PRICE will always dominate decision-making, especially in difficult economic times. Displacing price as the dominant factor for decision-making by shippers is often attempted but rarely achieved by service providers, according to Paul Little, president of Logistics Safety Solutions Inc.
In “Building Alliances to Strengthen Shipper Loyalty,” Little said alliances offer the opportunity to generate growth, develop competitive advantage, and move beyond price. The presentation was delivered May 12 during the National Tank Truck Carriers 62nd Annual Conference in Chicago, Illinois.
“The challenge for anybody selling is to hit that balance between price and service,” he said. “It gets more complicated for bulk carriers when hauling hazardous material, because you have the clients' third leg to the stool that you need to deal with. As you have to strive for lower costs, you can't offer less (safety and regulatory) compliance. You are either compliant or not.
“With that, it becomes a challenge. We need to find other ways to link up with customers so price doesn't become as dominant a decision-making factor when they decide who's going to haul their freight. It has to be a mix between price, service, and compliance. They look more to the kind of services you can provide.”
Little's background is in shipping, so he tries to put himself in the shoes of carriers and expound on ways they can solidify their relationship with shippers. Here are some ways:
- Networking.
“This is the foundation for alliance work you can do with clients — getting to know people in your business. And this is going beyond the traditional account manager at the carrier. It's talking with the logistics or procurement department or whoever manages the buying of freight. There are a lot of decisions, and sometimes the final decision is made by the business supply-chain manager. Every business has a different cost model.
“There could be half a dozen individual supply-chain managers. Get to know them, and it becomes more than buying on price — it becomes buying on relationship. Also talk to transportation or logistics safety people who know the regulatory challenges facing carriers. They could be one of biggest advocates for a top-notch, high-compliance, high-safety carrier. Definitely form a relationship with corporate people in environmental health and safety or security. You touch a lot of people within a chemical shipper. Getting to know them all is advisable. Let them know what your approach is to their specific area. With care and attention, you can build an alliance that makes shipper employees feel comfortable with who you are.”
- Training.
“Most shippers are not bulk truck experts. Some will have their own private fleets, in which case they are probably bulk experts. They might run a small fleet but don't consider themselves experts in terms of managing the regulations and preventive maintenance. There's an opportunity if a shipper has a small fleet to share ideas to help them with compliance and help lower their costs. Many shippers have employees with commercial driver licenses, so they can move materials between plants and literally across the street in some cases.
“Carriers can offer training for a shipper's employees, advice on driver screening and management, and best practices on vehicle maintenance. Build loyalty through knowledge creation. That can pay off in the long run.”
- Emergency response.
“Shippers continue to reduce the number of their own response teams. There are a lot of very good quality contractors across the country, and a lot of shippers have moved to having somebody do it on a contract basis. If they do have their own emergency-response teams, their budget has dwindled in the past few years.
“Carriers can provide on-scene response support through a detailed memorandum of understanding (MOU) or some formal document with rules of what a carrier would do for a shipper on the scene. It could save the shipper from traveling to the scene to look after their aspects of emergency response. It could lower the cost for the shippers. It provides more seamless management because carrier representatives can effectively speak for both the carrier and shipper and move the cleanup along more quickly.”
- Safety and compliance.
“Communicating safety information to carriers is a shipper's challenge. There's certainly the material safety data sheet, but it could include special product handling information, suggesting carriers might want to set up a portal or Web site, some place to post any or all. It could be reporting procedures, in the event of a spill or security breach.
“This way, the onus is on the shipper to provide the information. It's easily accessible to the carrier. Carrier personnel can easily go into the portal and see what the shipper has updated and always have the most current document. Often, the shipper finds each carrier operates differently in terms of who manages the account and where the safety information needs to be sent.
“The American Chemistry Council has built a program that requires members to go above and beyond regulations in terms of environmental health, safety, and security. The Responsible Care Program has that. It originated in Canada 20-some years ago and has been adopted in the United States by the American Chemistry Council. It's designed for companies that make chemicals. The council saw a need for those who handle chemicals as their principal business — such as carriers and warehouses — to participate in the program as a Responsible Care Partner. As a result, many bulk carriers are certified for the Responsible Care Program. They have an outside auditor come in and certify that they're practicing all the requirements.”
- Logistics security.
“Effective logistics security is a joint carrier-shipper effort. A shipper's security plans often are inwardly focused and lacking details of en-route risk management. Once a carrier picks up the cargo, he is responsible outside that plant gate. So any additional information you can share about parking in safe havens or inspecting the vehicle after lunch … all of that information helps the carrier understand risk-management practices that ensure that material arrives safely and securely.
“Without releasing confidential information, carriers can strengthen their credibility by sharing basic security practices and helping improve the shipper's security plan and assumptions. Collaboration will reduce the likelihood of a public security failure affecting both companies.”
Additional alliance opportunities:
“When a driver comes to the facility, often times he won't participate in bulk unloading. There's an opportunity, with additional training and proper risk management, that drivers could participate more in unloading and loading, rather than just transportation.”
“Advocate support of shippers for potential proposed rules that may not be supportive of the goals of the shipper or carrier. There should be more dialogue in terms of how that could impact service. Hours of service rules changes are a great example of how that's going to impact driver availability. Shippers need to understand that so they can manage their business well.”
“When a carrier and shipper need to partner at the roadside during an emergency response, it's always best to have trained together and know the other party. If there are certain chemicals that the carrier handles, train for that chemical.”