Transportation Industry February 28, 2011
Do I Have a Choice?
As the new year begins, many of you who do business with mass retailers are likely to receive notifications from them of various carriers being raised in status to 'preferred carrier'. These letters will likely go into detail about the benefits of this 'change'; things like preferred delivery times, daily runs to the stores, cost savings, and so on. Of course, they provide you with contact information for a representative from the company, who can assist you in getting set up with them.
It is critical to assess these proclamations on a case by case business, and read the details very carefully, before making any decisions. Although the language of these letters often insinuates that it is mandatory to switch to this carrier, usually a careful reading reveals that it is not. Here are some important things to assess:
1) Who's paying for the freight? If the answer is you, it is extremely unlikely you will be obligated to use the new carrier. The new carrier may be exempt from some things like appointment fees, but at the end of the day, their rates and service still need to measure up to your existing carriers.
2) How experienced is the Preferred Carrier with handling this mass retail business? Sometimes the preferred carrier designation evolved because the carrier is regularly going to the mass retailers stores/DC's, and there already exists a good working knowledge of their process. If that's the case, it may be worth the time to investigate. In other situations, the Mass Retailer has tendered the business, and it has gone to the carrier with a great proposal, but it may be somewhat new to them. Often a carrier may be a strong regional player in one part of the country, but to win a national piece of business, they need to partner up with a regional carrier to cover the other parts of the country. Although this is not necessarily a bad thing, do not be afraid to ask your new rep hard questions about how the 2 companies interact, how long they've been partnered, and how experienced is the partner at these kind of deliveries. If it's a strong partnership, good answers should come readily to these questions.
3) What are the consequences of not doing it? I have seen some letters that have some fairly firm language that insinuates that there will be consequences for non compliance, but you need to assess how realistic this is. The one indisputable fact is that there is currently no carrier in Canada that has the assets in placed right now to handle 100% of the volume to any of the mass retailers - not even close! Every single mass retailer in Canada receives freight daily from dozens, even hundreds, of different carriers. This fact will not change anytime soon, and it's good for competition anyways. At the end of the day, it is worth asking your existing carriers what they are experiencing until real consequences appear, a switch may not be necessary. Recent history has shown that more often than not, preferred carriers status is not enforced.
The answer really is to assess this matter on a case to case basis. One of our greatest strengths at McKenna is fulfillment to Canadian mass retailers. We currently work with partners that ship to every major retailer, so these are challenges we deal with every day. Take the time to consult with your McKenna account representative, and we can share our knowledge and experience with you.