At personal care products giant L’Oréal Corp., consistency and collegiality have been two of Andrew Banfield’s watchwords in transportation buying.
Amid all of the turmoil surrounding the pandemic and supply chain snafus, the experience was “surprisingly consistent, and I say that because we very much aspire to attest and learn methodology where we try things and we try to learn and we try to get better,” Banfield, director/indirect sourcing of transportation services, said on the first day of FreightWaves’ two-day Future of Supply Chain event in Cleveland.
For example, prior to the pandemic, L’Oréal had put in place a product called Backstop, which backed up its core carriers with first three, then two, carriers working under premium-priced, pre-negotiated and 100% tender acceptance terms. “Backstop was designed to capture anything that fell out of our standard network. We didn’t have spot freight,” he said. Vendors would approach L’Oréal for spot market opportunities only to walk away empty-handed, he said.
“It was very unique and very different at the time, and it was before COVID-19 that we put Backstop into place knowing the market swing was going to happen,” he said.
This current cycle is slightly faster and slightly more aggressive, Banfield said. “I don’t know if it’s due to the speed of information. You hear the term ‘war chest’: Have the carriers filled up their war chest, or have the customers saved enough and put it into their war chest. We shouldn’t be at war, and it seems like it is too frequently.”
“We are doing our best to avoid the conflicts … . [W]e are not going to have the huge swings. We will still pay more if it’s a tight market and potentially less if it’s a loose market. But we will not be aggressive or abrasive, and we’ll be able to have that cost confidence we’re looking forward to budget.”
However, “no matter how strongly you think you’ve negotiated in advance, the fact is that if the market goes above certain pre-determined rates, you are going to get burned. That’s not the carrier taking advantage. That’s the market dictating what the cost should be over time.”
The key is preparing leadership for the trends that inevitably drive transport pricing, Banfield told Craig Fuller, FreightWaves founder and CEO. “For the past 12 years, there has been a 2.8% to 3.2% increase in truckload costs. It’s not every year you’re going to see this. You are going to see hard years. You’re going to see soft years. But there is a trend.”
Asked how to get finance, which makes the transportation spending decisions at L’Oréal, on board, Banfield said, “It really comes down to the market intelligence. Companies like FreightWaves are fantastic for that. It’s a matter of showing folks over time what those trends are.”
According to Banfield, at L’Oréal service is the most vital pillar. Cost is the second pillar. Carbon emissions is third, but for a France-based company it is extremely important, he said. L’Oréal has been tasked with reducing its transport carbon emissions in 2030 by 50% from 2019 levels. “We will find a way to make it happen. There’s no question about it,” he said.
Banfield added that L’Oréal never ran its own internal RFPs when he joined five years ago and did not have a transportation sourcing team. “We first needed to figure out how that process needed to look. What we had done up to that point was evaluate our network over and over again through various disjointed processes, but we didn’t have a true clean cycle that was owned by our sourcing group. Now we do.”
Banfield said that a core L’Oréal mission is to look out for its carrier and driver partners. “If rates are going up and our partners are locked into a rate … that routing guide is going to break down and they’re going to struggle because they could be making more money hauling freight for somebody else. We don’t take the full fluctuation of that increase or decrease. As we go forward, we’ll continue to improve, and we hope that our providers, the folks that we’re working with, understand how much we’re doing to work with them and be partners with them.”