A terminal tour has long been a key element in the freight transportation purchasing process, particularly for medium and large size LTL shippers. After the sales, pricing and operations planning work has been done, a tour can be a turning point in either maintaining an existing piece of business or obtaining a new one.

In my work, I get to see a good number of terminal tours, hosted by a variety of carriers. I also get to see how shippers respond to these tours. No matter how good a job has done leading up to “the terminal tour”, this particular event can be a “make or break” in securing an account. In the competitive world we live in, a few mistakes can cause a shipper to pursue another option. In many cases, the carrier may not even realize the mistakes they made. Here are few tips.

Put out the Welcome Mat

Everyone likes to feel important and wanted. Putting a sign at the door welcoming, by name, the shipper representatives, is a good first start.

Communicate

All of the salaried staff in the terminal should be aware of the visit. Anyone who may be involved with the account, whether in dispatch or customer service, should be coached as to the specific requirements of the account. There is nothing worse than bringing an employee into a conference room with no knowledge of the account who asks all the wrong questions.

Put Safety First

Making safety a priority is absolutely essential. The Terminal Manager should lead off by talking about the safety procedures in the terminal. The visitors should wear hard hats, safety vests and steel toes on their shoes. A focus on safety makes a loud statement about your company and your terminal. It tells the client that you are going to protect their people and their freight, that the freight is going to move free of damages. It says that your company pays attention to detail.

Since many shippers require their dock workers and forklift operators to wear safety boots, safety vests and follow similar safety procedures, it communicates the message that your two companies share common values. In other words, yours is the type of company that they should have as a business partner.

Keep it Clean

A clean terminal communicates a similar message. Since many LTL terminals have cross-dock operations with narrow docks, cleanliness in the workplace also sends a loud message. A dock that is strewn with broken pallets, has a large and dusty OS & D area that hasn’t been looked at in months, and is very congested, tells the shipper that this dock is an “accident waiting to happen’”.

Present your Freight Management Game Plan

The carrier should have a clear game plan for how they move freight and should be able to communicate this in a clear and articulate manner. The dock should have well marked areas for inbound and outbound freight. It should be clear to the shipper that this company is organized and knows what they are doing. This tells the shipper that the right freight is going to get to the right destination at the right time.

Demonstrate a Passion for your Work

Some companies have it; others don’t. You can tell immediately if people really care about their work and their customers’ freight. A passion for doing a great job, coming from different people within the organization sends a strong message. “We care about you. We value you as a customer. We will do a great job for you”.

Demonstrate your Systems Capabilities

This is becoming increasingly important to shippers. In the current environment, shippers want EDI communication, excellent web-based track and trace capabilities so they don’t have to spend all day on the telephone calling carriers and crisp, clear KPI reports in a timely manner. The IT person doing the demo should be able to present this effectively without stumbling or suggesting that IT is still a “work in progress” at his company.

Present a Team Effort

The shipper is there to meet the team that will take care of his company’s freight. They want clarity as to who will be the personnel servicing his account, who to call for a pick-up, to trace a shipment or for other tasks. For a sales rep to say, call me for everything undermines the credibility of the carrier and their ability to service the account. Running a successful trucking company is a team game. The “blocking and tackling” assignments of each person on the team should be clearly spelled out to the shipper.

Providing a very positive terminal tour experience can be decisive in securing a piece of business, even if your company is not the low bidder. Each carrier should put a “Terminal Tour Game Plan” in place just as they do for other events that can change the nature of their business.

There are a number of signs that shippers may come under pressure for freight rate increases this year. An economic recovery is under way. Robust retail sales in the latter part of 2010 may result in some inventory restocking in the first quarter of 2011. This may increase the demand side of the curve. If the recovery has legs, there may be higher shipping volumes during the historically stronger second quarter.

Transportation companies are facing a number of pressures on the supply side. New hours of service regulations and CSA 2010 could reduce an already depleted driver work force. Despite the high unemployment levels, driver recruitment remains a challenge.

Trucking companies that were faced with excess equipment during the recession are exhibiting more caution in buying new tractors and trailers. Major carriers such as Schneider National and Con-Way Truckload have already indicated that they do not plan to make truck acquisitions other than replacements until there are clearer signs of a sustained economic upturn. The result is an expected capacity shortfall of 3 to 4 percent by mid 2011.

Another wild card is fuel prices. While diesel fuel prices have slipped back the last few days and are well off the pre-recession peak of $147 a barrel, the trend line appears to be upwards. This will drive fuel surcharge increases in all sectors of transportation.

