Starting a Third Party Logistics Company: Developing a Carrier Network

When you are starting a third party logistics company, there are a lot of variables to consider. From freight broker software to drafting the operating agreement and more. But perhaps the most important is identifying the right people and companies to partner with to ensure your business is successful. It’s obvious that every broker or shipper ideally wants a carrier that delivers cargo on-time, at a reasonable price, and with very minimal damage. But as with most things in supply chain management, this is easier said than done. Developing a carrier network that meets all of your expectations can seem daunting, but with a little time and consistency, you’ll have the strong network you need to grow your business.

The following list will help you establish a valuable carrier network we all hope for.

1.Define Your Needs

Start by specifically defining what you need in a carrier. Create a document that outlines your current and forecasted needs.  Do you need an LTL carrier? Dry vans or refrigerated trailers? How much space is necessary? What are your expectations for updates from their staff and from their drivers? It’s important to get as specific and granular as possible from the start, because as your business grows and your customer’s demands evolve, so too will the complexities of your carrier network.

2. Conduct Thorough Research

Once you’ve mapped out your specific needs you can begin the in-depth research process. Start with a few simple Google searches and compile a list of vendors with specific notes for each.  You may also find referrals, listservs, and tradeshows useful research tools as well. You should also leverage referrals from industry contacts. If you know any carrier sales managers with 10+ years of experience they should know of reliable carriers in certain regions that over certain lanes, have certain inventory of trailers, or have certain reputations. Hiring an experienced carrier sales manager can be as good as vetting several carriers from a 3rd party source. If the carrier sales manager has good relationships, he will bring those into your business and can help you decide who’s most reliable for servicing your precious early customers.

3. Build & Maintain Good Relationships

Cultivating relationships is an essential part of owning and maintaining any successful business, but this is especially true for a logistics company. The very nature of a supply chain depends on strategic relationships and connections. Bad relationship management affects all areas of the supply chain and can easily impact performance. Which is why when you are developing a carrier network, it’s imperative that you establish good relationships from the get-go. Where do good relationships start? Honesty. When do good relationships turn ugly? Dishonesty. Whether it be human error on your part, the customer’s part or something is wrong due to weather related problems, the best way to keep good relationships with carriers is to be honest about them. Don’t assign blame or act like you’re Bobby Knight and the carrier is a redshirt freshman. Own up to mistakes and your carriers will appreciate the transparency with which you operate. Relationships are grown and destroyed with open and honest communication.

4. Listen & Establish Open Communication

This leads us to number 4 – The more available you are to discuss possible hiccups and listen to carriers’ feedback, the more opportunity you will have to improve.  With an open line of communication, it not only ensures the carriers are happy but it also allows you to make minor adjustments to routes and weights, ultimately improving efficiency. Try adding an automatic feedback email that goes out after a load has been delivered. You might be surprised with what the feedback is that comes through. It might be hard to hear at times, but what’s important is that you take this feedback and use it as an opportunity to improve things. Otherwise, who knows how long the problem may go on for!

5. Pay Invoices On-Time

Maintaining good standing with your carriers should be obvious, it’s a simple and easy way to show that you value their services. Paying invoices promptly strengthens your relationship with carriers and helps to instill loyalty among both parties. Dilligence with cash-flow management is essential in order to make on-time payment an all-the-time reality. Don’t take this for granted, as delay in payment or non payment at all can land you in hot water, and blacklisted by the carrier at the very least. Defaulting on invoices is one of the quickest ways to end up completely out of business.

6. Network with Carriers & Drivers

Networking with carriers and drivers is a great way to ensure you continue to build your carrier network. You can do this both in person and online. Utilize social platforms like LinkedIn and Facebook to reach out to new people, share ideas and inform them about your business. If you remain dedicated to doing this on a regular basis, you will undoubtedly create a web of good relationships. Spend a little time one line making LinkedIn connections or contributing to certain message boards. It’s not just a phones-to-ears business like it used to be.

7. Use Technology to Your Advantage

As you already know, data is relied on heavily in the supply chain industry. Shippers depend on carriers to provide accurate, real-time data on their shipments. Without them, it would make their job a lot more difficult. In the same light, shippers should be willing to use technology that is available to increase transparency and ensure smooth data transfers.

