Tables Turning in Shipper/Carrier Relationship

As chief logistics officer for Avnet Inc., my focus is obviously on making sure that all aspects of Avnet's logistics operation — from warehousing and inventory control to transportation management — support our ability to satisfy customer requirements in the most efficient and effective manner possible.

The problem is, there is a critical element of our order fulfillment function that falls outside of Avnet's physical control — the ultimate delivery of product to the customer. So, how do we assure that our product is handled with the same professionalism and proficiency we expect of our employees once it crosses the loading dock doors into our freight carrier's possession?

As the customer, one might think that I hold all the cards and can therefore dictate my terms. There are two major flaws in reasoning. First, having worked for many years now in a service-based business, I know what it's like to be on the other side of the table, facing customers who care only about meeting their requirements, with little or no appreciation for the value I bring to the engagement. I don't like it, and I won't put my suppliers in that position.

In addition, as consolidation in the carrier community has limited the number of viable suppliers, the balance of power between shippers and carriers has shifted. With their increased leverage, carriers are reportedly becoming “more selective” in their choice of customers, according to the 24th annual State of Logistics Report released earlier this summer by Council of Supply Chain Management Professional.

Therefore, it is more critical than ever that today's shipping customers make a concerted effort to be good customers. Clearly there are certain basic expectations in any business relationship, these include treating your counterparts with respect, paying your bills on time, and communicating in a clear and timely manner. In the logistics world, however, there are some additional measures companies can take to facilitate the capable and cost-effective fulfillment of your product.

For example, the increased globalization of business has been accompanied by an onslaught of new international trade regulations and customs requirements. If I am shipping a product from Avnet's Chandler, Ariz., warehouse to a customer's EMS provider in Shanghai, and I do not include the correct gross and net freight, there is a good chance that shipment will be delayed or will cost more than expected. While many carriers specialize in dealing with these complicated import/export rules, it is important that you, as a shipper, have at least a working knowledge of those import/export directives that apply to your business so you are not inadvertently putting up roadblocks for your carriers.

Customers can also ensure they are extracting the most value from their carrier partners by laying out clear expectations at the very start of a new program. This includes providing as much disclosure as possible about your freight requirements, such as inbound freight, backhaul opportunities, pallet configurations, loading processes, freight density, lane-by-lane volume, seasonality issues, and any other relevant aspects of your shipping processes and requirements. Keeping your primary carrier up to date on any significant increased activity or closures that might impact their capacity planning is also recommended.

It is also important to understand all the services your primary carriers can provide. The cost of transportation is more than just your negotiated freight. Understanding the services they can provide can turn you from a freight customer only concerned about price to one who is driving more value for your company and making you more important to the carrier.

While I have not personally heard of any instances where carriers are actually turning business away, it stands to reason that these providers will focus their attention on those customers that show a clear commitment to maintaining a long-term win-win partnership. Remember, a little good will goes a long way.

5 comments on “Tables Turning in Shipper/Carrier Relationship

  1. Hailey Lynne McKeefry
    August 8, 2013

    Partnership is an overused word, but the cornerstone of any good business relationship. We use these words, partnership, collaboration and the rest, a lot, but it's important that these values get translated into how we do business. It sounds like that's what you are doing with your carriers.

    I'd be interested in hearing where the stickiest moments were in navigating these new waters. What was the biggest challenge? How did you tackle it?

  2. SunitaT
    August 10, 2013

    This fear among manufacturers stems primarily from the reason that recent handling agencies that have been emerging all over the market,that promise professionalism in their work but fail to do so, which results in loss for the company.

  3. SunitaT
    August 10, 2013

    What a manufacturer dreads most is a waiting customer. This not only means loss in importance of the company for the customer, who would now be looking to other companies for deals, but also loss of valuable support. Manufacturers need to rely on handling agencies that have a good track record or which are run by rofessionals, which provide both speed of delivery and safety.

  4. Mr. Roques
    August 14, 2013

    Dealing with shipping has to be dreadful. It's the last leg of your business and you have no control over it. It can make or break a long term deal between your company and your customer. 

    Maybe shipping companies should be help more accountable or to make joint ventures were both sides have things to lose.

  5. Hailey Lynne McKeefry
    August 18, 2013

    @Mr. Roques, since reputation is everything, you would think that carriers would be working hard to make sure that customers have a great experience. at the same time, it seems to me that the industry has so many things that the manufacturer, teh shipper, no one can anticipate, from things being delayed in customers to challenges with the weather. I suspect that flexiblity and good communication are going to be the most critical components to success.

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