Daily Archives: September 4, 2016

Provider Sustentation 68: Carriers

Roll on highway, Roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler roll on (Roll on)

If you decide against 3PL firms, which bring a disadvantage for every advantage, then your only option is to manage the carriers on your own. Without providers, the full force of their damnation is thrust upon you.

Thanks to the outsourcing outsourcing craze that began in the 80′s, no one makes their own stuff anymore which means that they are dependent on logistics carriers to get the products to the warehouses and then again to get the product to the retail stores. And these carriers know that, to use a common expression, they got you by the balls.

Now it’s true capacity isn’t always full capacity, especially in off season, and at these times there is some negotiation room, despite what the carriers will initially tell you, but at peak season when the holiday rush is closing in and half (or more) of your annual sales are at stake, and the carriers really are at, or close to, peak capacity, the carriers are in control and they know it. Fuel surcharges pile up. Overtime charges pile up more. And you’ll pay because if you don’t, your product won’t arrive on time, putting your sales, and profits, at risk. But this isn’t the biggest problem. If the driver shortage continues to worsen, their might come a day when you are willing to gladly pay those surcharges and overcharges but still won’t get your products delivered.

So what do you do?

1. Understand your overall shipping needs.

Map your entire supply chain, associated annual volume levels, associated revenue, and associated criticality. Understand that going out to tender category by category or region by region is not always the best way to do things.

2. Do a national, if not global, supply chain tender.

Do a large supply chain tender across regional, national, and global carriers across all volume where the goal is to award all strategic volume and all high revenue volume to a handful of carriers which will guarantee year round capacity and customer of choice status to your organization in return for long term, guaranteed shipments and income. The bigger the number, the hungrier the carrier.

3. Give a little more to get a little more.

Use optimization to balance cost versus delivery times and service level guarantees. Select carriers that can easily handle the load, are financially stable, and willing to give your deliveries priority in exchange for large volumes, timely payment, and relationship building (and lean transformation help) over penny pinching.

4. Don’t sweat the small stuff.

Some lanes will have to go local, and some smaller carriers won’t give you the best rates, but you can still use competitive bidding and not lose much by making sure the majority of volume is under sound management. You can’t completely escape the damnation, so just settle for getting as much as you can under control.