This summer has been the most dramatic carrier crisis in logistics since the 2020 lockdown. There were tense negotiations between UPS and Teamsters over a new contract. Yellow announced they were declaring bankruptcy and shutting down operations. Labor agreements up and down the west coast ports of Canada and the US expired. It seemed like a great time to hit the Panic Button …
Looking back now, it’s easy to believe there was no need to worry. In the end, UPS and Teamsters did agree on a new contract. The market absorbed a 5% shift in volume during the negotiations, and we avoided a strike. Likewise, estimates predict the freight market will survive the end of Yellow as well. In fact, 40% of their volume had already moved in preparation for the shutdown. And finally, the west coast ports were able to sign new agreements too. There were only moderate shutdowns and slowdowns in the end, all during a low point in ocean volume.
So, Hooray! We’re invincible!
Don’t fool yourself. While I don’t believe in Panic Buttons, each one of these events could have been much worse. And if all three had broken down at the same time, the effects would have been devastating. It’s easy and comforting to view near-misses as proof that we’re on the right track. But anyone who ignores this warning is hurting themselves and their customers.
And that’s the crux of what I want to cover in this post. As a shipper, what can you do to prepare for the next carrier crisis?
As with most things, the answer is simple, but not easy. You need to diversify your carrier portfolio.
In some ways, the timing couldn’t be better. On the parcel side of things, the national duopoly is dead. The rise of regional carriers and the evolution of USPS has leveled the playing field. For LTL, there are now many affordable TMS options that allow for multi-carrier solutions.
But that’s not to say choosing to work with more than one carrier is an easy decision. Let’s do a deeper dive into the Pro’s and Con’s of carrier diversity.
Let’s start with the positives:
- Lower Operational Risk – This summer threatened the logistics industry with strikes, shutdowns, and driver shortages. Having the ability to call upon more than one carrier mitigates each one of these risks. It gives you the ability to adapt to client needs or real-time market changes.
- Improved Service Levels – Leveraging different carriers provides your customers with different options at different price points. This means there’s a higher likelihood that they’ll find the right option for them, at the right price. Fostering a competitive edge like this helps to attract new customers and keep current ones.
- Reduced Expenses – A diversified carrier portfolio helps to mitigate price increases. Whether that be increases to base rates, minimums, or accessorials. Likewise, when carriers institute new surcharges, having options helps to soften the blow.
- Greater Knowledge Transfer – One underrated aspect of a diversified carrier portfolio is the increased exposure. Each carrier brings their own unique experience and expertise to the table. Shippers can tap into all this industry knowledge to improve their own operations.
- Riding the Cutting Edge – Logistics is an industry that thrives on innovation and continuous process improvement. Carrier diversity opens the door to more collaborative opportunities to do exactly that. It encourages new technologies that can drive efficiency across your entire supply chain.
Now let’s look at the other side of the conversation, and weigh in on some of the negatives of using more than one carrier:
- Added Complexity – A diversified carrier portfolio will add complexity to your operations. Coordinating pickups and deliveries between more than one carrier can be hard. It requires a high level of communication and effective monitoring. TMS technology has come a long way in the last few years to help mitigate this complexity, but it does still exist.
- More Vendors – Another part of that added complexity is managing more carriers. Creating and maintaining authentic, beneficial relationships with your carriers takes time. It’s not easy, and adding more relationships to the mix increases the effort required.
- Need for Technology – Speaking of complexity, you will also need the right technology to pull this off. There is almost no way to manage more than one carrier without it. And It’s true that implementing and adopting a new technology can be a hurdle. But in the end, the benefits of upgrading your resources will far outweigh any negatives.
- Fragmented Visibility – Again, with the right technology in place, this is not an issue. But using more than one carrier often means relying on disparate tracking systems. You need to consider how you will merge these into a holistic view of your supply chain.
- Volume Trade Offs – Having a positive relationship with your carriers and being a shipper of choice is huge. Before you decide to diversify, you need to understand how it will affect your existing relationships. How will splitting your volume affect your rates? How will it affect your ability to secure pick-ups during peak season? What does it mean for your drop-trailers? It’s critical to understand the answers to all these questions when making the decision.