Building a solid network of carriers takes time, consistency and dedication.  Don’t expect miracles overnight. However, if you continue to stay invested in building good relationships and following the above recommendations, your network of carriers will expand.

How to Prepare for Fluctuations in a Freight Brokerage Business

Steady income you can rely on. What freight brokerage business doesn’t want that? Heck, every business, no matter how big, wants predictable revenue. But as you know all too well, there are fluctuations that can hit a freight brokerage business if your portfolio of clients is not well balanced. Here are some things to think about to add stability to your 3PL operation.

 

Sniff out the type of fluctuation your clients may experience during the sales process.

Ever had a costume store customer? I bet your July – September were busy. But what about February? As a freight brokerage business, it’s on you to know that the client you’re taking on has seasonality to their business. If you’re just getting your freight brokerage business started, you certainly should turn down freight you can cover profitably, but if you take it on, don’t start spending money like you’re Jordan Belfort in The Wolf of Wall Street. Be conservative with your cash; you’re probably going to need some down the road.

Seasonal fluctuations can be easy to spot, but what about economic, cyclical or irregular fluctuations to the customers of your freight brokerage business? Those can be less predictable and much less predictable. If you’re not following general economic trends, you should start. Because as the economy goes, so goes freight. For example, when there’s income growth, this usually signals higher consumer spending. This generally leads to an increase in business spending. Is unemployment on the rise? This could foreshadow a dip in consumer spending, which means lower business revenues and profits.

Cyclical fluctuations are alternating periods of contraction and expansion that can last 18 months or longer. During contraction, consumer and business demand falls. During expansion, demand goes back up. In periods of contraction, businesses will look to cut costs by reducing staff, cutting back on operating expenses and delaying investment decisions. During expansion, consumer spending increases, which leads to higher demand for cars and other big-ticket items. In a time of expansion, your customers will be increasing production, which increases their need for trucks.

Have carrier sales inform their carriers that you’ll have freight in lanes they cover at a particular time.

This can be particularly important if you’re vying against other carriers for the seasonal customer’s freight. But, get at least a verbal from your carrier sales team and you can approach your customer with more confidence and let them know that you’ll have capacity to cover the influx of trucks they’ll need during their busy season. Now, we know trucks are generally reserved no more than 72 hours in advance, but by communicating this information ahead of time, you can stay top of mind with carriers and have a leg up on other brokers who wait to the 11th hour to call and expect their carriers to pull of miracles for them.

Think about how you can make life easier for your customer(s).

Your customer may be dealing with a seasonal downturn, but what if it’s bigger than that? What if the downturn is specific to their business? Are there any ways you can make life easier for them outside of the freight that you’re already moving? Your freight brokerage business is going to succeed or fail on relationships. You have to have good relationships with your carriers, but you have to have even better relationships with your customers who supply the freight. Talk to them and figure out what they’re struggling with. Even if it’s not related to supplying trucks and making pickups. The more ways you can add value in creative ways can take you really far in the freight brokerage business. It’s more than just providing GPS tracking for the exact location of the freight. Think people skills.

 

Be conservative with your cash.

The phrase “don’t spend it all in one place.” could probably be written above the door in your freight brokerage business. That way everyone could be reminded of this valuable piece of advice. If you’re going to have seasonal clients as a smaller(ish) freight brokerage business, you’re going to need to get better at squirreling away money so you have it if you hit a lull in customer activity. If you are trying to forecast revenue for all your clients for a year, a simple trick to stay in a conservative mindset is to simply divide the revenue by 12. This way, you start to look at revenue by what it means per month over a 12 month period.

 

Manage your freight remotely. Complete visibility to your transportation supply chain is as close as your phone, tablet or computer. Freightflow freight broker software is the most easy-to-use freight broker software available today. The best part? It’s completely free to try. Don’t wait. Get started today with your no obligation, 100% free trial.

