Selecting the right carrier for the right shipment seems like an obvious thing to do. But all too often we see shippers struggling, still relying on spreadsheets and tribal knowledge to select the carrier they believe would be the best choice. Let’s face it, unconsciously, transport planners have their own carrier preferences, and this preference is often based on ‘easy to work with’ and not so much the most economical best fit.

Coping with increasingly diverse shipment requirements

Supply chains are shifting from product to customer-centric. Transportation isn’t just about moving freight from a to b in the most cost-effective way anymore. It’s about meeting your (internal) customer’s expectations and transportation excellence, all at a competitive price.

This means that the requirements for each shipment might vary depending on different factors:

  • The customer’s expectations
  • Service level
  • Product characteristics
  • Origin / destination
  • Transportation cost
  • Carrier availability

Trends in the market also influence the shipment requirements, like:

  • Customers might lower their inventory for raw materials or parts, where you as a supplier, will have fewer FTL shipments, but more frequent LTL shipments.

  • Geographical disruptions (or global ones, like COVID-19) could impact your transportation flows, where suddenly, each shipment is ‘urgent’. 

  • A shift in business model, like Tobacco companies suddenly dealing with consumer electronics (e-cigarettes) 

  • Acquisition of a new business in a new region 

Whereas in the past a transport planner could rely on some basic rules to assign shipments, in today’s world this has become impossible. You can’t effectively assign the best suited carrier for each shipment manually. 

Advanced allocation criteria

This is where a modern TMS comes into play. When you have all your rate cards up to date, and have all relevant meta-attributes for each shipment, you can define the process of carrier selection in a set of rules. It’s these kinds of tasks where technology outperforms humans, applying logic and taking into account a whole bunch of business rules. 

You typically see the following type of allocation rules

Allocation rule

Description

Cheapest carrier

Just select the cheapest carrier from your carrier network that fits the criteria. 

Backup carrier

Often combined with other allocation rules, is the ‘backup carrier” allocation. In case the preferred carrier either declined the shipment or didn’t accept the shipment within the predefined time window, the allocation process will follow a cascading selection procedure for the defined backup carriers. 

Remark: make sure your TMS is able to alert you whenever the allocation engine doesn’t find a matching carrier to assign. 

Specific carrier

Always select a specific carrier (with backups) for shipments that match certain characteristics, like, destination country, collection location, type of products, … 

Volume allocation

Split volumes across different carriers allows for: 

  • Better negotiated rates across carriers (you can use multiple smaller carriers instead of one large one who can handle the volume)

  • risk mitigation: spread volume across different carriers, don’t put all your eggs in one basket

  • Carrier capacity limitations: spread the volume across multiple carriers to guarantee capacity

Shipping time range

Take into account transit times to select the right carrier.

 

Using these allocation rules in a good way will help you codify your carrier preferences for each type of shipment, leading to:

  • No more rogue buying

  • No more LTL carriers being used for FTL shipments and vice versa

  • No more expensive air shipments where an ocean shipment would also meet required delivery date

Automate your carrier selection process

This is where it all comes together. You have your rates setup, identified what characteristics to use for carrier selection and have defined your carrier allocation rules. The next step is automating the whole process. Shipments are created automatically, cost are calculated, carriers selected and shipments dispatched, all without any effort required from your team. 

A modern TMS also monitors the whole carrier selection process and alerts you when a carrier couldn’t be matched or a carrier cancelled a shipment. Or, it will launch a spot tender in your contracted carrier network, in case no carrier was matched. The only thing you need to do is focus on the exceptions.

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Interested in learning more about carrier collaboration and data sharing, check out our recent articles on 'Carrier-pay, a brilliant yet, broken business model'

Jonathan Raemdonck

Written by Jonathan Raemdonck

Head of Growth at SupplyStack