Win the Fight for Capacity

Oct. 1, 2006
Why do carriers play favorites with customers? Because they can. Driver shortages and other capacity issues show no signs of letting up. Being a preferred shipper helps ensure superior service to your customers.

Hasbro discovered one secret of becoming a preferred customer to a carrier: give it a monopoly. Headquartered in Pawtucket, R.I., the company entrusted FedEx Ground with 164,000 of them. Last month FedEx coordinated the shipping effort for the "Here & Now" edition of Hasbro's Monopoly board game, delivering 164,000 games to 7,200 U.S. retailers.

In preparation, Hasbro worked with FedEx to develop a just-in-time delivery schedule that would keep the game's details secret until the Sept. 14 release date. FedEx Ground transported the specially packaged orders from the Hasbro facility in East Longmeadow, Mass., to a FedEx facility in Willington, Conn., where they were sorted for distribution. To make this special assignment work, Hasbro and the carrier needed to share a lot of information, says Bram Johnson, executive vice president of FedEx Ground.

"Give me good data that will get it to the right store so they can sell it at the right time," he says. "When you have that kind of rapport and that confidence in the data and the ability to load trailers, everything flows smoothly."

The Golden Rule rules

You don't have to be a worldwide leader in the toy industry to get on a carrier's preferred customer list and receive preferred service. To become a preferred anything follow the golden rule: "Do unto others as you would have them do unto you."

Warehousing Consultant Don Benson ( sums it up simply: "Preferred customers maintain open communications about what's going on. They visit the dispatcher so when they call they have a first-name relationship. When they call the carrier to schedule a pickup, they say 'I think it will be ready at 3:00, probably 4:00,' rather than telling the carrier to be in at 2:00 and make them wait until 6:00. That requires shippers to have better information about what they have, what their plans are and the willingness to share that information."

Ken Ackerman, a warehousing consultant based in Columbus, Ohio, and publisher of the Warehousing Forum newsletter, says that the truck driver shortage, which shows no sign of letting up, makes it more important than ever for shippers to make it easier for carriers to serve them.

"Customers need to figure out how to get trucks in and out of their warehouses faster than ever before so the word will get around that XYZ Warehouse is a great place to go," Ackerman says. Warehouse managers have to change their mindset from seeing who can kick truckers the hardest, to putting their needs first. This is important no matter what size the operation. Ackerman has clients who say that they're too small to move to appointment scheduling at their docks.

"Baloney," he tells them. "Nobody's too small. The carriers love it. But when you make the appointment that places an obligation on you. You can't keep appointments unless you use tools that will tell you how long it takes to get things done."

A few years ago, Toledo-based Owens Corning, one of the world's largest producers of insulation products, started tracking the time carriers spent at its docks. John Gentle, principal of John A. Gentle & Associates, LLC, (, was Owens' global leader for processes and transportation affairs at the time. He says once shippers start studying what goes on between their logistics people and the carriers, they can provide information both to the carrier and to their own operations.

"That's what separates Owens Corning from others," he says. "They're willing to make the investment to understand the problem and do something about it. The driver signs in, puts his license number in the system and the system automatically tags it. We can tell the date and the time the driver arrived. Sometimes drivers decide to arrive and leave by caravan. Carriers don't particularly like that, but they don't always know it. If the information we give them includes the frequency their people are arriving at particular locations, sometimes they can do something about it. But the information also tells us if we can shift things around at the DCs so we can get drivers in and out faster, and do it without creating penalties.

Bram Johnson of FedEx agrees that such information sharing goes a long way to cementing a strong carrier-shipper relationship. It even gives shippers more bargaining power.

"Everything gives you negotiating leverage in this market. If you get the data and identification right you have less difficulty processing the packages. If you give me a bad label and an address I can't read, it's very difficult for me to get it to the right place, or if you give me packages without good EDI data then I have to take that and key it [in] and that costs money," he explains. "When you have fingers you make mistakes. If you have perfect information in your shop, the best thing to do is get it electronically into mine. That means better delivery and better service."

Before he was a consultant, Benson managed a book wholesale company. He did a lot of business with FedEx and UPS. When his company was small, pickup times weren't much of an issue. However, as his company grew, so did that issue. Trying to minimize stock levels, retailers tended to wait until the last minute to call orders in. That made it hard for Benson and his people to live up to the company's "in by 3:00, out by 5:00" promise.

"We ended up abusing UPS along the way, asking them to wait a little longer. Depending on our relationship with the driver sometimes they would bend a little and sometimes they wouldn't," Benson explains. "Ultimately we had to repair a relationship that had become not so good. [The prospect of] losing an approved carrier status in a market where they were one of two players at the time wasn't a big deal to them, so we could not play one against the other as easily as you could with an LTL or truckload carrier. We had to build a relationship. While we normally think of the carrier as providing the service, there are times when the shipper can provide some services to the carrier."

