We definitely communicate internally and then express that externally.”
Redwood Logistics ranks No. 36 on the TT 50 Top Dedicated Contract Carriers list and No. 25 on the Top Freight Brokerage list. It and Redwood Multimodal are divisions of the Redwood Family of Cos.
Knowing what the market is doing is helpful, but carriers have to keep rate information in perspective while carriers need to understand their own cost and operations, said Jack Jones, vice president at Transportation Costing Group Inc., a provider of costing and profitability software.
“Knowing there are 10 other carriers active in a lane and there is a rate of $2.50 per mile doesn’t mean this carrier can be profitable at this rate,” he said.
Although every carrier wants to run only the most profitable routes, almost every one of them has deliveries they must make because of contracts or existing relationships with shippers, Jones said.
“They are out there looking for freight in these markets,” he said. “They’re using the brokers in order to complement their capacity but also to make sure they don’t send their power into dead-end lanes that they don’t have backhaul opportunities on.”
And without a backhaul, carriers sometimes must open rate negotiations. But before resorting to a rate increase, Winton said, Trimac tries to find other ways to make those trips worthwhile.
“It is more advantageous for us to help the customer by finding the backhaul opportunity than going to the customer and saying, ‘I need a rate increase,’ ” he said.
Trimac uses many data sources to find backhaul opportunities, including an “available truck” e-mail so brokers know what markets the carrier will be in. This strategy has cut empty miles by 50%, Winton said.
“If we know it is 95% probable we’re going to get a backhaul, that gives us a better rate on the front end,” he said.
Sometimes, turning a profit comes down to selecting the right routing, TranzAct’s Durtsche said.
“If you’re traveling from Seattle to Los Angeles to Phoenix, which do you do first?” he asked. “Going Seattle to Phoenix to L.A. takes more miles, but if the cost is sufficiently lower?”
Durtsche said his company’s programs help users find the optimal route to yield the least cost along with the optimal sequence of cities. In addition, TranzAct provides benchmarking on the average cost per mile in the truckload sector and cost per hundredweight in the less-than-truckload sector, he said.
DAT also offers suggestions on routes.
“If a carrier comes to us with a request for a rate on a certain lane that may not be the most profitable way to get home, we can offer alternate routing and midpoints they can go through,” Green said. “Sometimes with that triangle route, you can take advantage of a much better rate.”
Richard DeBoer, executive vice president of supply chain logistics at Anderson, Indiana-based Carter Logistics, said tapping into reports from DAT and Transportation Costing Group, in Rockville, Maryland, has helped his company identify where price adjustments were needed and also walk away from business when a price adjustment wasn’t awarded.
“Operations are predisposed to keeping the route because the drivers are happy on the routes, but if you aren’t happy with the rate, you can walk away realizing that it is in the utmost benefit of the organization,” he said.