It may seem that carrier sales forces are in endless motion calling on shippers with varying proposals to get a piece or all of their transportation business. The true test of the carrier is when promises are matched to performance.
Savvy shippers are discovering that by working collaboratively with their carriers — by establishing mutually agreeable ground rules and ways in which they will be graded — they can better manage their transportation costs while getting preferred access to capacity.
While there are numerous high-tech solutions available to evaluate carrier performance, basic communication via web access or a regular spreadsheet seems to get the job done. Some less-than-truckload (LTL) carriers are backing service performance promises with guarantees that not only invite evaluation but provide penalties should they not meet their agreed-upon delivery dates and times.
"There are two things I base a carrier on: price and service," says Julie Bender, transportation manager of Wasserstrom Co. (www.wasserstrom.com), a supplier of food service equipment "You can give me a 95% discount, but if it's going to take you ten days to get there, you're not going to do me an ounce of good. So service is just as important as price."
Wasserstrom offers a full range of equipment for restaurants and other food service operations, such as schools, country clubs and correctional facilities and more. Headquartered with a distribution center (DC) in Columbus, Ohio, the company has four more strategically located DCs within the U.S., in Allentown, Pa., Jacksonville, Fla., Dallas, Tex., and Phoenix, Ariz.
Wasserstrom has manufacturing, sales and warehousing throughout the U.S. as well as in Venezuela. Closer to ocean ports, the Phoenix and Jacksonville facilities are used for breaking down imported containers, sending their contents on to appropriate DCs from there.
Bender is responsible for all freight negotiations, contracts, tariffs and delivery issues, both for LTL and parcel transportation, and she also handles the company's small wares. She estimates freight movement as about 45% parcel and 50% LTL, with the rest made up of truckload and air. "We like regional carriers because our customers want next-day, twoand three-day service," she notes. "We stay with the regional carriers who understand their areas very well."
Wasserstrom's final customers are the restaurants themselves, the end users. Deliveries present a challenge since many of them have inside delivery, require lift gates, or have other special delivery needs.
For a number of years, Wasserstrom has used LTL carrier Pitt Ohio Express (www.pittohio.com) for regional deliveries within its coverage area. Recently, though, Wasserstrom has expanded the amount of business it gives the carrier thanks to Pitt Ohio's new Signature Program.
Geoffrey Muessig, Pitt Ohio's vice president of sales, explains that the program is truly a two-way street type of deal. If the shipper is comfortable with the level of service it receives, and the carrier is comfortable with its margin of return, then Pitt Ohio will guarantee the same shipping rates to that shipper for up to three years. The shipper agrees to tender a certain shipment volume over the three years, and in exchange, the carrier guarantees on-time performance that will meet the shipper's expectations, as well as available capacity over the period of the agreement.
"We are looking for shippers who will work with us to help us take cost out of our mutual business relationship," Muessig explains. "Shippers signing up for this program recognize that they need to partner with us to continue to earn rate stability." For instance, Pitt Ohio requires program participants to communicate electronically instead of by paper. "That takes cost out of our back office and helps us plan operations more efficiently," he notes.
Bender finds the collaborative program a good fit for her company. She has been pleased with the service and price received from Pitt Ohio, and the only adjustment needed was to give the carrier a bit more freight within the area it serves.
"It's a good deal because I can budget how much my freight costs in those areas will be for the next three years because we work off a base rate that is steady across the board," explains Bender. "We have all carriers negotiate off the same base rate. So when Pitt Ohio said they could lock in the price for three years, it was huge for my budgeting purposes and future forecasting."
Muessig says that typically the carrier submits its pricing and delivery information on a monthly basis. At the same time the shipper reports back in an Excel spreadsheet. "Reports are available on our website," he notes, "but some customers want the data pushed to them rather than pulling it, so we have the ability to do that as well. We send them different management reports. Shippers can sort shipment activity by lane, origin or destination point on our website, and then measure our performance."
In terms of monitoring LTL carrier service, Bender explains that the carrier provides her a monthly report sent via email that contains all outbound and inbound shipments and on-time service data. "We keep a spreadsheet of their service levels and our costing — how many dollars we spend with them — on a bi-weekly basis," she says. "If service drops below 95%, which is unacceptable from any LTL carrier, then the rep gets a phone call. If there are specific issues, then the rep will come in and we'll discuss them."
Merits Health Products (www.meritshealth.com), a manufacturer of mobility products for bed-ridden and housebound patients, is another company that has learned the value of collaborating with a carrier. Located in Cape Coral, Fla., the company distributes products manufactured in Taijung, Taiwan, and Beijing, China, by its parent company. Kay Young, Merits' logistics manager, handles the Asian imports whether they arrive at the Port of Miami or they are brought in from Long Beach. Merits has a facility in California and warehouses in Dallas and Philadelphia. Shipments move from the ports directly to the DCs or warehouses, and the company employs a broker in Miami to help facilitate that movement.
Last summer Merits signed up for a program with its long-time LTL carrier, Saia Motor Freight Line (www.saia.com). Saia's Xtreme Guarantee is a money-back guarantee program based on its Customer Service Indicator, a series of performance metrics that come from shipper surveys, focus groups and an internal customer advisory board, and are posted on Saia's website. The Xtreme Guarantee is offered to everyone on Saia's rate base tariff, and the carrier guarantees that shipments will:
- Be picked up on the day Saia commits.
- Be delivered by 5:00 p.m. based on scheduled transit times.
- Be delivered claims-free.
- Receive accurate invoices.
- Receive proof of deliveries, if requested, within five minutes.
- Have all approved customer claims settled within 30 days.
The guarantee program is an evolution of its Customer Service Indicator, explains Richard O'Dell, Saia's president and CEO. "First we did the research and found out what things customers focused on. We then said in order to report on these criteria we'll have to measure our performance in each one of them. What's important philosophically is that what gets measured gets managed." According to O'Dell, the carrier has used the program to reduce its rate of defects in most areas from between 30% and 40%.
"I get a daily shipping manifest every morning faxed to me from Saia," Merits' Young explains. "I go over it every day to watch the movement of our shipments." Young can go to Saia's website to keep up with shipment movements, and to monitor problems if any occur.
The ability to monitor service Merits gets from the carrier is critical to its success.-"Our business is so competitive now that customer service is the only thing we can offer that's any different than someone else," Young points out. "We strive to satisfy the customer and make sure they get their shipment on time."
Baker Tankhead Inc. (www.bakertankhead.com), a Fort Worth, Texasbased manufacturer of industrial tank heads, also relies on Saia for measurable and reliable delivery.
"We're in a very competitive market in our area, with several tank head companies located here," explains B. Peacock, the company's shipping manager. "Reliability of delivery is very important because most of our customers need our product to meet their production line needs. We try to allow enough time to receive orders, order the steel to manufacture the tank heads, to produce the tank heads, and then ship them to the customers. Most of our customers require one-and two-day deliveries via LTL shipments."
Although some of its customers use their own carriers, Baker uses Saia — as well as FedEx Freight (www.fedex.com), another LTL carrier — because, as Peacock notes, "We seek the best service into our customers' area, and weigh the service that we and our customers receive. Certainly, though, pricing is also important."
Saia furnishes Baker with a performance report each month. Once a month a service rep visits to go over the reports. If there are problems, they are addressed at that time. Although a great deal of information is available on the Saia website, Peacock prefers to straighten out any problems by calling and talking to someone in person.
"Each morning I go on the Saia website and check outbound shipments that were picked up the day before," explains Peacock. It lets me know they are en route or have already been delivered. If there's a damage problem, I just go on their website and file a claim. It makes our customers happy to know we are looking out for them."