Proceedings of the 2008 Industrial Engineering Research Conference
J. Fowler and S. Mason, eds.
Developing a Qualification Process for Transportation Logistics
Providers
Maria E. Mayorga and Derek C. Mrozik
Department of Industrial Engineering
Clemson University, Clemson, SC 29634-0920, USA
Abstract
In order to ensure quality it is important that a firm track all processes, from manufacturing to external suppliers.
Since most firms lack control over their suppliers’ practices, they must perform quality audits or pre-qualify
suppliers. In an industry example, we found that transportation logistics providers were not held to the same quality
standards as direct material providers. In this study, we develop a qualification process for transportation logistics
providers. We present a process which uses guidelines of Japanese standards of quality and use empirical evidence
to develop the possible metrics to be used in the qualification process.
Keywords
Transportation, Logistics, Qualification Process
1. Motivation & Problem Statement
In recent years many industries have placed an increased emphasis on quality, as can be observed by the instatement
of six sigma practices throughout manufacturing floors, retail warehouses and even hospitals [1]. In a recent
industry case the question of quality was brought to a logistics transportation team: “How are your transportation
logistics providers qualified?” The team had no answer. This industry leader with quality certifications and ISO
9000 standards throughout every other aspect of the business has no current process for qualification of a logistics
provider. The purpose of this research is to identify a process for transportation logistics provider qualifications. In
order to identify a process for transportation logistics provider qualifications the current quality practices should be
assessed. This is done by interviews with various companies on either side of the qualification process. The
interviews are used to determine the best benchmarking techniques for these qualifications. In this study we will
first review current industry practice and some issues in quality improvement. Next, we will discuss the scope of the
project. Then the survey process and results are explained and analyzed. Finally, the resulting qualification factors
are defined.
“Totality of features of a product and service that bear on its ability to satisfy given needs,” is the way that quality is
defined by Dr. Cho at Clemson University. Many companies look to quality as the way to hold a competitive
advantage in their respective industries. Suppliers should be held accountable for quality to ensure full vertical
quality. For example, Dell has improved its supplier quality through their Critical Supplier Partnership Program.
This program improves communication between suppliers and company. This helped to reduce failures by 37% [2].
Companies hold suppliers accountable through many devices such as appraisals, certifications, and contracts. The
industry example given is of an ISO 9000 certified business that also rewards direct materials suppliers of their own
for being certified as well. The transportation procurement department doesn’t have the same certifications because
it was recently established. Some companies choose to use ISO 9000 certification as their standard of quality for
their direct materials suppliers. ISO 9000 certification tends to have a higher cost than direct inspection and
inspection verifies specifications that are specific to the company [3, 4]. For this reason, ISO 9000 may not be the
best choice for transportation logistics qualifications. The transportation logistics provider procurement process can
be generally defined in three steps as seen in table 1.
Table 1: Transportation Logistics Provider Procurement Process [5]
Bid preparation – The defining of the shipping lanes, routes or types of shipments to be bid on as well as the providers that will participate in the
bidding.
Bid execution – The sending and returning of the request for quote (RFQ).
Bid analysis – The final analysis of returned bids and the assigning of awarded entities.
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The qualification process falls within the bid preparation step in Table 1. The remaining steps can be further
reviewed in future studies. Within the qualification processes there are basic capacity and capability questions for
direct material supplier procurement. These common standards answer questions about the part capacity of the plant
and the material availability [6]. Furthermore, qualification standards define the technologies and the compliances
of the supplier. How can they show continuous improvement? What documentations are available? These
questions must be answered in the qualification process even before the bidding begins [7].
The process of supplier qualification that is crucial to the bidding process is somewhat overlooked in the industry
case involving transportation logistics procurement. Qualification of logistics providers may have a very different
process than that of direct materials supplier qualifications. What are the common aspects to this type of
qualification? What allows the team to compare transportation logistics providers correctly?
