Suppliers Outsource Shipping to Control Costs and Boost Customer Satisfaction
On-Time Deliveries Help Manufacturers Keep Production High and Inventory Low
Late shipments | Lost Freight | Damaged Merchandise
For suppliers, any of these scenarios can jeopardize customer relationships. Lack of product often translates to down time for manufacturers. Employees can't work without needed supplies, complete orders or honor customer timelines for delivering finished product.
To make matters worse, the supplier loses credibility as a reliable business partner. Forget about repeat business or word-of-mouth promotion from those customers. All it takes is one incident to tarnish its industry reputation.
However, on-time deliveries can make heroes out of suppliers. Manufacturers do not need to maintain high inventory levels or use valuable, onsite space to store excess product. Suppliers can also purchase large quantities of specific items often demanded by their customers, ensuring economies of scale. For a fee, some transportation companies will store those parts, then ship them directly to suppliers' customers whenever needed.
When added up, on-time deliveries create ample opportunities for suppliers to improve customer satisfaction, boost their number of work orders, increase profit margins and equally important, build customer loyalty.
So whether suppliers manage shipping inhouse or partner with a trucking company, the need for quality transportation services is essential to their livelihood and success.
Build or Outsource?
There's really one main reason to outsource shipping: cost containment. During any economy – sluggish or healthy – most companies constantly seek ways to control or slash costs.
Still, some suppliers own a fleet of trucks and hire full time drivers as employees. This may make financial sense when a supplier ships products every day to a variety of manufacturers in various geographic areas. The cost of trucks, maintenance, fuel and insurance premiums along with driver salaries and benefits may not be less expensive than outsourcing. Check around. Do the math and compare.
Outsourcing is usually a wise, economic alternative for suppliers who don't ship freight on a daily basis or want the headaches associated with it. Besides salaries, they also save money on employee benefits, which often exceed one-third of a worker's salary. With outsourcing, suppliers can also pinpoint delivery costs per shipment.
So if outsourcing better meets your business needs, start the process by conducting research. Call several transportation companies and ask these 10 questions:
- Does the company use tracking technology so your shipment can be tracked every moment from pickup to delivery, not just in or out of warehouses?
- How does the company communicate with its customers? Will you receive automatic email updates or can you log on to the company's website to track your package?
- What is their rate of on-time and late deliveries?
- How often is merchandise damaged or lost?
- How does the company respond when problems occur, such as bad weather or if their truck suddenly experiences mechanical problems? Is there a Plan B? For example, has it established partnerships with other trucking companies across the region or country that can pitch in as needed?
- What insurance rating does the company have and how does it compare to the insurance ratings of its competitors? There's a new program developed by the U.S. Department of Transportation called CSA, an acronym for Compliance, Safety and Accountability. For a small fee, suppliers can log on to this website and read the safety record of every licensed transportation company in the country. The site reveals information about driver incidences, losses and how long the company has been in business. "It's a good measuring stick to use when comparing shippers," says Steve Parker, owner of Rush Transportation in Dayton, Ohio.
- How often do shortages occur? How does the company determine where the shortage occurred? Also, how quickly can they deliver remaining merchandise?
- Will your shipment be combined with others that are being delivered to different cities? If so, find out how many times it will be loaded and offloaded, which increases the risk of it being damaged or lost.
Who arranges for delivery times and dates? Most of the times, carriers perform this task.
- What cities does the shipper frequently deliver to and at what times of day? If you partner with companies that routinely drive to cities you ship to, they'll most likely have backup equipment and other resources available in those locations in case of emergencies. Suppliers stand a much better chance of on-time shipments.
But not all responsibility falls on shippers. Suppliers also need to do a better job. Some don't even know how much their freight weighs or its dimensions. Likewise, others don't package freight properly. As a result, shipments can be damaged or become separated, then lost.
Put it in writing
Any contract with a shipping company needs to include many details that are often overlooked. For instance, the contract must specify what type of insurance coverage is carried by shippers, their guarantee for on-time delivery, consequences if they don't hit that target and how long these terms apply.
Make sure these other details are also addressed:
* How shortages and damages are handled * How shipments are tracked * What type of fuel surcharge is added? How is it calculated? * Is the supplier still responsible or accountable for freight once the shipper picks it up from their dock or place of business?
Then make sure the company is financially sound. After checking the CSA website, check the Better Business Bureau for complaints or ratings. Better to play it safe than avoid losing a customer or two over late shipments.
"After finding a company that is financially sound and has the internal resources to offer a backup and recovery plan, commit to a long term business partnership," adds Parker. "A working partnership is better than a dating partnership. They'll know your delivery schedules and can plan ahead to ensure on-time deliveries."