Logistics Sales: 3 Shipper Objections to Overcome to Ship More Freight

Logistics sales can be a tough sales environment to thrive in. Any shipper you talk to is going to have reservations about giving a new person freight. Without a demonstrated history of successfully moving their freight, you’re going to have to be patient.

Logistics sales is about overcoming objections and quelling fears. But not all of shippers’ fears are different. You can focus on becoming a master and overcoming a few common objections, then watch your logistics sales soar.

Logistics sales: overcoming a shipper’s fear of change.

Your shippers have a seemingly simple job: ship freight out of the facility, on time. But the need for simple execution of this task, over and over, means shippers can be very fearful of disrupting the status quo. The shipper who you are trying to win business from probably has a slew of carriers just waiting for one of the incumbents to slip up and fall off. So, what are you, the new guy on the shippers radar, going to do to earn enough respect to capture your first load?

Overcoming logistics sales objection: fear

What you need to do in this logistics sales situation is demonstrate how you are similar to the prospect’s current needs. Have you already managed aligning 10 trucks into a 2 hour pickup window on a Sunday? Do you already have great carrier relationships in the Paducah Kentucky region and know you could cover any load even on two-hours notice? Bring these similarities to your prospects attention, either on the phone or in a series of successive follow-up emails.

With email open tracking being a common feature of marketing software tools today, you can even wait to place your follow up calls until you know your prospect has clicked to view your website. Once your prospect has become more familiar with how similar your service capabilities are, you can move towards strategically asking for the order, or, asking to ship a small amount of freight for them, to start.

Logistics sales: Overcoming perceived lack of “size of benefit”

You may have had a great, charming opening convo. Maybe you made a connection with them about how you are both Cubs fans. They’ve actually answered three of your follow up calls, and you feel like you could be on your way to becoming friends, maybe even making a sale because of it. But for some reason, the prospect has yet to place an order, and they seem evasive when it comes to any freight-related questions. The problem? They just don’t see enough of a benefit to need to make a change!

Overcoming logistics sales objection: size of benefit

The best course of action in this situation is to shift the conversation towards understanding the metrics behind the shipper’s business. But, do so by leveraging a case study that speaks to a large size of benefit. Were you able to help another customer cut 2 hours per day off of their loading time because of more efficient truck arrivals?

Did you save them thousands in overtime costs through this efficiency? Don’t think of size of benefit as, “size of cost savings”, because you don’t want to cut your own margins to try and pump up the “benefit” of being able to save them $50/load. Focus on building up the size of benefit through other things that don’t involve cutting your own price. A great way to quantify the size of your delivered benefit? Pull statistics from your freight broker software so that you can use real data in your pitch to get a new shipper to see the benefit in working with you.

A great way to communicate the size of benefit enacted is through case studies put together my your marketing team. Don’t have a marketing team? Consider paying a freelancer to come up with a great one-sheet or short pdf doc outlining the size of the benefit you created. Some good looking sales collateral can make a big difference when attempting to stand out from a crowd of other freight brokers.

 

Logistics sales: Overcoming the “ive been burned before” fear of failure

So, what happens when a load doesn’t get picked up or a load doesn’t get delivered? No, it’s just stressful phone calls for you and your team. Over on the shipper side, your client is having to answer questions. Tough questions from their boss. They may even be naming their new grey hairs after you. Shippers have been burned by brokers before. They may have already asked you, fairly early on in your relationship, “are you an asset-based carrier?”. You’ve probably even seen a few call notes in your logistics CRM system of past prospects who have indicated over the phone that they want: “NO BROKERS!!!!!!”. The fear of failure or fear of getting burned again is very real.

Overcoming logistics sales objection: fear of failure

Again, it comes down to you the freight broker being able to display a level of expertise and professionalism that leaves no room for a shipper to wonder wether you can handle their business or not. There’s a saying, “the proof is in the pudding”. While, that doesn’t mean you should starting sending pudding to your shippers (well, maybe not right away). Leverage the outcomes you’ve experienced with other clients. These are the reasons you have for a shipper to believe you won’t fail them. Unlike other brokers have in the past.

