Is your phone ringing? Inbox overflowing? Another carrier looking for freight? If you’re answering “yes” to these questions you are not alone. So far, 2019 isn’t all that it’s been cracked up to be. Rates continue to fall, capacity continues to enter, and route guide compliance soars. As a result, carriers and 3PLs are putting their selling shoes back on and competing for market share, and your phone won’t stop ringing as a result. This market presents an opportunity for shippers to not only reduce costs, but also improve service. Here are some tips to maximize a soft market.
Let’s start with the obvious: leverage 3PLs in the spot market to reduce short-term transportation spending. Simply put, pick up the phone. As carriers call for freight, be careful to vet all partners to mitigate service risk as many 3PLs will underprice and underdeliver through these soft market conditions.
In addition, give your incumbents a chance, talk to them openly about what you are hearing from their competitors. If your incumbents are true partners they will be willing to work with you. The key in this soft market is to identify partners that are honest and that you can trust. This will enable the shipper and 3PL to maintain valued carrier relationships that drive long-term service goals. If you pull freight from a 3PL you may risk losing the carrier to other shippers when the tables turn. Though the market is loose, carriers that communicate and provide exceptional service are still tremendously valuable, so hang on to them.
Contrary to 2018, shippers have increased carrier options to assign to their freight. This creates an environment where carriers need to compete for the business through a value and price equation. Take advantage of the increased competition to drive process and technological compliance goals.
Most shippers today are utilizing EDI, TMS and supporting business intelligence platforms to drive efficiency. In 2018 those same shippers were fighting for every truck and carrier process compliance took a back seat. Unlike 2018, HOS and ELD implementation is not new. Carriers have had sufficient time to adapt to the new environment and thus have the bandwidth to adhere to increased price and service expectations.
In short, hold your carriers accountable to your service expectations, give the freight to those that comply and retract freight from those that don’t. Work with your preferred carrier partners to determine avenues to increase service KPI’s including but not limited to on-time delivery, route guide compliance, and OS&D ratios.
Data matters, however, it isn’t everything. When 3PLs and carriers partake in bids, they don’t exclusively consider historical data, they also use less tangible expertise to drive decisions. Many shippers held bids in late 2018 and early 2019, in an environment where carriers were confident, and shippers were not.
The market has changed. Consider re-evaluating your bid cycle, timing and process to drive cost reduction. You might consider an entirely new bid or utilize a mini-bid to drive costs out of select freight. Again, work collaboratively with your preferred partners to mitigate coverage and service risk in the event you ruffle some feathers.
In summary, the market is shifting back in favor of the shippers and you should take advantage. The discussed tactics are simple and healthy ways to drive out costs and improve service in a soft market. Don’t forget to be balanced in your approach. It is tempting to go with the least expensive provider in these markets, even if you do not have a history with them. Always consider long-term value in your carrier choices and foster the right relationships.
Is your phone still ringing? Pick it up!
(Michael fullam is the president of network development for ReedTMS Logistics)