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Chasing the Low Price Spread

Posted By Gail Rutkowski, Thursday, November 12, 2015
Updated: Wednesday, October 14, 2015

Do you remember the TV commercial about a popular brand of margarine where they compared their brand to the low priced spread?  Inevitably, as it is their commercial, the blind folded consumers choose their higher priced brand over the low priced spread.  But what happens when the blinders come off?  How many of us will choose the low priced spread just because it’s cheaper? 

 

Now we all know that cheaper isn’t always better and often times its worse.  When it comes to purchasing transportation services is cheaper the way to go?  Today more than ever the pressure on transportation managers to reduce costs never lets up.  No matter how much you squeeze your carriers your management keeps asking for more.  The end result is that relationships are strained, carriers put your business at the bottom of the pile, and you continually struggle to find carriers and/or brokers who will haul your freight.   While you may achieve some short term successes, being able to establish a sustainable transportation network will continue to elude you. 

 

We read every day that carriers are becoming more selective in choosing customers to do business with.  Of primary concerns to carriers when allocating capacity is how difficult the load is to handle and the amount of time it takes for drivers to load and unload.  How Carrier friendly are you?  There are a number of things shippers can do to become a Shipper of Choice.  Here are a few suggestions:

  • Plan Ahead – being able to give carriers advance notice of shipments goes a long way to help them schedule equipment and puts you at the front of the line.
  • Flexibility – Bunching up shipments at the end of the week/month/quarter or only loading between peak working hours makes it difficult to supply equipment.
  • Relationships – How well do you communicate with your carriers?  Do they have visibility into your operation?  Do they know what is expected and where resources need to be allocated?

A survey by Transplace, Inc. identified four key areas shippers should prioritize when striving to become a shipper of choice:

  • Economics – nearly all respondents indicated the market competitive rates and fair fuel surcharges as “critical” or “important” factors when choosing a shipper.  Payment terms and average time until payment are also key areas of focus.
  • Driver Productivity. 97% of carriers consider dwell time as an “important” or “critical” factor in determining a shipper’s status.  The ability to drop trailers and offering 24/7 freight is extremely desirable, as is no-touch, efficient freight.
  • Driver Friendly Facilities.  Carriers ranked on-site parking and available bathrooms for drivers highest.  Carriers will reject freight from shippers who do not treat their drivers with respect.
  • Relationships.  Here it is again.  Recent history has shown that outcomes sometimes can be disastrous when long-term relationships are sacrificed over price.  During economic downturns many shippers often allowed savings opportunities to pass by in favor of maintaining preferred partnerships that afforded the assurance that capacity would be met reliably and consistently.

Shippers need to understand a carrier’s costs in relation to equipment and driver productivity as well as a willingness to discuss issues the carrier may be facing.  Bringing carriers as many opportunities as possible can also be a significant factor.

 

Where does your company stand?  As more shippers vie for less equipment carriers are becoming more selective about whom they will work with.  When two shippers pay the same rate and one makes them wait for hours to unload and one who unloads within 30 minutes of arrival…they will choose the more efficient shipper every time.

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