Quality control in any organization - supplier, buyer, or provider – must start with the commitment to quality. A
1998 empirical study by Millen, Sohal and Moss asked managers about their logistics quality systems. The survey
asked whether the firm had such a quality program, how they defined quality, how the program was implemented
and what improvement measurements are in place [8]. These same types of questions can be asked to the
considered logistics providers. The quality systems that are in place at these providers are the first step to ensuring
quality. A study of Hong Kong’s logistics industry and their quality management systems done by Lai, Lau, and
Cheng defines these motives as quality awareness, customer pressure, and need for improvement. Further
development of this study yielded a “Ten-Step Approach” to a quality management system as shown in Table 2.
The Ten Step System ensures that all aspects of the business are working toward the same quality performance [9].
This generic process is the type of quality management system that should be seen in a logistics provider.
Table 2: Ten Step Approach for QMS [9]
1
2
3
4
5
Management Commitment
Quality Improvement Team
Quality Measurement (Standards)
Quality Awareness
Manager & Supervisor Training
6
7
8
9
10
Goal Setting
Error Cause Removal
Corrective Action
Recognition Awards
Continuous Improvement
Having a generic process to check for is important to ensuring quality in the logistics providers. In the third step of
the process in Table 2, a standard is used to measure the current quality of the providers. Due to the lack of research
in transportation logistics quality, these standards are not very well defined. This problem can be seen in a study
about the gaps of customer expectations where only half of the variables tested met customer expectations. These
gaps in expectations between providers and customers create a need for the defining of logistics quality standards as
referred to in step three in Table 2 [10].
The lack of these standards can also be seen in the difficulty in benchmarking logistics quality. There are many
different ways to benchmark in logistics such as interviews and research from industry associates and third party
companies. A problem that can be found in these methods is how to make common standards or metrics for
logistics quality comparisons. When standards are set throughout the industry, businesses can use these standards to
find the providers advantage in the industry [11]. Again, by providing these standards, the evaluation of the quality
at a provider will be much more distinguishable. The research shows the multi-tiered approach to evaluating the
quality of a transportation logistics provider. A process of qualification can be derived from the studies discussed
above.
 Initial questions of basic quality processes (Does one exist?)
 Proof of fully integrated company quality plan (Ten Step Approach used?)
 Evaluation of Transportation Logistics Quality Metrics
Refining these processes and defining the transportation Logistics Quality Metrics is the goal of this empirical
study.
2. Significance & Scope
The short term focus of this study is on the qualification of logistics providers of basic truckload (TL) shipments.
These shipments are contracted in various ways. Some companies choose a provider on a city to city basis. Other
companies use zip codes or even regions. While direct materials qualifications involve one provider for one product,
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logistics provider qualifications involve many products and many providers of one or many of those products. Also,
logistics provider qualifications must take into consideration the types of provider available (brokers, owner
operators or asset based). These differences in qualification needs are why the transportation sourcing team is in
need of a separate process for their qualifications than the direct materials process already in place.
The qualification process fits into a larger Quality Control System consisting of three portions as can be seen in
Figure 1. The scope of this research, the initial qualification process is bolded. Furthermore, these qualification
measures can be used to help create a tracking mechanism for the continued quality of these providers. The tracking
of these providers is necessary to determine if termination is necessary and how the termination process must be
implemented.
Figure 1: Quality Control System
The results of this study will play a very large role in the development of the bidding process for the procurement of
transportation logistics providers seen in Figure 2. The qualification processes will be one portion of the criteria
reviewed for each provider in this procurement method. The dotted lines show the connection of the qualification
measures to the portions of the bidding process it most influences. The qualification will be used to determine
which providers receive biding options and will also help in choosing the provider based on quality. These are all
highlighted in Figure 2.
Figure 2: Bidding Process and Quality Control System
3. Current Industry Viewpoints: Survey Implementation
In order to determine the best practice for an Initial Qualification Process for Transportation Logistics Providers a
survey was conducted to find what the current industry standards are for qualifications of this type. Two surveys
were conducted; one for those companies with shipping needs and the other for the actual logistics providers (refer
to our working paper for full survey [12]). The questions were modeled loosely after the survey questions discussed
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in the study by Millen, Sohal and Moss [11]. It was important to find what types of quality systems each of the
companies had, how they define quality and what their transportation quality concerns are.
