Page 67 - FDI Alliance International Magazine Summer 2020 Digital Interactive Issue

THE VALUE OF A SHIPPER

CONSORTIUM

because railroads in certain circumstances have the STB or otherwise, many shippers certainly investment for companies looking for solutions
market power over their shippers unlike the perceive that this would occur based on testimony for their transportation challenges. Many large
diverse playing field seen in the trucking industry. before the STB. companies can have transportation spends in the
When shippers operate in a silo, they typically However, these groups usually have a advances ideas and knowledge to help shippers 100s of millions of dollars. Therefore, it makes
have no one to discuss their transportation transportation committee, or even a rail make strategic choices. It allows shippers This advantage that railroads have can cause Accordingly, trade groups or rail shipper groups sense to become involved in these groups that
issues, ideas, and opportunities with except for committee, that discusses and keeps track of a to share challenges they have resolved and customers to feel they are being treated unfairly can provide some support for these individual can lower these costs and improve their service.
the carriers that are providing them a service in secondary issue that usually centers on one of opportunities they have developed to produce when it comes to rates and service. This companies by allowing them to discuss as a
the first place. This makes conversations with the their members’ highest costs. conversations at the meeting that lead to new perception is certainly widespread amongst rail group. This way an individual shipper feels less
carriers inherently biased when it comes to difficult ideas and solutions in the transportation field that customers who often publicly complain about the vulnerable when these challenges are public.
issues that both parties do not agree on. As a The advantage of this type of transportation would not occur but for this forum. way they are treated by the railroads.
result, many shippers seek strategic collaborative group in a trade association is the members are
relationships by forming consortiums where they all manufacturing or providing the same Shipper and Provider Consortiums Moreover, rail shippers believe that railroads → A FUTURE INVOLVING STRATEGIC
can discuss their transportation service issues to products or commodities making discussions The last type of group that a shipper may get have obtained even more market power COLLABORATIONS AMONG SHIPPER
better understand and resolve these matters. about their transportation experiences more involved in would also include the transportation because the industry has undergone significant GROUPS
relevant. This way, each member can fill the other providers as well. The plus side of this type consolidation since the early eighties. There were Having a forum to discuss specific rail transportation
members in on what is going on in its world and of group is you may create stronger business about 40 Class I railroads in 1980, and now issues is valuable to companies that participate.
→ TYPES OF COLLABORATIVE SHIPPER the challenges and solutions it has found. relationships with your carriers and be able to there are only seven in the US. Many shippers In these groups, they can discuss what is
GROUPS THAT SOLVE INDUSTRY directly resolve issues inside the group. However, and economists believe that this consolidation bothering them with their rail service and see if DANIEL ELLIOTT
CHALLENGES Transportation-Specific Shipper Groups the downside is shippers may feel constrained has led to a duopoly on the eastern and western other companies are having the same problems. FOUNDING PARTNER
There is a wide variety of groups that foster shipper Another type of shipper group is one that deals from complaining about their carriers’ practices halves of the country decreasing the amount of This can lead to guidance on how to handle DANIEL ELLIOTT PLLC
collaboration and help companies navigate their strictly with transportation issues. This type of if they are in the room. competition among large railroads. matters based on others’ experiences and advice
transportation issues, each includes different group can be focused on transportation in one in this setting. It can also lead to a collaborative
players and serves different purposes. industry or include shippers from a wide variety Rail Shipper Groups Foster Open position on an issue that can be presented to
of industries. The advantage of this type of group → RAIL SHIPPERS HAVE A UNIQUE Communication Congress or the STB.
Industry-Specific Shipper Groups is it focuses strictly on transportation issues as RELATIONSHIP WITH THEIR CARRIERS Because of this market power and shippers’
The most common shipper group is usually found opposed to a wide variety of issues that trade I have the most experience in the rail industry need for rail service, many shippers are reluctant These shipper consortiums can raise a common +1 (703) 863 9670
inside a trade association for a specific industry, associations usually cover. where the relationship between railroads and to engage in open communication about rail goal before the appropriate regulator and
like steel, fuel, industrial minerals, or wheat. their customers can be somewhat unique. problems to their economic rail regulator, the hopefully obtain improvements in the law. Most
These trade associations are usually located in For example, the Mercury Group is an annual Surface Transportation Board (STB). They are of these groups have hired experts and lobbyists 2000 Pennsylvania Ave NW Suite
Washington, DC, so they can lobby Congress event hosted by Breakthrough, a transportation Market Power Can Result in Contentious also wary of making complaints in other informal who can help make these changes come about. 7000 Washington, DC 20006
and the pertinent federal regulatory agencies. freight and energy management company, Relations public forums in fear of retaliation by the rail I have watched many shipper consortiums in
Their focus is usually on the primary issues that that provides a platform for its clients to make It is one of the few industries where the provider’s carrier. While railroads deny that they would ever action since I became Chairman of the Surface
occur in their industries like laws and regulations informed, data-driven decisions in their supply relationship can be extremely contentious at times retaliate against a customer for complaining to Transportation Board. I believe they are a valuable danelliottiii@outlook.com
about trade or how their products are made. chain. Using network data, the Mercury Group with its customers. This phenomenon occurs

67. FDI ALLIANCE INTERNATIONAL