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The first part of this blog focused on the operational, service and equipment issues that constitute a strong shipper-carrier freight agreement. This blog will address the financial and business issues that need to carefully captured in detail.

6. Rates and Service Charges

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Best in Class shippers have high quality, granular, historical freight data. They capture clean, accurate, complete data on all of their inbound, outbound and inter-branch transfers, across all modes. The most fundamental building blocks are the individual boxes, parcels, envelopes, cartons, drums or pallets.

Capturing this data correctly and completely allows a shipper to address such fundamental issues as the type of container to be used, space occupied, loading plan etc. This data is also critical when conducting an RFP as a means of selecting the appropriate modes and carriers. The data that each shipper maintains must contain certain data elements in order to be useful for analysis and planning purposes. The following data fields are essential.

 Shipment number

 Pick up date

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If your company provides hundreds of thousands or millions of dollars in revenue to certain carriers, they are a critical part of your success, or failure and vice versa. While a rate quote may be a suitable form of agreement between shipper and carrier, for low volume service providers, it is not adequate for larger bid awards. There are several reasons for this.

First, a written agreement between the parties can spell out the nature of the business relationship (e.g. parties to the agreement, governing law of which country, state or province, services expected, etc.). Second, in this era of tight capacity, there is a requirement to obtain written commitments from transport providers on various elements of service performance (e.g. on-time pick-up, transit times, billing accuracy etc.).  These can be detailed in a set of SLAs or Service Level Agreements that can be attached to the core agreement.

Third, the full set of rates, accessorial charges and terms and conditions should be attached so there is no disputing the costs the shipper will incur over the agreed contract period.  Fourth, there should be a written understanding concerning the length of the bid award and a mechanism or formula (e.g. CPI increase) for rate increases in subsequent years. Fifth, there should be a written understanding as to what measures can be taken in the event of non-performance.

The intent is not to create legalistic, adversarial relationships with a company’s core carriers; rather signing written agreements will establish a framework for service performance and communication that can promote understanding and co-operation. In other words, the document will provide clarity with respect to expectations, performance and costs that can be quite beneficial to both parties.  

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This year, major freight carriers have been seeking general rate (GRI) increases, higher fuel surcharges (at a time when energy prices are at their lowest levels in years), accessorial charge rate hikes and the implementation of dimensional LTL pricing. In other words, shippers, particularly in the small parcel and LTL sectors are facing a barrage of rate increases in 2015.

This brought to mind some words of wisdom I heard from Jerry Hempstead, President of Hempstead Consulting during the Logistics Management 2015 Rate Outlook webinar. Jerry made the comment that when it comes to freight rates, shippers “don’t get what they deserve, they get what they negotiate.” This sage advice has stayed with me since the call and is the inspiration for this blog. Here are a few thoughts to consider.

Data is Power

Shippers without good freight data are virtually defenseless in rate discussions. If you don’t have accurate data on the density of your freight, you are at the mercy of freight companies, their scales and dimensioning devices. If you don’t have quality data on your volumes by lane and on the various components (e.g. line haul charges, fuel surcharge, accessorial charges) of your freight spend, you are not able to able to manage your freight and communicate effectively with your carriers.

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As the year 2013 winds down, it is time to reflect on the major transportation trends of the past year.  While I saw and read about a wide range of developments, these are the ones that resonated most with me.

1.Technology Comes to Freight Transportation

Last year I predicted that we would see a flurry of new technologies come to freight transportation.  They did and I wrote about some of these new companies on several occasions during the year.  Technology was successfully applied to the freight brokerage business, freight portals, LTL density calculations and to other segments of the industry.  Buytruckload.com, PostBidShip, Freightopolis, QuoteMyTruckload,  and Freightsnap were featured in various blogs during the year.  They are changing the way business is done in freight transportation.  Watch for more of these companies to surface in 2014.

2013 has been called the Year of the Network by numerous supply chain and transportation industry thought leaders.  Companies that built a successful supply chain trading partner network focused on three elements:

Connectivity— unite disparate systems and trading partners

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In last week’s blog, I shared some ideas from the recent SCL – CITA annual conference on how to improve shipper- carrier collaboration.  Various suggestions were proposed by a panel consisting of two leading shippers and two major Canadian carriers.  Some other thoughts were expressed during other tracks that day.

The panelists presented some suggestions that came out of a joint meeting between the Ontario Trucking Association and the Canadian Industrial Transportation Association.  Here is more of what they had to say.

Removing Waste from the Shipper and Carrier’s Operation

During the panel discussion it was suggested that it is through trust, communication and dialogue, rather than through an RFP, that opportunities to remove waste from a shipper’s operation can be identified, discussed and solved.  The RFP process is typically too rigid to allow for a meaningful exchange of ideas and for the development of action plans. 

