“Collaboration” was probably the most frequently heard buzzword during the “Transportation” tracks at the 2006 CSCMP Annual Meeting in San Antonio late last year. Collaboration in a transportation context can take many forms. You can have shipper – carrier collaboration when a company shares its shipping forecast with its core carriers to ensure it has adequate capacity or when a manufacturer and its core carriers work together to modify operating practices that result in excessive waiting time. A shipper can collaborate with other shippers in similar or different industries, or even competitors, to share truck capacity or to create round trips and continuous moves.

Collaboration in a business context is similar to collaboration in a personal context. To make a marriage work, there needs to be trust, good communication, patience and flexibility. What value should a shipper place on collaboration in the face of the significant increase in freight rates over the past few years? How can a shipper maintain its loyalty to its core carriers when it has an opportunity to secure lower freight rates from other carriers?

Similarly, what should a carrier do when it has an opportunity to provide its most valuable resource, its trucks and drivers, to another shipper that provides a higher yielding freight rate? How many carriers come to a shipper and say, we have an opportunity to achieve a higher yield by reducing our allocation of trucks to your company and making them available to another higher yielding client?

Is it reasonable to expect a carrier to share its specific operating ratio for each client with that client? In most cases, the answer is NO. This may work with unprofitable customers but every carrier knows that it is opening a “can of worms” if it reveals how much money it is making from its profitable accounts. Since shippers are seeking rate stability, a competitive cost structure and capacity and since carriers are seeking the maximum yield for its transportation services, does this make trust, open communication and information sharing, the key elements of collaboration, a myth rather than reality?

The writer would argue the opposite. Shippers need to share as much data as possible with their carriers concerning their freight characteristics, volumes, lanes, delivery requirements and their freight rates. Sharing this information with your existing and prospective core carriers is crucial since there is no point trying to establish a collaborative relationship with companies with whom your freight characteristics are not a fit. Similarly, it is essential that carriers share their strengths in terms of head haul and back haul requirements, capacity, service levels etc. so there is a happy marriage with their customers and minimal disappointments down the road. As situations change (e.g. new customers are added, the carrier’s head haul and back haul requirements become different), it is important to share this information with each other to sustain the relationship. Data from a recent study suggests that shippers that do work in a collaborative rather than adversarial role with their carriers tend to spend less on freight as a percent of revenue. Collaboration is a challenge but it is in the best interests of both shippers and carriers.

Dan Goodwill
President
Dan Goodwill & Associates Inc.
www.dantranscon.com