TOPIC 3 (Continued)
What you really need to know to optimise your operation
As a road transport Operator, its imperative to understand that income is derived solely from Third-Party Service Delivery - the principal purpose therefore is to provide freight transportation services to Industry. So, let’s begin by analysing the first of 10 challenges which all have profound effects on success in managing human and material resources deployed in road freight transportation.
Road transport is a Third-Party Service Delivery Industry
Unlike other business enterprises, the VALUE component in freight transport is established when the essential requirements for creating time and place convenience, by moving mass over a distance in a public domain (public road), is accomplished.
Freight transport is considered a SERVICE industry because there is NO OTHER VALUE CREATED beyond fulfilling preconceived freight transport expectations for Shippers.
The principal challenge however is whether-or-not it is moved by a dedicated transport service (in-house fleet), or a public service provider (Carrier), is that there are three parties involved. These are:
1) The Shipper (who needs to move the load) is referred to as a “Consignor”
2) The Carrier (who moves the load) is referred to as a "Road Transport Operator”
3) The person (who receives the freight) is known as a Consignee”.
In this instance, a contractual relationship exists between the Shipper and the Carrier - not the “Third-Party” who is the Shipper’s Customer (Consignee) - who is not the Carrier's customer.
The critical elements in this agreement, whether verbal or contractual, is that the Shipper strives to maximise service delivery at the lowest possible cost. While, on the other hand, the Carrier strives to maximise return in a Capital-intensive business. It is therefore a matter of the parties agreeing to conclude a mutually beneficial agreement, accepting that there must be some latitude to address issues arising from servicing the Shipper Client's demands. It is therefore imperative that both parties (Consignor and Carrier) strive to fulfil their Customers’ (Consignees) expectations by executing a mutually beneficial transaction.
Standard deviations to these Shipper/Carrier agreements are set by diligent research into the essential requirements for cost-effective freight movement, mutually beneficial to all three parties. To achieve this, it is imperative for Shippers to include Carriers when negotiating terms and conditions for freight contracts. It is only when this is done that Carriers can provide accurate pricing with lasting benefits for all three parties. Once this stage is reached, it is then up to Carriers to set their compliance mandates for each Shipper, as what might suit one Shipper, may not necessarily be effective or beneficial to the parties in all other situations.
This first discussion in Topic 3, set about questioning whether your existing control system accurately monitors service delivery performance in relation to those set and agreed by all three parties, thus avoiding perceived notions of poor service delivery, which leads to dissatisfied customers and unprofitable/lost business.
What you need to know then as a Carrier: Does your information system set essential criteria for each transportation assignment and monitor critical performance criteria in respect of fulfilling contractual expectations?