Many companies of each classification were interviewed. These companies differed in size, type and industry. The
procuring companies are measured in size by the number of providers used, ranging from 1 to 50. The type of
logistics control these had over their operations are classified from “Fully Integrated” to “Out-Sourced” logistics
departments. These companies are a part of the Energy and Automotive Supplier industries. The Logistics
providers surveyed measured in size from 350 to 9000 Trucks and are of the Asset, Owner Operator, and/or 3 rd Party
Provider types. We observe the following results from the survey.
None of the procuring companies had a full qualification process in place. The largest of these companies has
started to develop a scorecard system for their carriers as a tracking mechanism but has yet to implement it and the
second largest does monitor critical to quality metrics but not strictly. Besides these mentions of quality control, the
procuring companies do not have quality in mind when it comes to transportation logistics. The main concern for
the procuring companies was on-time shipments with little concern for quality of their providers beyond
word of mouth. They took the word of their providers as the only indication of quality. Cost was a major concern
as well. This supports the gaps in procuring companies and logistics providers.
The survey results also show that logistics providers seem to track driver retention, safety and on-time
percentages in all the companies’ quality programs. Again, this supports the study by Forslund and the gaps
found between the providers’ and procuring companies’ expectations [10]. The interviews with the logistics
providers had a tone of advertising. Many of the interviewees took the opportunity to boast about their quality
measures. One company was ISO certified. The others all had various degrees of quality control systems. The
largest of these companies had a quality department that developed various quality processes from driving standards
to management goal setting and employee development.
The logistics providers want the chance to prove their quality control through qualification processes but the
procuring companies don’t do that. In one interview, the vice president states, “I would love to see more
qualifications. We would love the chance to prove we can help save our shipper money.” This statement is
referring to the focus on cost by the procuring company. The logistics providers insist that the savings to the
procuring company comes most prominently in the saving passed on by the lack of loss due to quality issues.
If the provider has good quality standards then the procuring company will not have to take on cost due to loss of
shipments. This is a greater savings than the savings just from cost reduction. In order to bridge this gap of thought,
the procuring companies need to utilize the measures already in place by the logistics providers. The next step is to
determine the best qualifying measurements from the information found in the survey.
4. Quality Measurements
Despite the fact that the procuring companies and the logistics providers did not speak of the same metrics of quality
measurement, three measurements can be used to benefit the choice of logistics providers. Driver retention, carrier
safety, and the on-time percentages are three factors that tell of the basic quality within a logistics provider. In this
section, the analysis and background behind each choice and the best way to use these measurements will be
discussed. The definition as used in this context is discussed in Table 3 below.
Table 3: Factors for Quality Measurement
Driver Retention
Carrier Safety
On-Time Percentage
Most commonly measured by Driver Turnover Rate defined as: the total number of drivers that leave the company
divided by the average number of drivers employed over that same year [14].
The overall safety of the carrier including ratings of Accidents, Drivers, Vehicle and Safety Management as defined on
SafeStat by the Federal Motor Carrier Safety Administration [19].
The percentage of shipments that arrive within the time allotted by the procuring company.
The driver retention metric within a logistics provider can provide a lot of information about the quality of the
provider. The truckload industry has been battling a problem with the retention of drivers [13]. This can be
measured by the Driver Turnover Ratio (DTR) defined as the total number of drivers that leave the company divided
by the average number of drivers employed by the company over that same year [14]. The truckload industry has a
very high average DTR of about 130% for larger providers and 96% for smaller providers [15].
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What driver retention means in terms of quality is that the higher the DTR, the less experienced the drivers are.
According to Fox and Stephenson in their Driver Retention Solutions study, “these solutions have the potential to
improve driver satisfaction and loyalty, reduce disruptions and tensions at home caused by job changes, improve
carrier profitability, expedite shipping, and enhance highway safety” [16]. As an example, lower DTR carriers have
drivers that are better trained and seasoned for the job. A driver with less than a year experience with a company
has a better chance of getting in an accident then one with a year or more experience, regardless of previous
experience [16]. The replacement and screening of new drivers can be a costly affair: it costs between $3000 and
$5000 per new driver [14]. These savings in cost can then be passed on to the procuring company. Looking for the
lower DTR providers results in a safer and possibly more cost efficient service. The interviewees boasted of DTRs
of less than 60%. This would be a difficult target for most providers considering the average, but it gives a
procuring company a target to look for.