Since the focus in an RFP is typically on rates and service, it doesn’t create a forum for dedicated problem resolution.  Moreover, by not creating project teams, action plans and time lines to remove waste, the inefficiencies typically doesn’t get extracted.  The shipper continues to perform the same functions, in the same way, with its existing and/or new carriers.  Drivers continue to be pick up half full loads since opportunities to consolidate freight or change pick-up dates are missed. As one trucking executive mentioned, the savings generated from these types of initiatives can be much larger than the two percent saved as a result of the freight bid.

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For the past week I have been reading with great interest the postings on the LinkedIn Sales Management Group.  As of the date of this blog posting, there have been over 40 responses to the question, “What advice would you give a new salesperson”?  The tips offered were so good that I thought I would share a “reader’s digest” version with the followers of this blog. 

As I read these suggestions on a daily basis, I see two sets of users for these tips.  First, new sales reps should study this list and make sure they take action on every item.  Second, sales managers should take this checklist and cross reference it with their current (and future reps) to ensure they maintain a winning team.  Here are my 21 favourite tips for the new rep.

  1. Achieve mastery of the services that you sell.
  2. Achieve mastery in sales skills.
  3. Seek out the top performers on your sales team and learn from them as to how they dress, their work ethic and their communication skills.
  4. Understand how your services compare with those of your competitors.  
  5. Be a great listener so you understand the needs of your prospects.  There is a good reason why we have two ears and one mouth.  Focus on understanding the needs of your customers so you can solve their problems. 
  6. Get to know your prospects before you turn them into customers.
  7. People buy from people, specifically people they like and trust.
  8. Prospect, prospect, prospect.
  9. Learn as much as possible about your customers.  The more due diligence you do up front, the easier it will be to close the sale at the end.
  10. Be persistent and consistent.  Success comes from a strong work ethic.
  11. Be passionate about your company and its services.
  12. Try to sell solutions rather than products or services.  Learn your company’s value proposition and where it fits best.  Sell the value of your solution, not price.
  13. Learn early on to distinguish buyers from non-buyers (i.e. lack of mutual fit/interest/resources, etc.).  This will go a long way towards increasing your income and your employer’s income while reducing customer acquisition costs.
  14. View yourself as a profit centre.  To be successful, time management is critical.  Spend your time, energy and resources on the most viable opportunities in your sales pipeline.
  15. Be ethical in all of your business.  Remember, you are selling your (and your company’s) credibility and integrity.  If you lose your integrity, you have nothing to sell.
  16. Invest in yourself.  Continually upgrade your product and business knowledge and your sales skills.
  17. At the end of the day, when all of the other sales reps have left the office, make one more call to a new prospect.
  18. Acquire a CRM tool and use it faithfully every day.
  19. If you are having difficulty in one or more areas of your sales pipeline, this is telling you that you have a weakness in specific areas (e.g. prospecting, obtaining appointments, asking for the sale). Take action to turn these weaknesses into strengths.
  20. While the sales job can seem very lonely at times, don’t forget sales is a team sport.  Work closely with your manager and the rest of your team (e.g. drivers, dispatchers) to achieve your goals.
  21. Always ask for the sale.  If you don’t ask, you may not get. 

I am sure there are many more tips that can be added to the list.  What advice would you give to new freight transportation sales rep?  I would love to hear from you.

 

This year’s Surface Transportation Summit will take place on October 16, 2013 at the Mississauga Convention Centre.   Please block out this date in your calendar.  We have some great speakers lined up for this year’s event.

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Tight capacity is driving shippers and carriers to take a hard look at the value of freight contracts. Shippers are seeking rate stability, good service and capacity commitments.  Carriers are looking at securing the most attractive yields on their assets and consistent volumes on lanes that fit with their core competence. One method of helping both parties achieve their goals is by capturing the key elements of the business relationship in a well crafted contract. To create truly Win-Win freight agreements, there are a number of core principles that need to guide these discussions.

Pricing is one Key Element of the Total Package

Shippers are looking for competitive rates. Carriers are looking at offering rates that are competitive, so long as they produce a satisfactory return. Competitive rates are a starting point, a way of filtering and ranking potential carriers in terms of cost savings or cost containment.

One of the critical guiding principles in the carrier selection process should be to evaluate potential business partners across a broad set of variables. These requirements should include size and type of fleet, safety rating, energy efficiency, service performance, and EDI capabilities. A good contract should spell out the shipper/carrier expectations and requirements for each of these items. Rates are very important and will ultimately be a determining factor but they should be partof the total package.

The contract should spell out the length of the award and the level of rate increases in future years. All rates, accessorial charges and fuel surcharges should be spelled out in the appendices.

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