Trucking trends, problem areas and ways to manage your freight costs in 1998.
This year's transportation outlook is much different than anything seen for years. It has changed from a buyer's market to one where the carriers are holding more power. The excess capacity has been squeezed out by industry consolidation and trucking companies scrapping worn out equipment rather than replacing. The capacity shortage situation has been complicated for shipments to and from the West Coast by the Union Pacific Railroad problems where freight is lost for weeks and months. Specialized furniture carriers are hustling to meet customer requirements and some transit times are several days to a week longer. LTL rates and discounts have firmed and most LTL rates have increased 5-6% between October and January 1st. Truckload rates have also had modest to major increases depending on transportation lane. Few manufacturers are increasing the size of their delivery fleets, preferring to use outside carriers. Manufacturers with prepaid or private truck programs are also adjusting rates and services.
To top it all off, the National Freight Agreement between the Teamsters and the Big 4 (Yellow, Roadway, Consolidated Freightways and ABF) expires on March 31, 1998. Even the best crystal ball readers cannot project how the negotiations will go. If they go out on strike, there is absolutely no way that non-striking LTL and truckload carriers can make up the difference. Some carriers that overextended themselves during the 1997 UPS strike are now telling customers that they will only commit to current business volumes in existing lanes if there is a strike.
With all the words of doom out of the way, there are plenty of things you can do to protect your transportation costs and services. A review of your present freight arrangements is definitely worthwhile. It is highly likely that you can actually reduce your 1998 costs below 1997 levels.
You know what your expectations are when you select manufacturers. You look for consistent delivery with a quality saleable product at a reasonable price. There's no difference with buying transportation.
By focusing your freight business on a small number of carriers, you can be more important to them. Today's knowledgeable carriers understand their costs and will set rates based on the specific costs to serve you. When their truck pulls off the interstate and comes to your dock, it takes only a few more minutes to deliver 10 pieces than 1. By way of comparison, you know that your costs only increase nominally when you deliver a room full of furniture to a customer rather than just one piece. And you aren't operating a big tractor trailer rig.
Something that can be of great benefit to you when you concentrate your business is simplified pricing. For example, case goods from North Carolina to your store travel at a flat rate of $12.00 per hundred weight and upholstery might cost $18 per hundred weight. This simplifies the freight calculation for markup purposes and auditing the bill. There are many options used to price freight. I personally prefer working with weights rather than freight on a per seat basis for upholstery or a percentage of merchandise invoice, but it works for some retailers.
Are you easy to do business with? If you haven't asked your carriers that question, do it. The improvements that can take place by being open to suggestions can be amazing. For instance, a carrier noted a concern that it always took at least a half hour to get into a receiving door, even when delivering a few pieces. In response, the retailer set up one door as an Express Line for deliveries of 10 pieces or less. Now truckers get in and out quickly.
What are your policies on appointments and receiving hours? Flexibility and extended hours increase equipment utilization and may even offer benefits to you. Another retailer opted to offer evening receiving hours when the warehouse was open anyway for customer pickups. The retailer was able to get excellent flex time help from a nearby community college and overall internal efficiency also improved. Their carrier always faxes the manifest before the truck arrives so the office staff can have the receiving packet ready.
Do you measure carrier performance for freight damage and how quickly do they settle claims? There are some carriers you cannot afford to do business with because they don't know how to handle furniture. Assuming you chose the carrier, FIRE him and let him know why. If your manufacturers continue to use carriers that damage freight, outline the problems clearly to your rep and/or the customer service department. When all else has failed, the manufacturer has the clout to get a settlement from the carrier.... provided you documented the situation. In disputed cases, there is also the potential for manufacturer, carrier and you to split the loss out of respect each other.
Finally, keep in mind that today's business environment requires reasonable cooperation between everyone in the supply chain. Your manufacturers have limited dock space and failures of your carriers to meet pickup promises can really cramp their docks. Everyone has to keep in mind the only thing that keeps us all going... your customer.
Bottom line, taking a careful look at your freight program yields improved service, cost savings and competitive advantage. Just like taking a few pounds off after the holidays, it simply takes discipline.
Daniel Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. Questions can be directed to Mr. Bolger care of FURNITURE WORLD at firstname.lastname@example.org.