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What is the relative expense of the transportation component of your sales dollar? Transportation costs can represent some 3% to 20% of your company's corporate dollar, so buying services to handle th...
What is the relative expense of the transportation component of your sales dollar? Transportation costs can represent some 3% to 20% of your company’s corporate dollar, so buying services to handle this expenditure should be done properly.
What are the most important criteria in selecting the right service provider? What steps should you take to ensure the people you choose to handle your fine products are indeed “worthy” of that trust? Yes, it should be an honor not a favor, and in order to ensure you’ve done your homework we’d like to provide you with some guidelines to the steps you might wish to take in this process. Purchasing buyers, agents, managers and the like go through very detailed criteria to “make the buy” so why not those involved in the buying of transportation services?
The Carrier Profile
The process of selecting the right transportation provider should be the most important undertaking by the potential buyer. Just as these providers select their clients, transportation buyers should undertake to research their providers. When you are selecting a new supplier they most often ask you to complete a credit application just for the privilege of being their customer, so why not have them complete your application too? Call this your “Carrier Profile”.
While there are many ways to source potential carriers, the format for qualifying them has to include a Carrier Profile.
Start with the basic information required, including the carrier name, address, contact name, phone, e-mail, Web site (and check it out thoroughly). Include such “General” information as:
– Year they were established/opened for business and any pertinent ownership/affiliation information you can gather.
– Union/non-union and affiliation – always important to gather information on this and perhaps their recent history, contract expiration dates, federally/provincially regulated.
– Insurance company, deductibles for cargo, maximum limits of their 3rd Party liabilities.
– Approximate annual sales – this will tell you the relative size of who you are dealing with and how significant your portion of the tendered freight would be to them.
– Where they bank – they want to know where you do so why not ask them? Check on their financial stability as they do yours.
For “Specific” information you should include:
– Equipment information such as number of trucks, vans, flat decks, specialized trailers, lengths and widths available, tarps.
– Operational information including the type of service they provide such as LTL, TL, geographic regions and service standards, terminals, number of owner/operators and/or company drivers, hours of service, weekend service.
Do not fail to ask as part of your profile for any additional information that you find important and is specific to your business. An example would be if your company required delivery of building materials to job sites; ask “do you have job site delivery experience” as this is a particularly unique delivery requirement.
Always get carriers to provide you with certified copies of their insurance, any brochures or literature and copies of their operating authorities by mail, fax, or electronic means.
Finally, the most important part of the Carrier Profile is the “Reference” information. This is one area that most buyers neglect and it’s the most critical of all. Ask for three references and don’t just file this information, contact these people by phone preferably.
Be sure to ask your references about those items that matter most to you as a buyer of transportation services. Some of these might include the following: on-time service performance; speed of delivery; consistency of service.
What is “service” and how do they measure it? This is one area that your references can really help. Drive around and see where else this carrier might also deliver and call up those companies not provided in their references.
Many carriers can provide you with service standard reports on a predetermined level either monthly or quarterly. Ensure that you understand and agree to the service report format, the definitions of delivery days, on-time and other variables in the report. Some can customize this information relative to their client’s needs. Make every effort to create your own carrier performance criteria and reporting methods – even if you must devise something in-house.
Do they carry the equipment you need to get both the pick up and delivery done properly, and when you want it?
What is their ratio of claims to shipments handled? The number of claims they handle in a given year; the average settlement time in days? The most significant part of claims is prevention so ask what they do to evaluate the incident and determine cause, frequency and what steps they take to correcting the problem.
Next month we will tackle Part II in this process by looking at quotations, their review and other selection criteria.