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6 Ways to Choose the Right Supply Chain Partner for Higher ROI

July 7, 2020
Posted in: Innovation
Tags: ,

A straightforward guide for vetting shipping and transportation companies.

Few companies control every step in their supply chains.

Retailers (unless they’re Amazon) and manufacturers almost always have gaps in the transport and logistics part of the chain. You can turn raw materials into finished goods, and you might even have storefronts to sell those goods. What you (probably) don’t have are the trucks to bring raw materials in or finished goods out to the market.

A lack of vertically-integrated logistics isn’t usually a problem, unless your transport and logistics partner needs improvement.

There’s no need to settle for substandard shipping providers. It’s not especially difficult to narrow your focus to the most reliable and most durable partners on the market. You just need to know what to look for.

That’s why you’ve got this guide. Here are 6 great ways to make sure you choose a supply chain partner to reliably produce positive ROI:

1. Partner financial stability

Transport and logistics businesses, particularly those with their own fleets, can be jeopardized by the loss of a major client or an economic downturn. The last thing you need when you’re trying to move products is an unexpectedly bankrupt carrier.

Your prospective partner might not want to share a full P&L statement, but you should be able to ask about metrics such as:

  • Is the company profitable? How profitable?
  • What’s the company’s history of profitability in recent years?
  • Do any clients make up over 5% or 10% of the company’s business?

You can also dive deeper and ask about your potential partner’s disaster recovery plans, their cash on hand, and their cash flow or burn rate. A carrier with only enough cash to keep its trucks running for another week might not be the partner you need.

2. Route and mode compatibility

There are about 4.2 million miles of road in the United States alone. Few carriers will operate on all, or even most, of these roads. Shipping by rail is more cost-efficient, so long as you can cover most of the ground of your shipment between one rail terminal and another. There are 140,000 miles of railroad tracks in the U.S., and many are largely controlled by regional railroads.

You might also need to move your products internationally, which in most cases will involve a container ship, or rarely, a freight aircraft.

You get the idea.

It’s critical to partner with a carrier that serves efficient routes between your pickup and delivery points. This includes not only the availability of transport between points A and B, but the type(s) of transportation used.

If you’re trying to ship ice cream, it’ll need cold containers and cold trucks to make it safely from your plant to a store or distribution center. If you’re shipping large, bulky objects like pianos, you may find fewer willing partners — not only are pianos inefficient uses of carrier space, they also pose potential liability risks if damaged in transit.

Carriers always prefer to work with new partners who will use their existing routes on a regular basis. If you need to make intermittent shipments to many different places, you’ll probably have to work with multiple specialized carriers.

3. Cost of service

The cheapest proposal may not always be the best option, but you always want to get the best service you can for the lowest price.

A proposal or quote comes with a price point, but you may wind up with hidden costs or unexpected charges if you don’t ask good questions up front. Try to either calculate or request metrics such as:

  • Freight cost per unit
  • Transit time (this helps you assess the costs of speed)
  • Claims ratio (how much product does your partner damage or lose?)
  • Accessorials and surcharges

4. Partner track record (reliability and regulations)

The most financially stable, affordable carrier might turn out to be a terrible choice if they’ve built their business by cutting costs and breaking promises.

Reliability is critical, because timing is everything in business. You shouldn’t work with a shipper that can’t reliably keep to its scheduled delivery dates and times.

Larger and more reputable carriers should have case studies and positive testimonials, and if they don’t, you should ask for some. You might be able to check past client reviews through the carrier’s Google My Business profile, or on certain shipping platforms like FreightRun. You can also see lists of the largest carriers by fleet size on FleetOwner.

These large carriers should be fully compliant with any relevant regulations, but a smaller or newer company with a narrower client focus may not have all its boxes checked. Make sure to ask for your partner’s certifications, compliance documents, and proof of licensing, bonding, and insurance.

5. Technology and data transparency

Technology is pretty amazing. Unfortunately, technology isn’t always in a shipping company’s wheelhouse. This can be problematic if you expect visibility into your shipment’s progress and condition between points A and B.

You should, at minimum, be able to track your shipments stop by stop, especially if your shipment is time-sensitive. Some carriers may even give you real-time GPS data on your shipment.

It’s also important to be able to interact efficiently with your partner’s systems. You shouldn’t have to go through 20 hoops to get your stuff picked up or see where it is, and you certainly shouldn’t have to waste time fighting with someone else’s systems, or trying to make your systems work with theirs.

6. Communication and operational compatibility

Some companies love communication. Others prefer to say as little as possible and let their actions speak for them. You should work with a shipping company that has a similar approach to its communications.

If you want to check in daily by phone, make sure your carrier has representatives who expect this sort of interaction. If you want daily email updates, don’t partner with a company staffed with technophobes.

Your partner should also understand your needs, your processes, and your operational style, and be able to fit into those aspects of your business without disruption. A carrier that expects you to reconfigure your warehouse, adopt unfamiliar technology, or be available at weird hours isn’t worth your time. You might be searching for a partner, but you’re ultimately their client. The customer, as they say, is always right.

RTS Labs is proud to be a different kind of supply chain partner to businesses like yours. We’ll help you fully capitalize on the best supply chain management technology available today, and we’d love to help make sure you and your other supply chain partners work together just as seamlessly. Want to learn more? Get in touch with RTS today!