LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

Can True Shipper-Carrier Alliances Exist in Today's Environment?

Parcel Shipping & Distribution
By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com

Are there really such things as shipper-carrier alliances? Or are they just momentary movements on the pendulum of shipper-carrier relationships? Marriages of convenience, not love?

An alliance, by definition, involves a bond between parties, an association to further the common interests of the members. There would seem to be common interests since shippers require transportation services and carriers need shippers' freight. So given this common need, why aren't there more alliances? Why does it become a topic of articles instead of a routine business occurrence?

I say there are few, real shipper-carrier alliances. The reasons lie in the area of "so-called" common interests. Despite the apparent mutual need, there really aren't common interests; instead there are competing interests. Consider the following:

Price
The rate negotiation and bidding process can be adversarial, with winners and losers. Carriers measure success by profit generated after rates are established--a different goal from that of shippers, who look hard at price. This has great potential to create conflicts and adversarial relationships, not alliances.

Compounding the situation, some shippers have no loyalty to carriers and will change carriers for a lower price. Service is not a factor; getting the lowest price is the goal. So what if the carrier loses money? No alliances here, simply low rates.

Continuity and Stability
Stability and continuity are cornerstones of a good business relationship. However, such dynamic forces as political and economic change can cause confusion and instability. We have seen that with international in the 90's. T Gulf War, wild swings in the value of global currencies current economic problems in Asia have impacted carrier rates, capacity and demand for services.

Carriers add to instability as well. Shippers have seen mergers in all modes. One day a shipper is doing business with a carrier; the next day the carrier has been bought. This creates strong uncertainty and risk during a period when the trend has been for shippers to reduce the number of carriers to build closer relationships with sole-source providers.

And, are carriers reasonably consistent in their approach to rates? So that each year, through mutual understanding, carriers and shippers can agree to prices for the coming period? Or are there inconsistencies and fluctuations, even wild ones, in a carrier's approach to pricing? pricing?

Hidden customers
Just who is the customer? With forwarders and other third parties this may not be clear. Forwarders work directly with shippers for pricing and services. However, with few exceptions, forwarders do not control the service they are selling or providing. Carriers, not forwarders, provide the actual transport service. So, to the carrier the forwarder is the customer. Yet to the forwarder the shipper is the customer. Confusing? Yes it is. The shipper does not see the carrier, and the carrier does not see the shipper. This ambiguity makes it difficult to structure an effective alliance.

Organizational shortcomings
A successful shipper-carrier agreement requires the active participation and consent of all aspects of both organizations. Sounds good, but does this always happen throughout an organization? This is especially critical in large companies that have multiple divisions and shipping points that may not want to lose their identity. Uncomfortable with being part of the team, they may find reasons not to cooperate.

What's ahead?
Can shippers and carriers change their ways, counterproductive and shortsighted as they have been? I think so. Both shippers and carriers must show statesmanship, as exemplified in the following statement by a carrier executive: "Rather than hurling rhetoric upon rhetoric," he proclaims, "it is now time to have a meaningful dialogue directly with the shippers to plan a joint course which is acceptable to all parties and is not biased in either direction."