So after review, I assume I’ve convinced you. You need to diversify your carrier portfolio, and you need to do it before the next set of crises arise.
Great, glad I could help! Now let’s talk about how you get that done.
Step 1: Assess Your Situation
Like every good process, diversifying your carriers starts with understanding your current situation. What is your company’s strategic vision, and what kind of service do you need from a carrier to achieve it? Over what timeline?
After looking at your own needs, it’s time to look outward. Do you even know all your current carriers, across every mode? If so, what do they do well, and where are they failing? Are the businesses themselves in good shape (RIP YRC …)?
One other thing to think about in this first step is who carries your goods when you’re not paying for it? Is there a piece of your current supply chain that you don’t manage? Would you want to? The answer might not be Yes, but this is the time to ask the question.
Step 2: Prepare an RFP
I’m not going to lie, preparing a Request for Proposal is hard. But the more effort you put into this stage, the better your results. It’s as simple as that.
Here are some helpful things to consider when putting an RFP together:
- Who are you, as a company?
- What do you ship? Are there unique handling instructions the carriers will have to take into consideration? A picture can be worth a thousand words here.
- Where is your freight coming from, and where is it going to?
- When do you need it picked up, and when would you like it delivered?
- How will you measure a successful carrier relationship? What KPI’s do you plan to track?
Besides these basics, be ready to include all the available data you’ve got. That’s right, I said ALL. The more assumptions the carriers make in their proposals, the more your costs will go up. You should be ready to provide at least 3 months of scrubbed shipping data. It should be 6 months if you’re a seasonal company or made a major change recently (such as an acquisition).
Step 3: Let it Fly
Once you’ve prepared the RFP, you need to know where you’re sending it. There are TONS of carriers out there to choose from these days. To start your search, Google, AI programs such as Jasper or Chat GPT, and LinkedIn are all great resources. Also, if you already have a TMS, reach out to your provider and ask them for a list of the carriers they partner with.
I cannot stress this next part enough – When looking for a good partner, you need to BE a good partner. Don’t send out countless spam emails to potential partners. Pick up the phone and make sure you talk to a human, like a human. Whoever you choose will help determine the success of your business. That’s a relationship worth investing in.
This also means setting your own boundaries early in the process. Let them know what you’re expecting to receive in their proposal, and what you’re looking for long-term. Make sure to ask for detailed pricing, including all surcharges and GRI schedules. Ask them for references, along with their terms and conditions. If you’ve put in the work to submit a quality RFP, don’t be afraid to ask for a quality response.
Step 4: Evaluate and Decide
After you’ve received proposals from all interested parties, it’s time to make a choice. When you’re evaluating their submissions, make sure you’re comparing apples to apples. Analyzing carrier contracts is hard work, and small changes can have a massive impact. Be prepared to go through them line by line, many times, including the accessorials!
Once you’ve made your selections, don’t forget to close the loop with the carriers who didn’t make the cut. Even if it didn’t work out this time, that doesn’t mean they won’t be the best option next time. Make sure to give them constructive feedback on why they missed the mark. Be generous and keep the relationship intact for the future.
Step 5: Implement
The most important step in any implementation is having a plan. Now, that plan will change along the way, and that’s fine. But starting with a map makes it easier to see where you need to go.
As part of being a good partner, make sure you establish a Go Live date, with appropriate check-ins along the way. Give your carriers volume projections, real and reasonable ones, so they’re prepared. This will help kick things off in the right way. Finally, make sure you are receiving the bills, the bills are correct, and you pay the bills.
Now, a lot can go wrong during any implementation. But the more time you spend preparing with your new partner, the easier the transition will be.
Step 6: Bask in the Glory of Your Accomplishment
This is the fun part! Once you’ve implemented your new carriers, it’s time to sit back and enjoy the fruits of your labor. Now, no matter what happens, you’ve put your company in the best possible position to handle it. Bring on the setbacks!
The logistics industry is all about keeping things moving. Sometimes this can seem like an impossible task, but trust me, help is out there. But please don’t wait till you’re buried in the next crisis to seek it out.