The relationship between shippers and carriers has been completely flipped. Before shippers were in control and carriers had to take what they could get, but now shippers are having to try to make their freight attractive to carriers. The growing U.S. economy and truck driver shortage has helped turn freight into a seller’s market–and shippers need to change how they think about how they can get the best carriers to choose them.
Carriers are having to adapt to their new reality, and shippers need to adapt along with them. Carriers are having a hard time, and the challenges they’re facing have helped cause the flip to a seller’s market.
- According to the American Trucking Association (ATA), driver turnover rates are almost 90% and the U.S. driver shortage is projected to hit 175,000 by 2024.
- Warehouses are located closer to consumers, and increases in intermodal both cut into productive long-haul runs.
- Hours of Service rules and measurement of HOS compliance can reduce driver productivity as much as 15%.
- Drivers demand less efficient routes so they can go home more often.
So, how do you create certainty in this crazy, uncertain freight market?
- Stop speed dating (RFP/rate shopping) and get into a long-term relationship with a select group of carriers.
These annual pricing exercises are out of step with today’s freight market–because they don’t actually save you any money.
Instead, invest in long-term relationships with a select group of carriers. By “speed dating” you’re missing out on: network efficiency, better service, and better rates.
- Join forces with regional carriers.
Regional carriers are better than national trucking companies at getting and keeping drivers because they offer steady day runs that let drivers get home every night.
Get to know the top regional carriers in your distribution markets and talk with them about how to work together for mutual benefits.
- Make your distribution centers driver-friendly
If your receiving or loading docks at your distribution centers keep drivers waiting for hours, carriers are less likely to work with you. Here are a few strategies to help you tackle this big problem:
- Set up drop and hook programs to allow drivers to drop and go.
- Keep track of how long drivers spend on your property
- Set appointment times to help move trucks in and out efficiently
- Be flexible–make it a win-win relationship
This comes back to the original question of how to make your freight as attractive as possible to the right carriers. Start stretching because in many cases, it all comes down to flexibility:
- Extend delivery windows
- Offer night pick-ups
- Ship on off-peak days
- Work with your carriers to develop shipping schedules
Bend over backward to help your carrier maximize their efficiency, and they will want to keep working with you and handling your loads.
- Play well with others–stop viewing your supply lines in isolation
A top transportation challenge for shippers is the necessity of shipping in higher costs LTL shipments because of lower volumes. One way to fix this is to combine loads with other suppliers that ship to the same retail distribution centers.
Just like mass transit and buses solve the problem of moving lots of people to the same places, working with other shippers to consolidate loads will save on costs and reduce carbon emissions for moving products.
- Work with carriers who can hang on to their drivers
Move this right on up to the top of your list of carrier requirements. Carriers will often not be able to move loads because they lack drivers–the industry average driver turnover rate for large and small fleets is around 87%: basically a revolving door.
But you want to look for carrier partners whose turnover is below this average because happy, reliable drivers are more productive, make less mistakes, are more on-time, and represent you well with your customers.
- Ditch the Spot Market and Invest in Relationships
Despite what many think, dedicated freight contracts can drive superior savings over spot market freight. In this current market, shippers do better to deemphasize spot market sourcing and focus more on developing relationships with their chosen carriers. The bottom line: offer dependable freight rather than one-off spot market freight and you’ll become a shipper that carriers want to work and build a relationship with. In this tight capacity market, building collaborative relationships with carriers go a long way.
Scrap Your Old Habits–and Win
Freight sourcing’s shift from a buyer’s to a seller’s market demands that shippers take a long hard look at their sourcing strategies and make some fundamental changes. Companies will put themselves at risk if they don’t reckon with this level of change. To win, you need to act decisively to create collaborative carrier relationships and make themselves the “shippers of choice” in this competitive seller’s market.