Here's a practical plan to help guide your LTL sourcing efforts:
Collaborate with Your Carrier Base
* Do not disguise your business During the sourcing process provide carriers with an accurate reflection of your business. Clarity begets confidence, and confidence eliminates hedging:
a.) Provide actual shipment history data along with meaningful summary statistics on seasonality and weight breaks
b.) Give insight into actual class
c.) Exactly describe both difficult and desirable or driver-friendly freight
d.) Accurately depict your vendor's operations for inbound freight and your customers operations for outbound freight
* Promote creativity Don't pigeonhole carriers into your mindset. Allow carriers to propose from their own point of view and solicit their input on creative options.
a.) Bid out predefined lots if desired, but let carriers provide bundles as well. They will find the best way to use your volume to correct inefficiencies within their network.
b.) Allow carriers to define regions that make sense to them. Let the carriers see how your freight fits into their service regions.
* Challenge historical paradigms Use a strategic event to study legacy assumptions.
a.) FAK (freight all kinds) design and fit
b.) Handling of accessorial charges
c.) Insurance and release values
d.) Opportunities traditionally considered beyond the scope of transportation sourcing
Improve Your Technique
* Expand your influence Keep working to convert your inbound freight to collect. Not only does this generally create substantial savings, but it also improves the asset utilization of the carriers servicing your facilities
* Reduce carrier-quoting risk Use a tiered FAK structure that fairly reflects your business with huge cross-subsidization. In addition, employ a rate base familiar to the carriers.
* Use advanced sourcing tools Use a proposal collection technology specifically designed for the nuances of LTL freight. Use optimization-based scenario generation technology to fully evaluate service, capability and interest in your negotiating and award process.
* Balance the cost drivers Don't overplay the base rate, FAK, discount or minimum to the detriment of the others
* Reserve the right to "re-optimize" Leave yourself some flexibility to modify carrier awards when your business requirements or the marketplace dramatically changes.
Track and Measure Compliance
* Be vigilant with category management with an eye on your requirements over time Be ready to fine-tune your solution to include new lanes, increasing volumes and shifting mix. Establish formal loss and damage claims programs to keep service levels up, and you'll get a tangible payback from carriers when they drop.
* Drive routing compliance Track vendor compliance on inbound and install an inbound routing service if necessary. Ensure outbound routing is performed correctly within your own organization. Simplify routing instructions, keep up-to-date via Web communication, and make sure expedited shipment requests get adequate consideration. Hold carriers accountable when they ignore your instructions.
About the Author: Jeff Ryan is senior vice president of Advanced Sourcing at Verticalnet, a provider of strategic sourcing and supply management solutions. He is a widely recognized expert in transportation sourcing and logistics management.