HOW HOME DEPOT AND AMERICA’S LARGEST SHIPPERS BUILD GREAT CARRIER RELATIONSHIPS

With transportation prices low and consumer expectations high, The Home Depot and other big U.S. shippers are forging carrier partnerships based more upon predictable service reliability and alignment with corporate objectives than upon sheer short-term dollar savings.

Echoing thoughts expressed by leaders of Walmart, IKEA and the two top U.S. shipper groups, Michelle D. Livingstone, The Home Depot’s vice president of Transportation, says price is not the No. 1 factor in carrier selection.

“We’ve placed a very large emphasis on service, and that’s been our mantra for the last few years,” says Livingstone, who oversees movement of all inbound and outbound shipments for the nation’s largest home improvement retailer, with more than 2,200 U.S. stores.

“We really like to think that we walk our talk with the way we have developed a carrier scorecard to be able to track performance across the different metrics that we’re passionate about,’ says Livingstone, who notes that The Home Depot’s management of domestic carriers closely mirrors how international carriers are handled.

“We are passionate about on-time delivery, we are passionate about booking reliability, and, on the international side, about EDI (electronic data interchange) commitment and compliance,” she says. “And, on the international side, billing accuracy is also one of our metrics.

“Those are the primary ones,” Livingstone adds. “But, of course, there are always the subjective ones that don’t appear on the scorecard, like who really steps up when we’re in need of additional capacity, who brings us innovative ideas, who helps us reduce our costs by identifying areas of opportunity.”

Livingstone says The Home Depot, based in suburban Atlanta, has developed an objective “rack-and-stack” approach to evaluating carrier performance, with domestic and international carrier partners informed weekly as to how they are doing in relation to The Home Depot’s goals and as compared to their competitors.

“There can absolutely be no surprises in terms of if we have a difficult conversation regarding on-time service or any of the components, because everybody knows how they are performing against our target and against their competition,” says Livingstone, who has been a supply-chain executive for more than 30 years and serves on boards of such groups as the Intermodal Transportation Institute of the University of Denver and the environmental-stewardship-focused Coalition for Responsible Transportation.

Wal-Mart Stores Inc., the world’s biggest retailer, with more than 10,000 stores globally, also places an emphasis on partnership when engaging with carriers.

“When Walmart chooses a carrier partnership, we look for companies who provide outstanding service, effective communication, and for a company that will exemplify Walmart’s mission to ‘Save people money so they can live better,’” says Kevin X. Jones, vice president of Inbound Transportation for the Bentonville, Ark.-based mega-retailer.

At IKEA, the world’s largest furniture retailer, with more than 350 stores in 43 countries, carrier collaboration and numerous factors not directly related to cost are keys as well.

“IKEA wants to grow together with suppliers who have a strategic fit, which means we have shared business models and values,” says Mona Astra Liss, U.S. Corporate Public Relations director for the Conshohocken, Pa.-based IKEA North America Services LLC unit of the Swedish company.

“IKEA strives for long-term partnerships with suppliers to secure efficient production and continuous development,” Liss says.

“IKEA is unique in that it owns its entire value chain. IKEA is dedicated to delivering the best product at the best possible price. To support this, IKEA works with a comprehensive value-chain strategy that includes raw material sourcing, transport, product design, packaging, delivery and logistics.”

Consistent with IKEA’s active social initiatives, transportation providers to IKEA are subject to a broad-reaching supplier code.

“IKEA has a world-class code of conduct for suppliers—IWAY (short for IKEA Way)—and a very ambitious verification system,” Liss adds. “IWAY is based on values and principles for human rights, environmental protection, legal compliance and worker safety. IWAY directly applies to all first-tier IKEA suppliers who, in turn, are responsible for ensuring that their sub-suppliers acknowledge, understand and meet the IWAY requirements.”

Service upon which shippers can unfailingly depend is the No. 1 determiner in carrier selection, according to Jonathan Gold, vice president for Supply Chain and Customs Policy at the National Retail Federation, the world’s largest retail trade association, with some 13,000 members in a full spectrum of industry sectors from more than 40 countries.

“The most important factor for shippers of all sizes is the service reliability of the carrier,” Gold says. “Shippers, especially retailers, need a predictable supply chain in order to maintain an efficient supply chain, which includes inventory management.

“This is not limited to vessel arrival time, but all of the other services needed to get the container where it needs to be,” he says. “If one area falters, it impacts the entire supply chain. As such, productivity is another critical issue for shippers to consider when dealing with their carriers.

“While the ocean carriers are moving to larger and larger vessels, there is a question as to whether the ports and other related services are actually prepared to handle those vessels or will we see new problems with getting containers from the port?” Gold continues.

Predictable, reasonable pricing is a significant consideration, too, Gold adds, highlighting that price paid should consistently equate to service delivered.

“Shippers want to know that they are getting actual service levels that they expect,” he says. “Finally, customer service is always a consideration. While carriers are cutting costs to save money, they are sometimes doing this at the expense of customer service to support the shipper.”

Indeed, balancing cost and service is critical, according to Bruce Carlton, president and chief executive officer of The National Industrial Transportation League, the nation’s oldest and largest transportation association, billed as “the Shippers’ Voice since 1907,” with current membership encompassing 700 companies.

“Shippers have always looked to that combination of price and service that fits their needs—and budget,” Carlton says. “Price is just that—how much? For some years now, rates have been depressed; I haven’t heard any shipper complaining about shipping rates in a long time. But the service parameters have become more complex over time.

“Probably the biggest source of friction is missed delivery dates, and the more time-sensitive the commodity, the more friction generated,” Carlton adds. “Many shippers have scorecards on their carriers that rate them on a number of service components: timeliness, damage, information systems and so on.”

Environmental considerations also are important, according to Carlton.

“We’re seeing more shippers—especially the more visible, large shipper accounts—seeking readouts on the carriers’ carbon footprint and other sustainability measures,” he notes.
And there are other concerns that factor into the equation.

“Here in the United States, there is still a mix of information and confusion on container chassis,” Carlton says. “The (ocean) carriers’ transition out of providing chassis for their customers appears to be a work in progress at best. Lastly, shippers are waiting to see if the new global alliances—P3, G6 and CKYHE—will have any consequences for them once they are up and running.

“Shippers and carriers might have an old relationship, but it’s anything but static,” Carlton says. “There are always new elements and new challenges for both.”