It can be easy to overlook the need for a formal, thoughtfully structured carrier management program. But as your business and carrier network grows, you’ll need processes and tools in places. Without them, you could expose your network to costly inefficiencies and subpar service, with a negative impact on the important relationships you have worked so hard to establish with your customers and carriers. An effective carrier management program allows you to build relationships with you carriers and open doors for new opportunities for both parties.
Here are some tips to get you started:
1. Choosing the Right Carrier? Look at More than Just Rates
Selecting carriers based on rates alone could leave you vulnerable to service failures. Consider other variables like service track records, expertise, technology, and on demand fleets.
"An effective freight management program, supported by transportation management systems and carrier relationships, should be a key component of your logistics strategy"
2. Prospective Carriers need to understand what you consider the High-Priority Elements of a Service Contract
Although these discussions can take place at any time, the ideal time for them to start would be at the request for proposal (RFP) stage. At this point, you can outline your network and distribution strategy, and start comparing respective service networks to ensure that there is close alignment.
3. Create Carrier Alignment beyond Transportation Operations
It’s beneficial that your internal functions like finance, marketing, and sales are also connected to your carrier selection strategy, as these roles can also impact your relationships with carriers. Giving these various teams visibility to your transportation operations and tools can help keep them in the loop on your shipping process— from understanding freight spend to tracking shipments for customers.
4. Seek to Create a Transparent Relationship with Carriers.
You and the carrier must have a deep understanding of each other’s operations and strategic goals. Always account for items like carrier alignment, the ins and outs of your service contract, and service issues so you and your carriers are on the same page.
Carriers want to work with companies that have reliable, quick, and organized operations and processes. Like many other areas of your business, technology is also a key to streamlining and improving your freight operations. If the technology you’re using for shipping is limited to phone calls, spreadsheets, and emails, you’re missing out on access to visibility and analytics that are valuable assets for your business and carrier relationships.
Whether your company is a large, global corporation or a small business, there are a variety of freight management tools available today that can fit your unique shipping needs. Having greater access to your freight data and analytics also empowers you and your staff to make smarter decisions, and gives you an advantage as you look to negotiate rates with your carriers.
Using transportation management systems can be a great first step to streamline your process, but how else can you use it to find savings?
Look at Your Lanes
Examine the lanes where you need pricing, and target the carriers that need those lanes. When carriers are running routes, they need to be able to pick up freight that will make their routes worthwhile. Your carriers are a critical component of your business plan, but that goes both ways—they don’t want empty truck space, since it makes their equipment less efficient and cost-effective. Knowing which lanes a carrier most frequently takes can be helpful. If a carrier is already making a trip daily, you can probably negotiate a better discount than a route they only run once a week.
Know Your Freight Spend
Having this information at the forefront of your mind when negotiating is critical. If you are currently awarding a single carrier a large percentage of your freight spend, you can and should use that when negotiating with a carrier. Most carriers are going to want to hold on to being a preferred carrier for your business and may be more willing to negotiate in your favor. If you are divvying out a few lanes to a large number of carriers, you may get more value by dialing it back and using only a handful of core carriers. If a carrier feels like you are entrusting them with more of your freight, you are more likely to get better rates.
Know your Product Density
When carriers work out pricing for your shipments, they base their rates on density, NMFC class, and pounds per cubic feet. Understanding each of these factors allows you to develop realistic expectations about your pricing and enables you to appreciate the carrier’s perspective as they negotiate with you.
An effective freight management program, supported by transportation management systems and carrier relationships, should be a key component of your logistics strategy. By implementing these processes, you’ll enable your team to make shipping decisions that save the company time and money, while also improving service to customers.