The most well designed routing guides are going to fail. Even seasoned supply chain teams working with a roster of reliable service providers are going to design routing guide failures into their transportation execution strategy. This article discusses three common pitfalls that create gaps in routing guides in order to highlight the need to develop a plan to secure extra capacity at times – specifically about five percent of the time for the most well run supply chains.
The actual point is to suggest that there is an unfilled space between the end of the routing guide and the auction system that deserves a strategic design. Even a quick review of these pitfalls should give your team an idea as to how many times per year you or your customers will need to source alternative capacity.
The first common pitfall is that shipment volume awards are issued annually, but demand fluctuates daily and weekly – annual award vs. weekly demand and capacity. Consumers do not always buy the same amount of product on the same day spaced out evenly throughout the year. Therefore buyers do not order the same amount of inventory to be delivered on the same days spaced evenly throughout the week or year. Generally, the estimated annual volume is divided by 52 to forecast weekly demand. However, we’ve all experienced that the math isn’t always that easy – customers don’t always smooth their orders the way shippers and carriers balance their routing guides. Wal-mart is notorious for ordering their entire week’s worth of product on the same day. So the shipper knows that on average there will be 21 shipments on that week, and secures carriers to give them 3 trucks per day for 7 days, then the customer asks for all 21 to be delivered on Monday – meaning you need 21 trucks picking on Sunday, when drivers are resetting their hours of service and watching the game. Carriers are left with no choice but to say “I ain’t got 21 trucks today, but I can give you the 3 that I committed.” This is a perfectly executed routing guide.
The second common pitfall – albeit completely reasonable – is 95% tender acceptance – also known as compliance to award. The range is actually somewhere in the low to mid 90’s depending on the individual company, but whatever it is, it will happen at the least convenient times. Look, 95% is an A+ on any student’s report card just as it is on any carrier’s scorecard. It’s a really good number, we know it’s impossible to be perfect, but, we want you to be really close, like 95% of the time — you’ll get into good colleges and get steady business from your shippers. If you are in the 95th percentile for just about anything you do in life, you are best in class. However, it doesn’t change the fact that it means you’ll have institutionalized 5,000 rejected shipments for every 100,000 loads. Five thousand times that alternative capacity needs to be sourced. You’ve got 5,000 problems but compliance to award ain’t one. This is a perfectly executed routing guide.
The third common pitfall is the carrier’s standard requirement to provide 10% more capacity than their annual commitment during busy times of year. That’s like putting 10% more water into a glass that is already full. Yet, it is built into the master transportation agreement, and agreed upon by all parties, as if it were actually executable for the purpose of just saying that we have a perfectly executed routing guide. Most shippers are busy at the same times of year in any vertical market. Beverages are busier during the summertime, consumer packaged goods and retail are busier during Q4 – sometimes carriers can balance this with their commitments a little bit. But the reality is that for every 10 customers a carrier works with who requires the 10% surge capacity, the carrier needs 100% more trucks; yet we just write it into the agreement as if it were possible – but it ain’t. This is a perfectly executed routing guide.
Given that these pitfalls are built into the routing guide and partnership strategy, I would argue that the failure doesn’t occur at the level of the load or lane failing, it occurs at the level of the contingency design, or lack thereof. There is a space between routing guide failure and auctioning off thousands of loads that deserves attention. What is the established plan devised to account for the fact that you are going to need routing guide assistance 5-10% of the time? Who is the partnership strategy with? Are there conflicts of interest in the strategy? Is it transparent? Since these difficult loads take the most amount of work, and are the most expensive to move, I would argue that a considerable amount of time be dedicated to the contingency design. This is a perfectly executed routing guide.