The evolving shipper-carrier relationship

Due to the changing technological landscape, the relationship among LTL shippers and carriers is evolving.

During the Journal of Commerce Inland Distribution Conference, SMC³ CCO Brian Thompson told the Atlanta audience that the shipper-carrier dynamic looks much different than when he started in the industry 17 years ago.

“It was very common to see an LTL shipper go to a carrier and stick with them,” he said. “Nowadays, with transportation management systems and load-optimization software, you’re really seeing a lot more rate shopping happening out there.”

Shippers are using more carriers, but Thompson pointed out that they’re no longer consumed with getting the biggest discount on their contracted LTL rates. Today’s shippers realize that it’s more about the bottom line than a high discount, he said. The technology that’s now available lets shippers optimize their LTL pricing, directing attention away from discounting and focusing on what they’re paying in the end.

Of course, shippers would abandon this practice if it couldn’t be accomplished with blazing speed. Thompson noted that the prevalence of the Amazon business model and rapid replenishment has made speed more important than ever.

“Nobody wants inventory anymore. They want it when they want it, but not before they need it,” he told the audience.

In the LTL world, the just-in-time supply chain model has further complicated an already complex system. The modern supply chain almost encourages multimodality, he said, and shippers should consider adapting to technologies that allow apple-to-apple comparisons of truckload and LTL pricing. Thompson told the audience that there are “very few” large shippers that don’t utilize both truckload and LTL, using current technology solutions to compare rates between the modes.

In addition to looking at different modes, shippers should be using new technologies to examine their goods. As density LTL pricing gains steam, carriers are starting to look at the cube of shipments to be transported as well as the configuration of shipments in their trailers. Savvy shippers should start paying attention to these factors, he said, because while carriers may not currently use density technology when evaluating shipments, this new pricing model will soon be pervasive.

“As a shipper, if you’re not also trying to get some understanding of your shipment configurations and your shipment sizes, then you’re potentially setting yourself up for a surprise,” he said. “That’s the kind of analysis that SMC³ helps customers with.”

After accounting for mode crossing and the density of shipments, supply chain stakeholders should also try to work with their carrier partners. Thompson advised that for carriers, it’s not really about getting the largest revenue per hundredweight; the carrier wants to maximize profits, and any way the shipper can help with that will be valued.

A strategic discussion between a shipper and a carrier might concern lowering turnaround times at the dock, eliminating customer service calls or even a pledge that the shipper will bring the carrier more business. These conversations, he said, should focus on the collaborative relationship.

Thompson added, “Carriers are always open to discussion.”

SMC³ helps shippers navigate the unique complexity of LTL rating and transit detail to address everyday freight-procurement demands. Click here to learn more about how SMC³ tools help shippers optimize their LTL spend.