This leads to the obvious conclusion that shippers may face increases in freight rates and fuel surcharges and the likelihood of a more aggressive implementation of accessorial charges in 2011. This comes at a time when shippers are trying to rebuild their businesses. What can shippers do to mitigate these possible rate increases? Here are a few ideas.

One of the most overlooked opportunities to reduce freight costs is to take a look at packaging. As highlighted in one of my recent blogs, shippers with well defined Sustainability programs are searching out ways to lessen the cubic space occupied by their freight. Some are achieving significant success. This is an excellent way to limit freight costs.

Closely aligned with packaging is loading. Depending on a shipper’s pallet configurations, the use of logistics or high cube equipment may allow for additional capacity utilization.

Shippers should also extend their search for prospective carriers. In my work I often find that shippers limit their explorations to the “tried and tested” truckers they have used in the past. One of the keys to mitigating freight rate increases is to find particular carries that need additional head haul or back haul loads and can be more price competitive. This can take some time and effort but it can be very productive.

For many shippers, a load broker of freight management company may be the answer on some hard to fill lanes. There are tens of thousands of carriers in North America. A load broker may have an affiliation with some specific carriers that a shipper may simply not be aware of. They may be able help find capacity on some difficult lanes and should be part of any RFP exercise.

Last but not least are mode conversions. As the economy picks up, shippers should always be on the lookout for merging some LTL shipments and moving them on service days so they can turn a multi pallet shipment into a quarter, half or full load. If lead times can be extended, a conversion from truck to intermodal may also produce savings.

Rather than wait for carrier sales representatives to come knocking on the door, smart shippers should be looking at all aspects of their freight program and take action to minimize the impact of transportation rate increases that will likely be coming in 2011.

This past week I read an article entitled, “Not an Automatic Decision”, written by Eric Johnson that appears in the February issue of American Shipper. Since my company has been involved in numerous freight transportation e-procurement projects over the past seven years, I thought I would share my perspectives on this topic.

Mr. Johnson makes the point that e-procurement is widely used in certain modes (e.g. truckload transportation) but not as common in others (e.g. ocean freight and rail). He argues that “whether automated procurement is prevalent in a certain mode often boils down to a couple of key factors: the level of competition, and the strength of shippers versus their service providers. High levels of competition (re: fragmented markets with few key large players) and (buzzword alert) ‘substitute-ability’ are clear indicators that e-procurement acceptance levels will be high. Alternatively, in modes where a cadre of large players dictates how service contracts will be negotiated, e-procurement acceptance levels will be low.”

The term “automation” does not mean that the procurement process is managed without human intervention; Rather it means that a “company is using a substantial amount of technology to support its transportation buying process. . . Alternatively, ‘manual’ doesn’t mean the procurement process is managed without the use of computers, Internet access, or other fundamental business tools. It’s merely assumed that companies managing procurement manually employ spreadsheets and other tools”.

There are two levels of e-procurement. A shipper can use a variety of software based e-bidding tools (e.g. some designed for freight analysis and others of a more generic nature) to facilitate the process. The tools help standardize the information flow, perform the freight data analysis and provide a disciplined rate negotiation process. Large shippers with complex supply chains and significant inbound and outbound freight traffic may require a more sophisticated level of analysis that may involve optimizing rates for round trips, continuous moves, by mode and by region.

Neither LTL nor truckload transportation is not a pure commodity on any lane in North America. It is not a 2 inch by 4 inch by 6 inch widget that can be manufactured to the exact same specifications by a variety of suppliers. There are thousands of trucking companies in North America. Even in the transportation sector where e-procurement is most prevalent, truckload shipping, there are wide variances among the providers. These variances exist in multiple ways:

Capacity
Quality of fleet
IT capabilities
Customer service
Insurance coverage
Freight handling processes
Attention to detail
Safety
Quality of management
Head haul and backhaul requirements on individual lanes

Then there is the issue of modal options. For longer lengths of haul, intermodal service can become increasingly attractive from a rate perspective. But intermodal transit times are typically longer than road. Therefore, shippers comparing rates between road and rail options in an e-procurement environment are essentially comparing “apples” to “oranges”.

The question isn’t whether e-procurement can be used effectively for surface transportation, for other types of transportation or for other products and services. Mr. Johnson points out that in “the most recent American Shipper benchmark report on automated procurement, 2010 Transportation Procurement Benchmark Study: Leveraging Automation to Manage Market Volatility, manual procurement had dropped from 60 percent in 2009 to 40 percent as of July 2010. . . Thirty percent of shippers leverage a procurement application of some kind” . . . while “twenty-eight percent use a mix or hybrid model, which probably varies by mode or geography”.

