Managing Freight in a Tight Capacity Market
7 bold steps shippers should take to ensure freight capacity in a seller’s market
Truck capacity has historically been viewed as a commodity, where the carrier must position itself as the customer’s “carrier of choice.” But that’s changing. The combination of a growing economy and the truck driver shortage is turning freight into more of a seller’s market, requiring shippers to examine how they can become “shippers of choice” for carriers.
Here are seven bold freight management strategies shippers can use to create as much certainty as possible in a very uncertain freight market.
1) Put an end to the yearly freight RFP
There are distinct financial advantages to forging long-term relationships with a select group of carriers. First, longer contracts give carriers time to mine for customers to reduce deadhead miles – leading to greater efficiency for carriers and better rates for you. Long-term contracts also lock in rates.
2) Leverage regional carriers
Regional carriers are better than national ones at attracting and retaining drivers because they can offer steady, day runs that get drivers home every night. Regional carriers can also offer guaranteed capacity, a more personal brand of service, and wider time windows for pick-up and delivery.
3) Reduce driver turn time
New hours of service limits for drivers magnify the importance of faster driver turn times at pick-up and delivery. If your receiving docks are congested, carriers are less likely to service you. To speed turn times, consider establishing a drop and hook program that allows drivers to just drop trailers and go.
4) Be more flexible
In this seller’s market for trucking services, forward-thinking freight departments are asking “How can I make my freight as attractive as possible to the right carriers?” Good starting points include:
5) Co-load freight with other shippers
3PLs can help reduce LTL costs over 20% by consolidating LTL shipments from multiple customers into lower-cost, truckload shipments. Shippers not only enjoy lower costs, but also share those costs with co-loading partners. The strategy works best when many of your 3PL’s other customers ship to the same retailers as you.
6) Choose carriers with lower driver turnover
Ideally, you want carrier partners with turnover well below the 87% industry average. Consistent drivers:
7) Rely less on the spot market
Freight shippers have fed off the spot market for years as a means to control costs. But in a tight capacity market, there is huge value in building close, collaborative carrier relationships, including:
The shift from a buyer’s to seller’s market requires shippers to change their sourcing strategies in very fundamental ways. Companies who struggle with this will put their companies at risk. The winners will boldly forge collaborative partnerships with carriers as they position themselves as “shippers of choice.”