Be specific in your examples you provide of how you’ve succeeded for other shippers in the past. Does your prospect need refrigerated trucks early and often? Then you don’t want to drone on and on about how you can get low-boys and straight trucks all day every day. That’s not helping them. Which is not helping you.

If you can’t close a sale because you gave great examples of past success, don’t worry. You may have made the sale, but the shipper is just waiting for the right opportunity to test you out.

 

Manage your freight remotely. Complete visibility to your transportation supply chain is as close as your phone, tablet or computer. Freightflow freight broker software is the most easy-to-use freight broker software available today. The best part? It’s completely free to try. Don’t wait. Get started today with your no obligation, 100% free trial.

Freight Brokerage Business 101: How to Build Rock Solid Carrier Relationships

Carrier relationships can feel forced and unnatural at times, when just starting out. But if you take the right steps to cultivate a meaningful relationship, your carrier relationships can literally carry your freight brokerage business to new places. Remember, you can have the best customer sales team in the world, but if you cant cover the load, none of that matters!

As you build your freight brokerage business, it can be easy to get lost in the art of logistics sales and trying to find more freight to move. But slow down there, freight cowboy. Before you start moving 80 loads a day from that dream customer, you’re going to have to know you can get those trucks. Getting trucks requires you have rock solid relationships with your carrier.

Treat carriers as partners, not vendors.

Your carrier database grows and grows. There seems to be an unlimited number of options of carriers who can cover your load. Except, you just missed pickup for an easy-to-cover lane. The pickup was in an industrial park just outside of Indianapolis, of all places! How frustrated are you right now? Maybe not as frustrated as your carrier, who isn’t feeling the love.

Do you talk down to your carriers? Don’t do that. Yes, you may be paying them, but to build truly beneficial carrier relationships that will grow your freight brokerage business long term, you need to treat carriers as partners. Talk to your carriers as equals! You are in it together. They need you to get paid before you can pay them, so, of course they want to come through for you!

As a new carrier starts to demonstrate success for you, make sure you sell them on a long term vision for your relationship. Be sure to let them know that you appreciate them coming through for you on these first few loads, and that you see potential to get more from this customer. Tell them that you would love it if you could continue to bring them more freight! Single transactions don’t build freight brokerage businesses, relationships do.

Providing value is a two-way street.

Your carriers are working to make your job easy for you and you can do the same in return. The best way from the start? Great, detailed load information. In this day in age, you need to be utilizing a freight broker software that gives you access to all load detail with a single tap of the screen. It sounds simple, but you would be surprised. Be sure to emphasize the importance of this with your whole team. It’s the little things that seem obvious that, if not done correctly can really trip up the growth of your freight brokerage business.

Success for both sides in the relationship between the people, not just the freight brokerage business.

You may be working to build a freight brokerage business, but don’t forget, you’re doing it with people. When you call to talk to your carriers, don’t get right down to business. Ask them how things are going. Find some common interests. Is it football season? Find out who their favorite team is. If you play fantasy sports or are even a little interested in football yourself, it shouldn’t be too hard to know what’s going on with their favorite team or player. Does your contact at your carrier have kids? Do you both have kids? Get to know the details of their life.

Here’s a great relationship-building tip to try. Sometimes, it’s as simple as asking, “What can I do for you?

Prompt payment can make freight brokers and carriers best friends.

Did we just become best friends?

Margins in the freight brokerage business can be tight; there’s no doubt about that. But everyone appreciates on-time payment. It’s why we do what we do, after all. To make money so we can provide for our families. But as you grow, you may want to make this a priority over other positions in your hiring plan. Nothing will keep a carrier loyal to you more than a good track record of making on time payments. This doesn’t mean you have to pay carriers the moment the last pallet comes off the truck. But, do be clear about payment terms in the documentation you keep for each load, and abide by the expectations you set forth. It’s not so much about the speed that you pay, but more about how reliable your payment delivery is. So, if carriers will take loads with 60 day payment terms, this could be something that works to your advantage with the right accounting team.

 

 

Manage your freight remotely. Complete visibility to your transportation supply chain is as close as your phone, tablet or computer. Freightflow freight broker software is the most easy-to-use freight broker software available today. The best part? It’s completely free to try. Don’t wait. Get started today with your no obligation, 100% free trial.

