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AT
a time when the shipping industry is besieged
with stories about declining rates and increased
tonnage, the Shipping Gazette interviewed
a global logistics manager from a major
global shipper - who is willing to pay more
to ship goods with carriers who provide
a more reliable service.
The
company's global logistics head told the
Shipping Gazette there was a simple reason
for this: it saves the company money over
the long term.
This
publication has long advocated that carriers
are too preoccupied with price. In a bid
to secure volumes the carriers' response
has all-too-often been to reduce rates,
even sometimes to a point which threatens
the viability of the business itself.
While
accepting that price is one of the key factors
in securing business, we have argued that
it is not the only factor. If a carrier
provides a higher level of service and has
enough confidence in their product, then
there will always be players in the market
that are willing to pay above the market
rate and provide the volumes necessary to
make the relationship viable.
The
global logistics manager we interviewed
backed up our arguments. He categorically
stated that rates are not the only criteria
he uses when determining which carrier to
use. He said, "we do internal surveys,
satisfaction surveys and relationship surveys.
We ask questions like ¡¥what is your relationship
with the accounts manager and on a local
level are you able to get issues resolved
quickly?'"
According
to our source, those offering a superior
service might be chosen over a rival even
if the rates they were offering carried
a premium. Obviously our source was a little
reluctant to discuss exact figures and percentages
but said "certainly we would allow
between US$ 100-200 per container."
The
logistics manager admitted this figure over
the long term could amount to a lot of money,
but he said if you choose a carrier that
offers you a failing service because of
its extremely competitive price you will
end up being forced to change that service
provider anyway at some point.
This
causes a lot of unnecessary disruption to
your operations, and furthermore you will
likely return to the carrier you originally
wanted but chose to leave for a better price,
when after all they provided the service
that you want.
The
logistics manager added that many carriers
still do not understand the importance attached
to service by global brand companies.
"To
the unfortunate exclusion of service, a
lot of carriers cannot get their heads around
the idea that the customer might really
want to pay more; they think we are always
going to go with the cheapest.
"We
are constantly trying to educate the carriers
on the importance that we attach to service,"
he said.
One
example this shipper shared with us was
how one carrier, who clearly understood
the importance of service levels, benefitted
from this belief in their product.
This
carrier company held firm in negotiations
over price with the shipper (which was looking
for a more competitive rate because of the
large volumes it was offering).
"They
turned around to us and said ¡¥no, if we
accept your extra volume at a lower price,
we are not confident that we can provide
the service level that we offer you today
and that is more important to us
AT
a time when the shipping industry is besieged
with stories about declining rates and increased
tonnage, the Shipping Gazette interviewed
a global logistics manager from a major
global shipper - who is willing to pay more
to ship goods with carriers who provide
a more reliable service.
The
company's global logistics head told the
Shipping Gazette there was a simple reason
for this: it saves the company money over
the long term.
This
publication has long advocated that carriers
are too preoccupied with price. In a bid
to secure volumes the carriers' response
has all-too-often been to reduce rates,
even sometimes to a point which threatens
the viability of the business itself.
While
accepting that price is one of the key factors
in securing business, we have argued that
it is not the only factor. If a carrier
provides a higher level of service and has
enough confidence in their product, then
there will always be players in the market
that are willing to pay above the market
rate and provide the volumes necessary to
make the relationship viable.
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