Transportation: Managing the Carrier Base to Move Goods
Companies of all sizes have the same overall goal when hiring carriers to move their product – do it effectively and efficiently, while keeping costs manageable and under control. How carriers are selected, as well as the ability to manage carriers, differs dramatically from company to company. They may or may not have in-house knowledge about transportation and the desire to manage the carrier base. Having a transportation model or strategy in place - too often lacking - is also essential.
Wrong decisions companies make about hiring carriers
Smaller companies usually have less in-house knowledge about transportation modes and rely on their “shippers” to select the right carrier. We have witnessed companies that have hired carriers for the wrong reasons:
- The carrier happened to be the first listed in the phone book;
- A family member has a truck and was willing to move their freight, usually at a premium.
Medium and large companies have the ability to manage their carrier base more effectively. However, they can go off the track in transportation decisions. For example, we have witnessed companies that have made these mistakes:
- They have over 100 carriers in their “core carrier” base;
- They did not restrict who was allowed to hire carriers;
- They treated every carrier job as a “rush”, for the benefit of the customer.
Sound carrier management is essential
A properly-balanced carrier base can save significant amounts of money, while maintaining high customer service standards. Here are some practical ways to better manage your freight and select your carrier base:
1. Conduct a comprehensive review of freight activity including lane analysis, cost per cwt, carrier allocation, payment cycles and delivery performance.
- Are experienced people in your company available to do this work?
2. Identify which active carriers, lanes and modes of transportation are the most costly for your company.
- This will allow you to hone in on the biggest areas for improvement.
3. Confirm how many carriers your company uses and assess if that number is excessive.
- This will help you comply with your freight model and possibly indicate a need to realign the model.
4. Realign your transportation model if
- you are working with more carriers than expected;
- your company is not following this model;
- you don’t have the right resources or experienced people;
- rush jobs and associated costs are too high;
- overall costs of carrier service appear excessive.