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Supply Chain Solutions: Mix and match contracts and brokers

One capacity management strategy advocated by the experts is to use a mix of contracts and spot market rates.

Given the current volatility in supply chains, trying to forecast contract volumes and rates over longer periods of time is a risky proposition. Plus, a mixed approach makes it easier to manage a large number of carriers.

“I wouldn’t put everything on spot, and I wouldn’t put everything on contract,” says Kenny Lund, executive vice president at Allen Lund Company, LLC, BB #:107465 headquartered in La Canada, CA. “You can’t put all your eggs in one basket with the carriers because there are too many to have to deal with.”

He suggests establishing strategic relationships with reputable produce-focused brokers, just like they do with asset-based carriers.

Working with a broker helps shippers gain access to the many small trucking lines and independent drivers in the industry. The broker can also provide transportation management services well beyond load matching.

Gail Rutkowski, executive director for the National Shippers Strategic Transportation Council, agrees that relying on reliable brokers can give shippers access to carriers and capacity that would otherwise be invisible.

“Brokers play well in the small carrier market between one and 20 units that you don’t have time to pursue,” Rutkowski says. “Call your first or second asset-based carrier. If they can’t handle your load, throw it over to a broker and let them make the calls to move your freight.”

With more carriers establishing brokerage divisions, produce shippers can gain access to both purchase options under a single roof. Existing relationships can be expanded to provide greater access to
refrigerated capacity.

“Working with pure asset-based carriers is not going to get it done for you in the perishables world,” says Ryan Carter, president of Scotlynn USA Division Inc. BB #:263408 and Scotlynn Transport LLC.

“Working with transportation providers that offer a hybrid solution puts assets behind your shipments but also give you flexibility. When production ramps up or shifts to another location, you can bring in extra trucks as needed.”

No easy solution
The capacity shortage is a real phenomenon, driven by too few drivers and too much driver turnover, equipment availability issues, and productivity reducing regulation, dock delays, and road congestion.

Overcoming the problem will take time, effort, and investment.

“There is no silver bullet capacity strategy in the cyclical, dynamic produce industry,” Rutkowski cautions. “It’s hard to haul produce. If shippers want drivers to move the freight, they need to start by treating drivers as professionals.”

Building upon this foundation, shippers must take multiple steps to ensure that fresh produce makes it swiftly to store shelves.

Increasing driver pay, improving work-life balance, adding new equipment, mixing contract and spot rates, and reducing dwell times are appropriate tactics to address the capacity conundrum that isn’t going away anytime soon.

This is an excerpt from the Supply Chain Solutions department in the January/February 2022 issue of Produce Blueprints Magazine. Click here to read the whole issue. 

Dr. Brian Gibson is executive director of Auburn University’s Center for Supply Chain Innovation and a former logistics manager.