iTECH: Shippers, Brokers Use Data Services to Closely Monitor Carriers’ Performance

By Daniel P. Bearth, Senior Features Writer

This story appears in the February/March 2013 issue of iTECH, published in the Feb. 18 print edition of Transport Topics. Click here to subscribe today.

Shippers, brokers and freight forwarders are using new data services and software programs to monitor more closely the safety, performance and financial health of freight haulers before committing to hire them — driven partly by concern about liability risks if they use a carrier with a poor record and partly by the sheer availability of data.

Companies are using a variety of third-party vendors and internal transportation management systems to collect and analyze data, providing alerts when carriers fail to meet performance standards or when there is a change in insurance coverage or operating authority.

Industry observers said the availability of data from the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program is shifting freight away from carriers with poor scores and making it harder for new carriers to get business from shippers.

But in addition to checking out carrier safety compliance, shippers and brokers use a variety of screening tools to make sure the haulers they’re considering have good performance records, are financially reliable and can be counted on to show up and deliver as promised.

DB Schenker USA, a freight forwarder based in Freeport, N.Y., put in place a program four years ago to more intensively scrutinize motor carriers, said Stephen Gifford, vice president of risk management for the Americas.

“We recognized that to be successful . . . we needed to strengthen vetting and validation of underlying motor carriers,” Gifford said in an interview with iTECH.

The company adopted a carrier compliance checklist that included operating authority and insurance, safety rating, hazardous material certification and other criteria, such as being in business for a minimum of five years, and last year worked with software developer Veroot LLC in Medina, Ohio, to develop a program that provides alerts when a carrier falls below the company’s threshold for safety compliance.

“They give us a list of carriers every day, identifying those that fall under our threshold and taking into account CSA scores and other measures of performance,” Gifford said. “It’s a proactive approach.”

While the changes eliminated many carriers and led to some capacity problems initially, the process ultimately strengthened the remaining carriers, improved service levels and helped DB Schenker attract more business.

“We see shippers shifting liability to transportation providers,” Gifford said. “Large clients are wanting transparency of freight while we are moving it and not wanting to be on the hook for negligent hiring.”

By increasing its oversight of motor carriers and putting more freight in the hands of approved carriers, he said, DB Schenker gains leverage to enforce higher safety and performance standards.

“Typically, once we threaten to stop doing business with a carrier, they will jump out of their boots to correct the problems,” Gifford said.

DB Schenker USA is owned by Deutsche Bahn AG in Germany and, with estimated net revenue of $1.2 billion in 2011, ranks No. 7 on the Transport Topics Top 50 list of the largest logistics companies in the United States, Canada and Mexico.

Helping to monitor motor carriers are an increasing number of specialized data providers, transportation software firms and load boards that provide a range of services, including analysis and alerts.

Two long-established services for monitoring compliance are CarrierWatch and Carrier411 Services.

CarrierWatch is a service started by DAT, a unit of Dallas-based TransCore Inc. that operates an electronic freight matching service. It tracks operating authority and insurance coverage, safety ratings and CSA scores for 190,000 carriers.

“We started CarrierWatch 10 years ago because there was no good way to do due diligence on carriers,” said David Schrader, senior vice president of operations.

Having a centralized database of information eliminated the need for shippers to collect documents from individual carriers and gave brokers the means to quickly vet freight carriers before assigning loads. The system also tracked changes over time, making it easier to spot fraudulent activity.

“That’s the power of data,” Schrader said. “Once you get a taste of data, the thirst for it increases. We see it in all of our businesses.”

Carrier411 Services, Lake Mary, Fla., said it has a database of more than 685,000 companies and tracks all new applicants for motor-carrier operating authority. The company offers a certificate of due diligence to users.

Load-matching service Internet Truckstop, New Plymouth, Idaho, offers a comprehensive analysis and monitoring of all carriers with an MC or DOT number. It tracks operating authority, cargo and liability insurance and safety ratings, also providing credit reports and compiling a performance rating for carriers based on factors such as on-time delivery, number of loads accepted and compliance with contract terms.

In January, Internet Truckstop added a feature that allows anyone searching for a truck to identify carriers with tractors and trailers that are compliant with California Air Resources Board regulations.

Brokers are monitored as well and can be barred from using Internet Truckstop’s load-matching service for unethical practices, such as refusing to pay carriers., Cherry Hill, N.J., augments its compliance checks with a system that allows shippers to manage documents and exchange secure messages with carriers and brokers concerning contract terms. Company founder Jeff Tucker serves as chairman of the Transportation Intermediaries Association’s Carrier Selection Committee, which recently developed guidelines for brokers to develop screening processes.

Vigillo, Portland, Ore., a company founded in 2007 primarily to collect and analyze CSA data for motor carriers, now offers a similar program for shippers and brokers called Carrier Select.