The bottom line for me is that during every freight procurement or RFP exercise, you meet with the management team of the potential service providers. You have an opportunity to ask probing questions about their ability to service the shipper (e.g. trailer drops, satellite communication, weekend operation, holiday operation, EDI etc.). In some cases (e.g. LTL) a terminal tour is required to inspect the quality of their local personnel and their level of organization. This is when the “rubber hits the road”. The interviews and visits make it clear to me how companies that operate in the same sector of the industry can be and often are so different.

E-procurement is a tool that has been utilized by my company and others for years to successfully facilitate the freight services procurement process. These tools are extraordinarily helpful in leveraging volumes and producing cost savings. However, one should never forget that freight transportation is a people business, not an automated or assembly line process. As a result, the best decisions can only be made by blending the data analysis provided by e-procurement with face-to-face, eyeball to eyeball communication and observation.

Thankfully business conditions are improving in 2011 and freight volumes are more robust than they have been the past couple of years. As reported in a previous blog, freight rates are increasing. Shippers are taking less of a “bunker mentality” and are now looking for ways to optimize their carrier networks.

For carrier sales personnel seeking to secure new accounts, success comes from a persistent effort or “skating without the puck”. Opportunities to secure new business may arise when you least expect it. A new supply chain leader may challenge the status quo, an acquisition or plant closure, the U.S parent taking control of Canadian and cross-border freight movements, a series of service failures, a disproportionately high rate increase or a host of other reasons may trigger a search for a new carrier or logistics provider.

The actual process of securing a new account can be an arduous one. Some shippers conduct elaborate multi-round RFP’s. In certain cases, carriers must demonstrate that they have the fleet size and quality of equipment, appropriate insurance and good safety records to even gain consideration. Securing new business can take a combination of competitive pricing, good selling skills, strong IT capabilities, a terminal tour and possibly a set of trial shipments. Any slip-up along the way - - - non-competitive pricing, a less than inspiring sales presentation, a botched terminal tour, no EDI communications or other missteps can derail the entire sales effort.

Throughout the process, the new carriers are being compared to the incumbents. It is a big decision to leave a long-standing business partner, particularly if the partner has performed well. The decision is much easier if the incumbents have slipped up on service and there is a price variance. It is much harder if the incumbents have a stellar service record.

For some shippers, there is uncertainty as to whether they are making the right decision in making a switch. A failure can trigger a complaint from a customer, customer service representative, sales person and/or higher management.

For carriers that are able to pass all of these check points and make it to the trial shipment period, it is essential to “seal the deal”. This doesn’t always happen.

Some carriers don’t put the processes and procedures in place to “baby-sit” a new account and lock it up. Landing a new account involves several steps. The people charged with actually moving the freight must be engaged to develop the standard operating procedures (SOP’s) tailored to that account. These SOP’s must be communicated to those individuals within the organization who may come in contact with the shipper’s freight. This can be particularly complex for LTL freight moving throughout a carrier’s network.

There need to be two people who take responsibility for the new account. Typically a Customer Service representative takes 24/7 responsibility and watches it constantly. At one trucking company I worked for, we called it “Platinum Service”. That CSR must have responsibility for not just managing the movement of the freight but also for taking corrective action to prevent a late delivery, and for proactive communication with the customer in the event of a potential service failure. In other words, this individual must be constantly monitoring the KPI’s established during the SOP process to make sure all performance areas are achieved.

There also has to be a senior sales person who takes daily responsibility for the new piece of business. This individual is also responsible for monitoring the KPI’s, ensuring all of the promised routings are received and executed properly, communicating with other managers throught the organization and for making sure the decision-maker at the shipper organization is fully satisfied. This is particularly important at logistics providers where the assets employed are those of arms length trucking firms.

Surprisingly, as difficult as it is to secure new business, some carriers get distracted by other priorities and lose focus at the moment of truth. At this pivotal point, they move on to the next item on the agenda and assume the other members of their team will pick up the baton and get it right. The failure can usually be traced to a breakdown in communication. While the crisis in the Middle East is casting a dark cloud over the current economic recovery, it is still important for carriers and logistics providers to put their Platinum Service programs in place so they are able to successfully solidify the new business that they are trying so hard to secure.