4 Telltale Signs Its Time for a Freight Brokerage to Fire a Customer

If you run a freight brokerage, the idea of firing a customer might sound completely crazy. But it’s true. There are times when you just need to say goodbye. What are the telltale signs? And, could you be moving freight for a client who is actually a detriment to your business? We’ll explain what you need to know.

No matter what type of freight you are moving, your business comes down to margins. And margins are going to be thin. You’re in a volume business, but you need to consider more than the number of loads you’re moving. Time is money. Your carrier sales team has to find trucks to cover these loads.

How many calls does it take for your carrier sales team to cover a load?

If you’re committed to running a profitable freight brokerage, there’s undoubtedly many pieces of information that you watch like a hawk. But what about calls per load covered? Time is money, and even if the cost per mile is acceptable, what if it takes 100 calls to cover the load, when other loads take only 25? Sure, call volume is an imperfect science, but it should be a factor in how you assess the difficulty and true cost in covering a particular load.

Be sure to keep track of this statistic over a considerable amount of time. Carrier sales may have good fortune and make a one-call close.  This may result in them dancing through the office, bragging about what they just accomplished. But using average number of calls as a statistic to evaluate lane quality is a one where you want a lot of data on.

How many hours does a load stay on the board?

Let’s face it; some lanes are just tough to cover for your freight brokerage. You may have picked up a customer who runs these tough lanes. This customer they could actually be running your carrier sales team into the ground. Asking carrier sales to devote a ton of effort into covering a really tough lane, over and over, is tough on morale. It’s also going to be tough on their commission. Every freight broker has to use their own judgement.

But if your carrier sales team doesn’t have the right carrier relationships, and it’s taking too much effort to cover a tough lane, it may be best to gracefully decline that customer’s freight in the future. Be sure and pull numbers from your freight broker software to be sure you’re making a decision based on math, not mood. Tempers can flair between frantic calls to carriers. If you’re going to run a profitable freight brokerage, you need to base your decisions on sound logic and math.

 

How many carriers can you realistically estimate could have a truck for you?

Log into your freight broker software and run down the listing of your carriers who service the region of your potential customer. Now, you may be in the habit of telling yourself, “Oh, Big Star Trucking has trucks down there all the time”. Even though they’ve come up empty for you 7 out of the last 10 loads. Sure, they bailed you out once. But think about that their general batting average, or success rate, has been for you. Don’t get into bad habits of irrational reassurance. For example, telling yourself that, “because they had a truck for you one time, that they’ll be able to cover a low-margin load for a tough customer”. If the load sits on the board until 2pm and takes 100 calls to cover, is it really worth it.

At some point, the margin does not justify the effort it takes to cover the lane.

 

Does the shipper make your life a living hell for your freight brokerage?

You actually haven’t missed a pickup yet in 65 loads. You’d think that’s an fair start to your track record. Sure, you’re wouldn’t qualify as an eBay power seller, but your freight broker software has your operations team on top of every load.

Then you post one load to a load board and your shipper sees this. And they flip out. A customer start questioning your abilities on every phone call. Then request updates every 15 minutes. Finally, a request is put in for automated updates from your internal freight broker software. Have they lost all faith in your freight brokerage’s ability to do your job? What the heck?

What to do next

You’ll need to work to restore this shippers confidence. Figure out a way to track the amount of time your team is spending on managing this relationship. Weigh the time spent to service the client against the margin made per load. 20 percent of your customer base will account for 80% of your revenue in many instances. You should have a sense for how many loads your shipper is moving. It may change the way you devote time and effort towards servicing this customer.

Take some time to forecast out what your expected account penetration could be for each shipper with a high volume of freight. The short term pain of managing a high-maintenance shipper must be managed against the long term potential and expected lifetime value of each customer.

 

Manage your freight remotely. Complete visibility to your transportation supply chain is as close as your phone, tablet or computer. Freightflow freight broker software is the most easy-to-use freight broker software available today. The best part? It’s completely free to try. Don’t wait. Get started today with your no obligation, 100% free trial.