“Shippers and brokers have much more of a financial interest in [CSA],” said Drew Anderson, Vigillo director of sales. “They look at these scores to determine which carriers are appropriate to use.”

Anderson said the program can access data on as many as 1 million carriers. The system can be used to monitor a list of carriers they currently use or can be queried to match carriers with specific requirements.

For less-than-truckload general freight carriers, the use of CSA scores could be a “game changer,” said Ken Weinberg, vice president of Carrier Logistics Inc., Tarrytown, N.Y. “We’re starting to see it. Big-box stores and large manufacturers are driving it. The issue has the attention of executive management.”

Carriers are responding in two ways, said Ben Wiesen, vice president of products and support for CLI. One is to examine internal operations to improve CSA scores.

“Carriers are expanding the role of safety director. They used to look at equipment, work methods, driver training. Now they are involved in more paperwork,” Wiesen said.

But the increase in screening activity and, in particular, the use of CSA scores to judge safety qualifications, has raised carriers’ concerns.

“Carriers are losing contracts and may be excluded from bidding on freight because of CSA scores,” said Rob Abbott, vice president of safety policy for American Trucking Associations, adding that CSA scores don’t necessarily indicate crash risk.

Another response has to do with the way carriers do business with each other.

“In the LTL industry, it’s very common to have interline agreements,” Wiesen said. “Carriers are asking, ‘What type of control and decision-making applies to each party in the movement? Does liability flow back to the shipper?’ ”

Carlos Rodriguez, a partner at Husch Blackwell LLP in Washington, D.C., said a spate of recent court cases holding shippers and transportation intermediaries at fault for failing to adequately investigate carriers for compliance with safety rules before giving them freight has altered the landscape and changed expectations for all parties.

“Insurance companies are seeing different risk exposure,” Rodriguez said. “They are redefining what they are willing to insure, and they want to make sure that transportation intermediaries are properly vetting carriers.”

At Load Delivered Logistics, the decision on whether to use a motor carrier is purposely kept separate from personnel who select the carrier to handle loads for customers.

“There’s no gray area,” said Danny Simon, vice president of operations for the Chicago-based brokerage firm. “A carrier is not OK unless it proves that it is.” The company uses Carrier411 Services to verify carrier operating authority and insurance — and rechecks the data prior to every load.

Employees also are trained to spot signs of trouble, such as when a carrier accepts a load but turns it over to another carrier without the knowledge of the shipper or broker.

Using a program developed by McLeod Software, LDL also tracks specific performance measures, such as on-time delivery and number of freight claims.

“The system allows users to build carrier qualification profiles for different loads,” said Robert Brothers, vice president of development for McLeod. “A high-value or hazmat load has a different profile than a load of paper products.”

Each service element is assigned points to reflect its relative importance in the decision about whether to use a carrier.

Similar capabilities are available from most other providers of transportation management software.

“Our software has always been able to keep track of what carriers are capable of doing,” said Keith Mader, vice president of development for TMW Systems, Beachwood, Ohio. Users can search the database to find carriers and even compare rates for similar hauls.

Looking ahead, Mader said, he believes the industry’s focus will be on expanding searches to include new carriers and to evaluate capabilities on the basis of more than just rates.

Larry Kerr, president of EBE Technologies, East Moline, Ill., said carrier monitoring is the fast-growing portion of the company’s business, which helps transportation firms to automate business processes.

“Our customers are looking at two processes,” Kerr said. “The initial screen and requalification at least one time a year, and post-qualification performance that looks at check calls, damage claims and late deliveries. One is the safety side and the other is, ‘If you hire the company, will they show up?’ ”

Kerr said the initial qualification process captures data on a range of issues, including insurance, operating authority, safety ratings and credit scores.

“We look at how long [carriers] have had authority. We look at any gaps that may have been caused by financial stress. If carriers are struggling financially, that can have an effect on maintenance and what type of driver they are able to hire.”

All of the data are analyzed by what is called a “rules engine,” a software application that compares each carrier’s scores, and turns out a list of carriers that fail to meet a preset performance standard.

“The value to a broker is they can see at a glance who they don’t want hauling their freight,” Kerr said.

The system also provides an online portal where customers can post comments, good and bad, on carrier performance, he said.

Sheldon Hudson, director of risk management at Trinity Logistics, Seaford, Del., said his firm also uses a number of outside vendors to verify carrier credentials, including safety ratings and CSA scores, but the company also uses some low-tech methods to check up on carriers.

To guard against illegal double brokering, for instance, Hudson said that personnel will sometimes make a call to the driver or shipper “to verify the name on the side of the truck.”

The company uses its contacts to develop a better understanding of where carriers like to go and the type of freight they like to haul.

“We used to have a carrier compliance department,” Hudson said. “That has morphed into carrier relationship management.”