Thursday afternoon, Seaport Global’s Kevin Sterling, an equities analyst focusing on transport and logistics, hosted a conference call with Kevin Perry, principal at The Domestic Transportation Consultant. Perry has an impressive resume from his decades of experience managing transportation from the shipper side: six years at Walmart managing carrier relations and supply chain, 12 years as the Director of North American Carrier Relations and Inbound Transportation at Lowe’s, and almost three years as Belk’s Director of Transportation—you get the idea. Perry started his consultancy practice at the beginning of this year.
Sterling and Perry held a fascinating conversation about large shippers’ perspective on the current capacity-constrained freight environment, focusing on shippers’ pain points and how they’re adapting to market conditions they consider ‘uncharted territory.’
Perry began by listing best practices that he recommended to shippers seeking to become a ‘shipper of choice.’ “You can’t just try to beat up the carriers,” Perry said, “When you’re talking about being a shipper of choice, take the time to talk to carriers to find out exactly what that means. Providing accurate volume forecasts is critical, tendering loads 72-48 hours in advance, providing drop and hook access 24/7, providing amenities to drivers, such as secure parking, are all important. To the extent that you can, balance load tendering through the week and month and you improve service levels and cost. We all hold carriers accountable to high levels of load acceptance percentage, but shippers need to make sure your own house is in order. Speeding up carrier receivables is important—try to get to 30 day terms or less. And pursue longer term collaborative partnerships over transactional relationships,” said Perry.
Another issue that came up was the ‘core carrier philosophy,’ where shippers trying to reduce the number of relationships they have to manage try to establish a small group of carriers that handle all of their transportation needs.
“When you limit your options, you’re usually overpaying,” said Perry. “I am seeing examples of people building depth on their routing guides so they can try to stay on published rates [without resorting to the spot market].”
That’s one way that shippers are trying to adapt to a capacity-constrained freight market that Perry thinks is “definitely here to stay for the foreseeable future.”
“More so than in years past, shippers have done detailed peak planning for this fall to lock in capacity,” Perry noted. Shippers are also being forced to accept poorer service—Perry said that a tender acceptance rate “somewhere in the 90s” is expected in a period of normalcy, but shippers have seen acceptance rates degrade year over year, into the low 70s.
Sterling asked Perry whether 98.5% or 99% on time is still feasible in the current economic and regulatory environment. “Anything is possible,” said Perry, “but shippers have to balance out the cost impact of what it takes to hit those service levels. You might have to build in more lead time and change transit standards to hit those levels.”
Perry also said that carriers should not be shy about voicing their concerns about shippers’ efficiency, especially the operations of specific facilities. Sterling asked Perry whether carriers keep scorecards of shippers, and Perry said yes, they do, “but what I’ve seen is that carriers are reluctant to share their scorecards. Most shippers have thick skin and welcome the feedback and look for ways to improve. If there are certain facilities or vendors that are cost centers, they want to know—you can’t improve what you can’t measure.”
Continuing on the subject of shippers who are perceived to be problematic by carriers, Perry said, “There are certain locations where it’s very challenging or difficult to get carrier support, and once you find a carrier to service it, it’s often because they’ve never been there before, and once they start their service, they want to bail out.” Shippers aren’t stepping up their game across the board, Perry said, because there are too many egos and entrenched practices in play. To truly change the way facilities operate and make them more efficient, Perry said, “the more you can get exec level support to drive those changes the better off you’ll be.”