Material handling's role

This is where efficient material handling comes in. The salesperson from the trucking company needs to understand how efficient a company's operations are to see if there's a real opportunity for building some kind of quid pro quo relationship. That means taking the carrier's salesperson on a tour of the facilities.

"If your warehouse looks like a mess, and if your material handling looks inefficient, you've just lost all your negotiating power," says material handling consultant Robert Footlik, president of Footlik & Associates, Evanston, Ill.

"You have to convince the salesman that you can deliver. We're talking about being neat and organized, with lines painted on the floor," he explains. "You're looking to build confidence as a partner. Show you can expedite getting loads off the truck and getting that truck out so you are fully prepared for the next truck that comes in."

As facilities grow past a million square feet, inventory layout and material flow become even more important to carriers. The further the warehouse is from the dock, the more important stocking methodologies become. The old habit of putting A items near the front, and Bs, Cs and Ds further back may result in longer distances to the dock and longer loading times. Or it could mean that your staging areas balloon enormously. That's why Footlik suggests storing items by affinity.

"If I'm a furniture company, that means I zone my warehouse into bedroom furniture, living room furniture, and so on," he explains. "I have a vendor sending a truck in loaded with mattresses, so I send him to the bedroom dock. I have a truck coming in that's predominantly upholstered furniture, he's going to a different set of docks in a different part of the building. You use the truck to greatly diminish the amount of movement in the building and the time that truck spends at your dock. This cuts down on your material handling equipment and your lift truck time."

Even something as simple as pallets can make a difference to a carrier and a potential negotiating point in becoming a preferred customer. Rick Blasgen, president and CEO of the Council of Supply Chain Management Professionals (Lombard, Ill., CSCMP), says that with driver shortages, capacity shortages, hours of service rules and rising fuel costs, drivers need to turn loads quickly.

"Do everything you can to keep the driver driving and keep them off the dock waiting," says Blasgen, who formerly ran supply chain and logistic operations for ConAgra Foods and Kraft. "Everything" means working up pallets so they can get off the truck and onto the customer's dock as quickly as possible, configuring loads for ease of receiving and building pallets to the receivers' specifications to minimize the time the truck driver has to stay on the dock to rehandle freight.

"You could ship on Chep pallets, or do eight other things to gain preferred status-like only ordering in full truckloads, or ordering plant direct in full palletloads, all of these things in a preferred program will allow a better price for a customer," he adds. "Savings could be from 3-4 cents per case to a half percent of the invoice. It's all over the map depending on the shipper and the characteristics of their product lines."

Per Ohstrom, director of marketing for Chep, which provides pallet pooling services, supports Blasgen's advice. "There's a general crunch in transportation capacity," he notes. "A few years ago availability of trucking capacity was a given. Now it's getting to be a constraint."

"A good customer to a carrier is one that is not only profitable, but one with straightforward material handling processes. The trucking companies like us because the pallet model involves going right into the retailer and they don't have to worry about waiting around to pick up exchange pallets. Retailers encourage their vendors to ship on Chep [pallets] because they know unloading will be fast and they also know that product damage is less than with GMA [Grocery Manufacturers Association standard] pallets."

Be flexible

If shippers give carriers options in how they handle freight, the results can be mutually beneficial. A drop-box program is one example. This allows carriers to pick up freight during off-peak times when drivers and tractors are more available. It also allows the shipper to unload and reload trailers when it's best for them.

Don Derewecki, president of Gross & Associates, Woodbridge, N.J., notes that some 3PL operations will setup a drop yard for multiple end users. This benefits the carriers because they can drop at a single location rather than at multiple sites.

"This is also useful for shippers located in congested areas where they don't have the space to drop boxes," Derewecki explains. "If you're sharing this with other shippers and it's a beneficial relationship, it tends to lower the cost. You're balancing out costs with others. And if carriers understand that you have a good and fair scheduling program and they have a reasonable expectancy to be able to back in, get unloaded and released within a short period of time, that goes a long way to a shipper's being a preferred customer."

The perspective of carrier managers is one thing, but don't overlook the driver's power. They know there are fewer of them to go around, and it puts them in a position to have preferences too.

Derewecki says drivers have basic criteria for formulating preferences. Simple things like having a proper driver waiting area, access to a clean restroom and someplace where they can rest are big pluses. So are adequate access roadways and back-in areas.

"If that carrier comes in and one out of ten times he damages his trailer backing in or pulling out because of inadequate clearance, that's a problem," Derewecki states. "Whenever you have the opportunity to engineer their access and their back-in and pullout areas, take it."

As transportation assets continue to get squeezed, carriers will think more and more about the customers that they want to do business with. Giving them the information they need and paying attention to the needs of the people behind the wheel, as well as those in the sales and dispatcher offices, will keep shippers at the top the carriers' priority lists.

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