The Collaborative Advantage

By now, the doom and gloom mentality stemming from our country’s financial crisis has set in. We are daily riding the DOW roller coaster with many more chills than thrills. In our world of logistics, this financial crisis began to take form several years ago, with significant signs reflected at the beginning of 2008.

Record-high fuel prices, and shortages, have dominated the transportation headlines, leading to rate increases and carrier bankruptcies. However, a less publicized trend, namely the ongoing reduction of truckload capacity, has begun to impact shippers, and will create the most adverse affect on growth when the economy recovers.

Is your company taking steps to minimize this projected crisis?

The Capacity Crisis

With over 1,900 carrier bankruptcies in the first half of 2008, more than 90,000 trucks have been removed from operation. To put this shocking statistic in perspective, think about this; there were only 1,200 carrier bankruptcies in all of 2007!

After some months of modest growth in 2008, the American Trucking Associations' For-Hire Truck Tonnage Index decreased 1.6 percent in August, the largest month-to-month decline since March. Many analysts estimate that the drop in available tonnage has led to at least a 4% reduction in truck capacity. Additionally, due to the combination of these bankruptcies and the weak U.S. Dollar, thousands of used trucks are being exported to other countries.

What does all of this mean for shippers?

Considering all of the forces impacting the transportation industry today – record-high fuel prices, ongoing driver shortages, bankruptcies, global competition for capacity, outdated and congested infrastructure – it's clear that this critical component of the supply chain infrastructure is nearing its elastic limit. Unfortunately, the most significant effect of this capacity crunch will not be truly realized by shippers until the economy rights itself, and freight tonnage shifts to month-over-month increases.

According to a recent survey of best-in-class companies across all major industries conducted by The Aberdeen Group, 99% of shippers have already experienced supply chain disruptions during the past year, and 58% suffered financial losses as a result of those exceptions. Among the most frequent supply chain disruptions identified in Aberdeen's study were:

• 56% Supplier capacity not meeting demand


• 49% Raw materials price increase/shortage


• 45% Unexpected changes in customer demand


• 39% Shipment delayed/damaged/misdirected

When economic conditions begin to improve, demand for truckload capacity will increase. The problem is that there won’t be enough capacity in the market to meet it. Supply chain disruptions across all industries will be magnified, and will most likely linger, as many carriers will be hesitant to immediately ramp up capacity. As an example, a recent report by BB&T Capital Markets noted the following, “both Werner and JB Hunt management state that the fleet reduction effort is permanent and won’t suddenly retreat to fleet growth when volumes increase.”

What can shippers do now to prepare?

By now, many of you have heard suggestions for weathering the storm, such as becoming more carrier-friendly by making your freight more attractive, providing carriers with forward visibility to capacity needs, showing flexibility in appointment scheduling, and ensuring timely payment cycles on freight invoices. While all of these strategies improve your value as a customer to transportation providers, they lack depth in improving inter-company business processes and enabling continuous improvement.

Collaboration has often been an over-used, yet misunderstood phrase in supply chain discussions. In our world, effective collaboration means creating a network of trading partners that enables shippers to operate more efficiently and at a lower cost as a group. Enabling collaborative transportation processes between shippers is one of the hidden values of the M33 Transportation Management System.

Through selective partnerships, both carriers and clients are screened to ensure optimal advantages in the collaborative network. The result is an integration of distribution channels and transportation providers to plan and execute 'best-practice' solutions.

What does collaboration have to do with equipment capacity issues?

The typical ‘new client’ adds two immediate values to an inter-company collaborative network:

• A footprint of similar distribution channels that overlap existing client shipping lane.


• A select group of quality transportation providers.

Much like finding lost pieces to a puzzle, many of the new distribution channels offer immediate opportunities to collaborate between network partners. As an example, a recent addition to the M33 Collaborative Client Network introduced a consistent delivery from Sioux Falls, SD to Winston Salem, NC. Consequently, an existing customer ships regularly from High Point, NC to Mitchell, SD. The results of the newly available round-trip opportunity eliminates the search for two separate transportation providers based in two separate areas of the country, not to mention the reduced costs and faster time-to-value.

How does the group of transportation providers from a new client benefit the group?

Carriers newly introduced to the network usually find immediate synergies with existing clients, often increasing their availability in critical lanes for their original client. Additionally, with over 80% of the trucks on the road carrying less than full trailer loads, collaboration allows cost sharing for shippers, increased carrier revenue, reduced capacity demand in the market, and often faster transit times.

M33’s Collaborative Network opens doors to resources and engineered routing ideas that are unavailable to the single shipper. Members of the network share in best-practice solutions while solidifying reliable relationships with providers that typically wouldn’t present a partnership fit independently.

If you haven’t been introduced, allow us the opportunity to further discuss the protected environment of our network, and the benefits of Co-managed Logistics.