Quality of transportation logistics providers also depends on the overall safety. Driver retention solutions can only
ensure safety to a certain extent. The safety of a carrier can prove to be the difference in millions of dollars. An
insurance study of trucking accident claims from 1999 to 2002 resulted in a cumulative total of $280 million [16]. It
is obvious that being proactive in the choice of a provider with good safety can help reduce this possibility.
According to Atkinson, the three largest contributor in accidents are fatigue, recklessness and substance abuse, all
driver related [16]. This is again grounds to ensure a proper screening process is in place. Another major reducer of
accidents is the use of technologies that improve safety. In a study of safety technology adoption by Cantor, Corsi
and Grimm, they discovered that the use of technologies seemed to correlate with the size in sales and size in area
covered of the providers [17].
The best way to ensure the safety measures such as screening processes and technologies is through an empirical
questionnaire of the providers in question. However, there is a system to help determine quantitatively which
providers are superior in safety. This system is called SafeStat by the Federal Motor Carrier Safety Administration
(FMCSA). This system assesses the likelihood of having crashes in the near future [18]. The information in this
system is current and historical state and federal data on roadside inspections, crashes, on-site compliance reviews,
and enforcement history. A carrier can be found by name or by DOT number. Once found, an overview of the
safety statistics can be seen. The Safety Evaluation Areas (SEAs) are accident, driver, vehicle, and Safety
management. These SEAs are considered to be bad if over 75. If two or more are over 75, a SafeStat score is
calculated [19]. A link to the Safety and Fitness Electronic Records system (SAFER) website can be found in the
provider profile. This system can provide you with a carrier snapshot including insurance information and
inspection safety information [20]. Using these tools and asking the right questions concerning the safety
technologies and screening process can help a procuring company choose the most qualified carrier based on these
safety measures.
The final measurement of quality to discuss is the on-time percentage. The time pressures in the trucking industry
are getting no easier [21]. This constraint was the only constraint talked about by the procuring companies as a
quality metric. Late shipments can be the source of lost productivity throughout the entire supply chain. There is no
question why this measurement is taken so seriously. In a much more time constrained less then truckload industry,
providers are guaranteeing on-time shipments. The money back guarantee is not what the procuring companies are
excited about, it is the peace of mind their shipment will be there when asked for [22]. Even though the cost of full
truckload shipments make guarantees unreasonable, this concept is important to understand. The cost of a late
shipment results in much more then the transportation dollars [22].
Unfortunately, tracking the on-time percentages of transportation logistics providers is much more feasible once the
provider is delivering loads for the company. How can you track the previous shipping records of a provider? The
best ways are through references such as other companies that may have similar shipping needs. This can be time
consuming especially for the initial qualifications. The procuring companies surveyed used contracts that panelized
those that broke the standards required. In order to find the best quality providers in this area, it requires a
determination of the standards that the procuring company is in need of and they need to find the provider that has
the percentages to match.
5. Conclusions
Through this study an initial qualification process for transportation providers was defined. The surveys provided a
basis of what each side of the process was looking for in terms of quality. By analyzing the responses a collection of
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quality measurements were determined. Driver retention, overall safety, and on-time percentage were the
measurements that best exemplify the overall initial quality of transportation logistics providers. These
measurements were defined and explained and then the process of identifying each for the specific logistics provider
was explained. The hope is that these measurements and corresponding processes of collection can be used by a
procuring company to initially qualify their providers.
Acknowledgements
This work is part of an ongoing investigation for Derek Mrozik’s undergraduate honor’s thesis. It was made
possible, in part, due to his participation in the Departmental Honors Program of the Clemson University Calhoun
Honors College which promotes advanced learning and further knowledge in specific areas of undergraduate thesis.
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