7 Steps to Strategic Partnership Between Shipper and Service Provider
By Omar Singh, President and Founder, Surge Transportation
Most of the shippers I have worked with over the years are large well-known Fortune 1000 companies with complicated supply chains. One of the challenges to partnering with customers with that profile is that they typically work with between 100-250 service providers — roughly 90% motor carriers and 10% brokers — and there is always somebody else competing for the same part of their business you are interested in.
Also, companies that size are well established in their relationships with service providers that sometimes go back decades, so, just getting a chance — just getting noticed, let alone a chance — can be daunting. However, one of the advantages is that in complicated supply chains, there are many layers of opportunity for partnership.
While there is nothing wrong with being a niche player, or regional, or specialized, or only operating on one level — I think we can all agree that being a diversified strategic partner is essentially the holy grail of long-term partnership and relationship success.
I have identified seven levels of opportunity for partnership with large shippers in domestic truckload over-the-road business that, if you can be relevant and reliable in, you should expect to have a career-long, transportable, partnership, and quite frankly, even deep friendships.
1. Primary level
The first level is primary business — as in primary award from an annual RFP. Most of the time, in order to just gain entry into a customer’s network, you have to establish some amount of relevant primary business to give them a reason to give you a chance.
At 30,000 feet, this is easier for motor carriers than it is for brokers — more than anything it is their business model. They know their costs, their lanes, their network, and ‘cost’ isn’t really market-based. Price is market-based, operating cost is not. For brokers, this first level may be the most difficult — gaining entry as a primary because you are competing against 100 other providers who want primary on that lane and have to find out a way to somehow do it for less than, well, cost. However, if you can find a way to win some primary business and get noticed, you can begin to breathe some life into the possibility of a more complicated partnership.
2. Backup level
The second level is back-up business — most commonly a little further down the routing guide — say 2nd or 3rd or 4th choice — your rates are not primary, but they are relevant and close enough that you might be called upon if the primary is not available.
More often than not, I think of this as being a short-lead-time provider. Either the end customer orders more product in a window that the primary is not required to accept and cannot do so affordably, or, a primary provider accepted the load 7 days ago and suddenly the assigned driver is unavailable due to detention or returned product or one of many reasons.
Short lead time is a more difficult space to operate in — it is a pressure cooker: the load may already be late as a carry over, there are limited available shipping and receiving appointments, limited capacity, and often you need a second- or third-shift staff to be working to build the loads and get appointments by the next morning.
While it is a pressure cooker, no pressure — no diamonds. This can be one of the most relevant spaces to play in while establishing yourself as a reliable strategic partner. This can also be one of the most dangerous — almost like being in the mob; you can’t do it one week and not the next, but want back in on the third week. Once you say you will be there, and then fail to be there, on that very shipment you will be replaced with another provider and your spot will be taken.
3. Seasonal level
The third level is seasonal business — I define seasonal as around 90 days; whether is it the 100 days of summer between Memorial Day and Labor Day or 70 days of Q4 from November through the first week of January, every large shipper will experience some seasonality within their supply chain in which there will be too much volume for their primaries to cover.
Even if the shipper does not ship seasonal product, the marketplace is seasonal which has a network capacity effect. I believe we all know the high-level seasonality: produce ships in the growing areas during that area’s time; beer, water, and ready-to-drink beverages surge during the summer; poultry, dairy, and retail surge during Q4. Whatever it is, there will be times that all shippers with complicated supply chains experience seasonal demands on available capacity that leave them short of primary providers.
If you can establish yourself as a reliable provider of extra capacity during those seasonal periods, not only is it an opportunity for an additional revenue stream, it is an opportunity to go further into building a strategic partnership.
4. Temporary level
The fourth level is temporary business — I define temporary business as 30 days or fewer — often it is unexpected, sometimes it is not. When unexpected, think: hurricanes, tornadoes, snow, ice, port strikes, polar vortex, bridge collapse, rail congestion, wild fires, manufacturing lines going down and switching to a co-manufacturer in the meantime, a blocked Suez Canal. When expected, think: major holidays, major sporting events, planned promotional events of product, pre-buy before announced price changes.
Throughout the year, in some years more than others, there will always be short term bumps in capacity needs — spikes in demand that primaries are not able to supply capacity for. While being available to help your customer during temporary times of need may not account for a large percentage of your overall business with them, my experience is that it does account for a large percentage of the overall value that having a relationship with you will bring to them.
5. Strategic spot
The fifth level of partnership is what I define as strategic spot — in the hybrid digital world this is API, real-time, dynamic price routing guide. This is playing in a space where loads are not covered by design.
Either the shipper does not want to award this portion of their business to primaries so that they can play the market, or, they are being more strategic about selecting the providers they want to get a first shot at loads or domiciles that need extra capacity.
The providers in this space are normally fewer in number than in the open market and have already established some sort of strategic value within the network. If you can build the capability of providing real-time pricing and have the bandwidth to provide real-time capacity, chances are that it will help improve the quality of your relationship with your customer.
6. Transactional spot
The sixth level of partnership is what I define as transactional spot — this is the space where loads are not covered by mistake rather than by design. There was a plan, there was a routing guide that matched capacity with demand forecast, but something went wrong.
As strategic as you may be in your customer’s supply chain — you may be there for primary, for backup, for seasonal, for temporary, for strategic spot — there will always be some percentage of their business that will go to the good ole-fashioned user-interface, web-login, debauchery that we all know as spot auction.
This is where everybody operates — both strategic and transactional — and it is known for high prices and low service levels. Nonetheless, it is a place to cut teeth and prove yourself: prove that you will be there, prove that you will be a reliable partner, and maybe even convert some regular isolated load awards into actual volume lane awards.
I have left the best and most relevant for last. The seventh level of partnership is the expedite. I think that if you don’t and can’t do this, you don’t get a crack at the middle five levels. This is the Navy Seal load — leave your family at the restaurant at dinner, leave your kids in line for a ride at Disney World, stay up all night on the phone with the driver talking about the old days of paper logs and your first time going up/down Grapevine and the despair of watching your last truck get towed away by the bank, send in four trucks and pay three TONUs, absolutely cannot fail under any circumstance load, I am here for you and always will be because you matter to me and for some reason this load of high-fructose corn syrup matters that much to you and your customer that we are going to find a way to get it done against all odds. If you are reliable here, you get doors opened in the middle five.
Large and complex shipper supply chains are not easy to gain entry into. Trust and relationships have high barriers to entry. Familiarity with the network and individual site needs is expected when you don’t have the benefit of experience to gain that familiarity. Murphy’s Law is that something will always go wrong with the first shipment when all eyes are on you and fingers are on the trigger.
Yet, there is also huge value not just to having diversified accounts, but diversification within accounts — almost customers within customers, different buyers. Through the ups and downs of my career, I have learned that if I can be reliable in these seven levels of partnerships, then I have a high likelihood of work-to-do, and my customers have a high likelihood of finding value in a strategic partnership with me. In an endless sea of competition getting noticed may be the most difficult thing to do, but if you do, then shoot for all seven and you will likely find yourself in a lifelong partnership.