Grabbing for the Holy Grail: Using Vested Outsourcing in the LTL Market

Even a casual visitor to this space knows by now that I’ve been thinking, writing and advocating about using the collaborative, outcomes-based methods of Vested Outsourcing for a long time, an effort that reached a milestone earlier this year with the publication of the book by that name and the start-up of this blog.

It’s been a gratifying and rewarding experience, but the most satisfaction really comes from the growing acceptance and implementation of vested principles into actual business practices, and when the theories and ideas of Vested Outsourcing are put into play.

The rubber does appear to meeting the road. Literally, in the case of the less-than-truckload (LTL) transportation segment.

Meet Hank Mullen, president of The Visibility Group of Alpharetta, GA. His company acts as a go-between for shippers and carriers to provide “user-friendly, efficient transportation industry pricing tools” designed to reduce costs, increase profits and improve visibility.

The Visibility Group’s staff has more than 105 years of cumulative experience in the transportation industry, including expertise in freight classifications and sunsetted Interstate Commerce Commission, National Motor Freight Traffic Association, National Classification Committee (now CCSB), National Motor Freight Classification, Department of Transportation and Surface Transportation Board regulations.

The group has 28 years’ experience working for major LTL and small package carriers and smaller regional carriers.

So when Mullen becomes a proponent of Vested Outsourcing as a way to bring rationality to transportation outsourcing, it’s very much time for the industry to take notice.

In a February Logistics Management article on negotiating LTL costs, Mullen wrote about “five golden rules designed to reduce costs for LTL shippers and carriers.” Yes, you guessed it; those five rules are (ahem) none other than Vested Outsourcing’s Five Rules to transform outsourcing!

Mullen wrote that improving service and reducing costs for the shipper and the LTL carrier is the “Holy Grail for logistics and transportation professionals.”

But how do you resolve those seemingly opposing objectives? “We thought of proposing a method founded on space occupied, or a process-based concept that has dimensional shipment size as the basic measurement to determine rates and charges,” he said. In other words, pay for what is used based on the truck space occupied.

Later he came across our research work on contracting logistics and transportation at the University of Tennessee on behalf of the U.S. Air Force. Specifically he came across the Five Rules; he agreed that they make “good sense” for LTL shippers and carriers.

“By ‘vesting,’ the shipper and carrier match supply chain networks, but also mesh business processes right down to choosing insurance, fuel options, shipping schedules, and weight/cube impact of the product,” Mullen says. “The goal is to reduce the carrier risk in dealing with the shipper and reduce costs by aligning processes to optimize freight cost and service in a tough business environment.”

Talking about Rule 1 – Focus on the “What,” not the “How” – Mullen wrote that he learned recently of a partnership between a shipper and a carrier over date and time of shipments “that resulted in fuller trucks making fewer pickups. The benefit was a shared cost reduction of 12 percent – split by both partners.”

That sure sounds like a win-win. While I don’t claim that Vested Outsourcing guarantees you’ll reach the Holy Grail of reduced costs and better transportation service – remember the real Holy Grail of Arthurian legend was never found – it can certainly be the road-map that helps you navigate around the pitfalls and the dysfunction in shipper and carrier relations that’s all too common.

Comments

  1. I have received many comments on the LM article. What I feel is most important is the concept of win-win, or Vested Outsourcing.

    A industry classic is happening as we talk. The National Motor Freight Classification, Commodity Classification Standards Board (CCSB) a group of 6 people,has a pending classification change on shoes. This will increase the basic cost to ship by 50%, or from a class 100 to a class150, for the 2 billion shoes sold last year.

    Shades of Reed-Bulwinkle act. (1948 Reed–Bulwinkle Act, which allowed rate and classification bureaus to set rates without the Sherman Act’s antitrust oversight but still subject to ICC approval) This antitrust was elminated on 1-1-2008. By the way I often refer to this act as the Rocky and Bulwinkle Act due to the funny things our Congress does to the American shippers and public.

    So how does this work in “Vested Outsourcing” Sit down with your carriers and say what can we do to make this go away. There are many ways, just read the article one more time and gain a true partner.

    Hank Mullen

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