Load Management in a Small Capacity Market: 7 Bold Steps for Shippers
Introduction
The trucking industry is undergoing rapid changes. Historically, truck capacity was viewed as a commodity, and carriers aimed to position themselves as their customers’ “preferred carriers.” However, this is shifting due to a growing economy and a shortage of truck drivers, turning the freight market into a seller’s market. Shippers now need to develop strategies to position themselves as “preferred shippers.” Here are seven bold steps that shippers can take to create as much certainty as possible in an unpredictable shipping market.
1. End Annual Freight Bids
Traditionally, shippers would initiate a bidding process for freight transport each year, binding carriers with contracts for specific periods. However, this method is no longer sufficiently efficient. Building long-term relationships with a select group of carriers has many financial advantages. Long-term contracts provide carriers with more time to find customers and reduce deadhead miles. This increases efficiency for carriers and offers better rates for shippers. Additionally, long-term contracts stabilize rates, providing cost predictability.
2. Leverage Regional Carriers
Regional carriers are better at attracting and retaining drivers than national carriers. This is because regional carriers can offer drivers stable, daytime runs that allow them to return home every night. Regional carriers also provide guaranteed capacity, a more personalized service brand, and broader time windows for pickups and deliveries. This makes the shipping process more flexible and efficient for shippers.
3. Reduce Driver Turnaround Time
New hours-of-service regulations increase the importance of faster driver turnaround times at pickup and delivery points. If your docks are congested, carriers will be less likely to serve you. Implementing a drop-and-hook program, allowing drivers to simply drop off trailers and leave, can expedite turnaround times. This reduces driver wait times and enables carriers to handle more loads.
4. Be More Flexible
In this seller’s market for trucking services, forward-thinking shipping departments ask, “How can I make my load as attractive as possible to the right carriers?” Starting points include extending delivery windows, offering nighttime pickup services, shipping during off-peak seasons, and developing shipping schedules that work for all parties involved. This flexibility makes your loads more appealing to carriers.
5. Co-load with Other Shippers
Third-party logistics (3PL) providers can help reduce less-than-truckload (LTL) costs by over 20% by consolidating LTL shipments from multiple customers into full truckload shipments. This strategy works best when your 3PL’s other customers ship to the same retailers as you. Shippers benefit not only from lower costs but also from sharing these costs with co-loading partners. This helps reduce costs while enhancing service quality.
6. Choose Carriers with Lower Driver Turnover Rates
Ideally, partner with carriers that have a driver turnover rate well below the industry average of 87%. Consistent drivers:
- Know the routes and pickup processes better
- Provide superior on-time performance
- Represent your business well with key customers
This improves service quality and efficiency in the shipping process.
7. Rely Less on the Spot Market
For years, shippers have relied on the spot market to control costs. However, in a tight capacity market, close and collaborative relationships with carriers have immense value. These relationships provide guaranteed capacity, reliable performance, predictable rates, and happier customers. Transitioning from a buyer’s market to a seller’s market requires shippers to fundamentally change their sourcing strategies. Companies that fail to adapt risk their business, while the winners will boldly forge collaborative partnerships with carriers, positioning themselves as “preferred shippers.”
Conclusion
The trucking industry is rapidly evolving, and shippers need to keep pace with these changes. Ending annual freight bids, leveraging regional carriers, reducing driver turnaround time, being more flexible, co-loading with other shippers, choosing carriers with lower driver turnover rates, and relying less on the spot market are strategies that can help shippers adapt to these changes. By taking these steps, shippers will create more certainty and efficiency in a tight capacity market, forge stronger and more collaborative relationships with carriers, and position themselves as “preferred shippers.
