The Carrier Perspective: Q&A with Dan Cushman

Related article: The 12 Best Practices of Freight Bidding

This article is available for re-print with attribution. If you would like more information or an interview, please contact Keri McManus, (919) 855-5516.

Werner Enterprises, Inc. is a premier transportation and logistics company, with coverage throughout the United States, Canada, Mexico and China. Werner is among the five largest truckload carriers in the United States, with a fleet consisting of more than 9,000 tractors, in excess of 25,000 trailers, and more than 14,000 employees and independent contractors.

Werner's service offerings include freight management, truck brokerage, intermodal, load/mode/network optimization, domestic and international freight forwarding, and U.S. Customs Brokerage services, as well as serving as a licensed NVOCC, non-vessel operating common carrier.

The Supply Chain Consortium asked Dan Cushman, Werner’s Senior Executive Vice President and Chief Marketing Officer, to provide a carrier’s perspective on the current state of the market, what makes for a successful bid, and his big-picture perspective on transportation-related issues that may be looming on the horizon.

Dan Cushman, Senior Executive Vice President and Chief Marketing Officer, Werner Enterprises

Q: There is a perception that now is a great time to send freight out for bid, but preliminary economic results for the second quarter suggest things may be heating up again. What is your opinion of where the transportation industry has been in the recent past, the current state of supply and demand, and where it is going in the next few quarters?

Cushman: Werner saw a huge increase in bid activity in the first quarter. The second quarter was a little slower. I'd break down the mindset of customers into three categories:
1) Customers who followed their normal bid timeline and clearly stated that this was what they were doing;
2) Customers who put out a bid because they felt the timing was right to get a rate reduction;
3) Customers came to us and said they didn't want to bid because they didn't want to take advantage of the marketplace so asked if we would consider extending existing rates so that we both would win.

As for where things are going in the next few quarters, based on my observation, capacity has tightened a bit and some customers haven't experienced the real rate savings they thought they would. I think (the RFPs) will slow down.

Q: Was there a significant increase in bid requests for the first half of 2007 and have you gotten a read on RFPs for the second half?

Cushman: Werner’s bid volume was nearly double in the first half of 2007 compared to previous years. The bid volume has slowed to more normal levels recently.

Q: Does your pricing department currently have a larger-than-normal backlog?

Cushman: We do not have a bid backlog. But keep in mind that some or most customers do not give a carrier that option. They say “respond timely or you won't be considered.” In those cases, you have to evaluate the likelihood of success and your available manpower. You may "no-bid."

Q: Your team participates in hundreds of bids every year. What are the common threads for the ones that are conducted and implemented very well?

Cushman: The most successful bids are done with a lot of planning and thought ahead of time, along with follow-up and dialogue after the bid has been submitted. When we tell a shipper what's important to us, and the shipper is clear what's important to them, we both succeed. It is also important to take into account capacity, service, and partnerships...not just rate. We see a lot of bids made up of "paper rates."

Q: In a similar vein, are there any win-win enablers that a company can stipulate in an RFP which allow a carrier to confidently and aggressively bid on the business?

Cushman: Like I said, if we clearly understand the requirements of the business, and both the shipper and carrier are able to express our needs, both can be successful.

Q: Conversely, what are the RFQ don'ts or red flags from the carrier perspective?

Cushman: RFPs with poor FSC (fuel surcharge) or accessorial programs, or bids with unrealistic requirements, are very tough to deal with. In many cases, Werner will choose not to bid. If we do bid, we will adjust our rates to compensate for those factors while other carriers might not; therefore, our chances will diminish at the time the business is awarded.

We have also found that over time, the carriers who signed up for the business without properly considering those factors come back and ask for a rate increase, or back out of the business altogether. The costs are there...period.

Q: The results of the Supply Chain Consortium’s Hot Topic survey on Freight Bidding indicate that over half (53%) of all respondents do not allow a carrier to broker any shipments. Understanding that there are some legitimate reasons for this regarding loads that originate internationally, what does this do to a carrier’s rates and on-time performance?

Cushman: If a shipper does not let their carrier broker freight, then they limit the carrier’s opportunity to find better options, and it does impact cost and service. If a shipper has 10 loads a day outbound from an area and says "all or none," the carrier may have to build in deadhead. That is an increase in cost. Also, being able to broker that load with a partner carrier not only can eliminate empty miles, but the driver is there and available, positioning us for success on service.

Q: Speaking of on-time service, the same survey shows that shippers place more emphasis on a carrier’s on-time performance than on its rates. Care to comment on this?

Cushman: I would not agree with this. I think shippers would tell you, "All of the carriers we allow to bid are very good service providers." So that being said, price is a huge factor. I do believe that shippers get to the point that they will not allow poor service carriers to bid, but once they are allowed to bid, I think this factor is neutralized.

Q: Finally, the transportation industry is so dynamic. What are the new opportunities, service offerings, and potential pitfalls that shippers need to know about right now?

Cushman: I think shippers need to very carefully choose their carrier providers. There are a lot of changes in the industry. Shippers need service providers that will be there and are consistent in terms of service and rates and new service offerings.

Shippers pay carriers not just to move freight but also to keep them abreast of challenges and opportunities and to improve service and maintain and even cut costs. We have seen driver challenges, new engine cost and performance challenges, and H.O.S. (Hours of Service) changes and challenges. I am told that security and driver qualifications may become the hottest issue--potentially greater than any we have seen thus far.

Partner with a carrier that will help you navigate through these issues and not just ask you to solve them for yourself or take rate increases to make them go away. We all have to become more efficient and understanding of each other’s needs over the course of time. There will be extended periods where the shippers hold the cards, and other stretches where the carriers hold the cards. Both need to do so with dignity.

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The Supply Chain Consortium's survey of manufacturers, wholesalers and retailers on their freight bidding policy created many insights into how to do it right. Read the 12 Best Practices of Freight Bidding.

 

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