Folks, pull up a chair, we have a confession to make. Our Executive Briefings are read by lots of people. We get lots of positive feedback, but sometimes we wonder whether anyone really pays attention to what we’re saying. So we were genuinely humbled by the number of thoughtful responses we received on our last Briefing about LTL pricing.

Several carriers responded and took exception with us highlighting the magnitude of savings opportunities. Here is a sampling of some very thoughtful carrier comments:

“Too often, the cost savings offered to a shipper have much less to do with doing things differently and more to do with leveraging the carrier for cheaper prices.  Is there any wonder why relationships are strained under these conditions?”

“A respectable transportation manager once told me that he knew of no one who lost their job for paying "too much" but he did know of traffic people who lost their jobs due to bad service.  There is a connection of rates and service. Shaving dollars can cost thousands in excess inventory, lost sales, declining reputation, etc.”

“It has been extremely frustrating to deal with a marketplace that is so focused on the short term...and yet I understand why.  We are fortunate to have some shippers who are willing to not only pay to move their load from point A to point B....but are also willing to invest in a long term solution....by investing in a carrier who is capable of recruiting, training and retaining drivers and who is willing to operate safe equipment. These shippers are rare....and they are precious.  They will also be the winners.”

We need to clear the air. We believe there are significant savings available, but as we noted in our Executive Briefing, the fourth step in the process was: If you’re going to put out an RFP, do it the right way! Doing it the right way means giving and getting the right information so that you can make the right decisions. Often times, it means asking the right questions. We noted that far too many shippers use “traditional” procurement models in order to get the lowest possible rates.

For those shippers who didn’t get the message, we want to be real clear: There is a right way and a wrong way to try and reduce your rates. What’s the wrong way? Call up the carrier and demand that they cut your rates. It’s demeaning and insulting. There’s also the old saying about oats being cheaper after they’ve been through the horse - but would you want them? What’s the right way? Sit down and find out if there are things you can do to make your business more attractive and that would enable the carrier to share the savings with you?  It's called “Freight Engineering” and if you’re looking for ways to do this correctly, call us; we can help!

Let me close by sharing a phone conversation with the CEO of a large LTL carrier who told me that he was upset by the fact that they had heard from shippers demanding that the carrier reduce their rates because of all this information about a soft market. I listened and then asked him a question:  Could I improve that carrier’s operating ratio by taking away freight in unprofitable lanes and giving it to carriers who are actually looking for that type of freight? He responded: “Yes, taking away freight in undesirable lanes would be a big help.” And then I asked if he would be willing to share the savings associated with this change. He said: “Absolutely!” In other words, savings are available but it may require thinking outside the box.   

This is just one illustration where carriers and shippers, working together, can lower costs and achieve savings. It has nothing to do with demanding lower rates; it’s about getting lower costs by working together. Let me close by sharing an observation from a mentor of mine, Newton Graves.  When someone asked him about the profitability of carriers, Newt said: “We don’t need the practice.” In other words, the carriers need to be profitable. Carriers and shippers can both profit from doing things the right way.  If you are interested in learning more, let me know.

That’s it for now – and all on one page.

Michael A. Regan, CEO
TranzAct Technologies