Three ways to Measure your Freight Partner's Level of Transparency
There are a lot of over used terms these days… each might warrant its own blog post:
- Paradigm shift
In our industry, we have come to find there are shippers who “know” freight, and shippers who… “KNOW FREIGHT!” Some who have been working the dock for 20 years and “know freight,” and others who have worked on the pricing team or dispatch at XYZ LTL carrier and “KNOW” the ins and outs of why LTL carriers do what they do. If you find yourself somewhere in the middle, maybe this can help with one part of the Freight Management world.
Here are a few checks to possibly “Disrupt” your freight partner and hold them “Accountable” to what's in your firm's best interest:
1. Do you know the Who, the What and the When?
True Transparency starts with data and visibility. When you ask your shipping coordinator why a load was not picked up, ever hear, “well… I called the carrier around 2pm…” Or… “the 3PL was supposed to dispatch…”
These scenarios are not uncommon. But if I’m the shipping coordinator, is my boss going to believe me? Or, just cause my 3PL tells me they were going to dispatch, did they, and when?
Who entered the dimensions on this shipment that caused us to hit with Overlength Fees or fall outside Capacity restrictions? Were they correct?
Using a TMS (Transportation Management System) can track every move by every user. If not, maybe you’re using the wrong freight management technology. You should see a log with detail from when a shipment was rated, who entered the details like NMFCs, dimentions and weight all the way to when it was dispatched and by whom.
2. Freight Rates / Freight Pricing – Do you get it?
What does that mean, “get” it?
I hear industry terms like Czarlite base rates and FAKs all the time. Your provider may
brag all day about how good your pricing is, but how well do you understand why? Here’s the magic question… Is your provider willing to share the pricing agreement that governs YOUR pricing? And educate you why it fits your freight?
Real Transparency = Real Information Sharing. Get it!
3. What am I paying the carrier… and what am I paying for my provider's service?
Ever hear, “It doesn’t matter… it’s just about the bottom line!”
Well sure, the end payment is important, but how often is it changing? Do you know? This uncertainty demands some explanation of how a LTL Freight Broker or Freight Brokerage operates. (Note, Recon Logistics does not broker LTL).
A Freight Broker leverages all their clients’ volume to negotiate blanket pricing with whichever carriers wish to participate. The Freight Broker then marks up that rate and passes it on to you.
Reputable Freight Brokers fit a very specific space; helping shippers with too little volume to demand the respect of carriers. But the less-reputable ones take advantage of their position.
My biggest fear for a small shipper is that a broker shows up and suggests a 15% savings on a few previous shipments. What happens next week? Or next month? Whatever margin was charged on those first few is a thing of the past… maybe it’s 2% more today, 2% next week or month…
If we are using a Broker, we probably don’t have sophisticated tools to measure their cost over time… or the staff to do so. That means, to hold them accountable, we get freight quotes, and more freight quotes… and any benefit from consolidating resources and developing deeper relationships is gone.
Know what you pay the carrier and what you pay the provider!