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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'."
The
result of all this, after the initial shock
of the carrier turning down the business,
was appreciation of the honesty of that
carrier company which gave our source's
company more confidence in their ability
to provide the level of service they were
offering. The global manager said "today
we treat this company as our premium carrier."
A
key area in which carriers can provide the
kind of service that shippers are looking
for, he explained, was in the area of connectivity.
As
part of the service package carriers provide
to major customers, this element cannot
be under-estimated; as the customer's primary
concern is getting its boxes to the required
destination on schedule.
So
for example, if a carrier has a good relationship
with the US rail authorities, or trucking
companies in Europe, if it can get its boxes
unloaded efficiently or if it has berthing
priorities these factors will make it more
attractive - and for this higher level of
service many global brand name companies
are willing to pay more.
In
addition to connectivity, another area in
which carriers can attract major clients
and premium rates is through greater transparency.
As
all businesses try to increase their supply
chain efficiency, the importance of transparency
between different partners has increased.
Our
source said, "From a planning perspective
we need a lot more transparency on the carriers'
execution of their service. This means we
need our IT systems to recognise where a
product is and how much of it is where.
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