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April 29, 2013 4:30 AM, EDT

Shippers Say Reliability as Critical as Costs When Selecting Carriers to Move Freight

By Michele Fuetsch, Staff Reporter

This story appears in the April 29 print edition of Transport Topics.

ORLANDO, Fla. — Shippers attending Nasstrac’s annual meeting here stressed the importance of reliability, service and relationships, even as cost remains the top concern.

“You can tell me, ‘I can get that [competitive rate], but if you don’t have the truck to do it and you can’t deliver, or if it takes a week to get there instead of three days, you aren’t helping me,’ ” said Sherry Askew, transportation manager of Revlon Consumer Products, who led a roundtable discussion on carrier selection.

The April 21-24 conference of the trade association for shippers, was attended by shippers, carriers, brokers and logistics companies.

It found in a recent survey of manufacturers, retailers, wholesalers and distributors that cost is the No. 1 issue for 51% of them when shopping for a carrier.

New York-based Revlon no longer sends out annual requests for proposals to carriers, preferring to concentrate on improving the carrier relationships it already has, Askew said.

“That’s what I say is one of our best practices,” she said of the policy of no requests for proposals. “You’re more than likely going to go with the same people that you’re already doing business with, and it’s just better to renegotiate with them.”

Sending out RFPs is “very time-consuming, and where’s the value in doing it every year?” Askew said.

Revlon is not the only shipper homing in on a select group of carriers rather than casting a wide net in hopes of more competitive rates.

Northfield, Ill.-based Kraft Foods last year narrowed its pool of carriers to 95 from 170 and gave them three-year contracts, said Michael Cole, the company’s director of transportation for North America.

“It creates a better accountability environment; there’s a higher commitment level to our business,” Cole said of the winnowing.

In some cases, carriers lost Kraft’s business because they didn’t have the technology Kraft wanted to monitor performance, he said.

Kraft also made another big change, moving away from “just a pure rate decision to a lowest landed cost,” Cole said. “What I mean by that is you could have an incredibly competitive rate on a lane, but if you’re not at a high level of first tender acceptance, you’re really not getting that rate.”

A carrier with a 65% acceptance rate “is forcing you to go to a higher cost carrier,” Cole said.

Kraft sends scorecards to carriers monthly to show them how well they’re doing on such things as on-time deliveries, he said.

In Nasstrac’s shipper survey, 47.4% of the respondents said reliability of on-time delivery was the most important criteria in choosing a carrier, and 18.4% said financial stability was the most important.

The study also found that shippers believed truckload and less-than-truckload rates will experience the highest rate increases of all the shipping modes.

While only 33% of those surveyed said they expected intermodal rates to increase, 47.4% said they expected LTL rates to rise, and 45.6% said the same about truckload rates. 

Several shippers at the conference told Transport Topics that they want their relationships with carriers to support their specific needs and overall business goals.

Dixon Ticonderoga Co., the pencil maker based in Heathrow, Fla., has three goals: protecting jobs, hitting its financials and growing its business. It expects its carriers to support all three, said Sandy Hill, who manages the firm’s distribution center in Macon, Ga., which ships 43 billion pencils a year.

“If we’re being efficient, if we’re hitting our on-time deliveries to our customers, if our customers are happy, all three of these are going to fall into place for us,” Hill said.

Additionally, environmental concerns are an increasingly important factor in whether a carrier is hired, said Brian Morgan, director of logistics for Leviton Manufacturing Inc., which controls an annual transportation budget of more than $20 million. The Melville, N.Y.-based electronic and lighting manufacturer makes products that range from light-switch plates to theatrical lighting.

“We always look at how our carriers are performing,” said Morgan. “Are they helping us to be more efficient? Are they reducing our total costs, which reduces miles, which reduces carbon emissions?”

For Dalton, Ga.-based carpet manufacturer Shaw Industries Group Inc., relationships are critical, said corporate freight manager Ben Ball. Shaw has its own fleet but is always seeking for-hire carriers willing to diversify, he said. LTL carriers prefer to ship on pallets but carpet is shipped in 15-foot rolls.

“Our model has been once we award someone business, for the length of the contract it’s theirs as long as they’re keeping their commitments, so we don’t go out and shop others,” he said.