As a presenter at the annual meeting of the Transportation Intermediaries Association said Thursday, it’s a shipper’s market.
Shippers sit in the driver’s seat in a market with so much spare capacity that FreightWaves SONAR’s Outbound Tender Reject Index continues to hang around the 3% level. That makes the views of a panel of shippers particularly important for brokers and carriers that seek their business.
There may not have been clearer evidence of a shift in shipper behavior discussed at the panel than that spelled out by Robert Savage, vice president of North American transportation and logistics at Del Monte Fresh Produce.
In the heat of the capacity crunch during 2022, Savage said Del Monte (NYSE: FDP) shifted to six-month RFPs when it went to market to secure transportation.
This year, Del Monte has shifted back.
“We expect the rates to be lower this year so we’re really focused on putting back the 12-month RFPs,” Savage said. And for a company the size of Del Monte, it’s a big deal; he said it operates in 800 to 1,000 lanes and the RFPs will cover about $130 million in freight spend.
The other extreme on the panel was from JJ Jones, the chief supply chain officer from Monin America, a manufacturer of flavor products. He said Monin had moved away from RFPs.
Instead, the company has gone to a system of working closely with brokers to secure capacity, Jones said. It drew the list of the 18 brokers it is working with from prior RFP bidders, Jones said. But of those 18, five are handling the vast majority of the freight.
“So we’re really building a proactive relationship instead of one that is reactive,” Jones said. He said Monin will study how the non-RFP approach works before deciding whether to repeat it in 2024.
The shippers are in a strong position, and they know it. There were several references to the sheer number of phone calls and emails they receive from brokers and in some cases carriers seeking business in a soft freight market. Savage used the term “bombarded.”
And with that position comes the ability to more aggressively seek what the shippers said they wanted, and it wasn’t just low rates. Service came up repeatedly as the No. 1 standard used to judge brokers and whether the shipper would choose to use them again.
“Some brokers don’t try to build relationships with carriers. All they are doing is taking a load and posting it and posting it,” Jones said, emphasizing the difference between service and deal-chasing.
He said his company produced a white paper several years ago on its shipments and that it sought a “win/win/win” strategy for shippers, carriers and brokers alike. If service from the broker is inadequate and that “posting and posting” is the approach, “then all you’re trying to do is get the lowest rate and post it high,” Jones said. “That is not a win-win process.”
There are size requirements for some shippers. For example, Savage said Del Monte will not do business with brokers that have less than $200 million in turnover. Staying away from smaller brokers — Savage said he had “nothing against them” — reduces the chances of getting caught in a double-brokering scheme. And with larger brokers, he said, “I don’t have to resolve issues with claims or trouble getting paid.”
Not surprisingly at a conference sponsored by the trade group for brokers, the view of that industry from the shippers was strongly positive. Savage said brokers can “flex” and have the ability to “go out and find a truck when I can’t flex, and they can do things quicker.” Onboarding a new carrier to fill a short-term shipping need takes longer than dealing with a broker that already is in the system, Savage said.
A shipment that is diverted due to weather raises the question: If more capacity is needed, should Del Monte turn to a carrier? Savage’s answer was succinct: no. “We’re going to really focus on the brokers because they can flex and we can really count on it,” he said.
Savage did say Del Monte has a staff member who responds to every approach by a broker, because the company’s list of approved brokers is not set in stone. A few are purged every year, and new ones are brought in; those that approach the company could make the cut to be on the list of brokers the food company uses.
The discussion kept coming back to what the shippers sought from brokers, and low cost was generally third on the list after two standards that are somewhat interrelated: service and safety.
Michael Lin, the third shipper on the panel and the director of supply chain for the Musco Family Olive Oil Co., summed up the view on safety: “The last thing I need is that one of our shipments taken on by a broker runs into a bus of nuns,” he said.
“All things being equal it comes down to what extra service am I going to get from a broker that I don’t get from a carrier,” Lin said about the choice between the two ways of getting product into a truck and onto the market.
That is particularly true, he said, for a spot load: “When we have these one-offs, we’d probably take it to a broker.”
Savage did note one drawback to brokers: the rate of turnover, which he said is greater than what he traditionally finds among carriers. He said it is frustrating to establish a good relationship with a broker that does “an unbelievable job, and then all of a sudden that person leaves. Then we have another person who doesn’t know our account and the service deteriorates.”
The solution, he said, is cross training so that the departure of one individual allows for a smoother transition for the customer left behind.
When moderator Mike Mikulik, vice president of operations at SPI Logistics, asked panelists what they would grade their brokers on in an internal scorecard, respondents didn’t mention snagging the lowest rate.