part of the trucking co-op.
Freight co-op negotiates lower costs for businesses
At a time when businesses are experiencing skyrocketing shipping costs – as struggling trucking companies pass their rising costs on to their customers – a handful of Rhode Island businesses are fighting back by banding with other businesses in a national freight cooperative.
The shipping co-op offers a win-win scenario, say both businesses and trucking companies – helping the businesses negotiate in the cutthroat transportation industry and bringing more clients to a contracting trucking industry.
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The Merchant Shippers Cooperative Association, or MESCA, is a member-owned, Maine-based nonprofit cooperative that offers its services to businesses free of charge. MESCA stays in the black by charging commissions to the trucking companies.
With 7,800 customers across the nation and gross annual revenues of more than $76 million, MESCA is one of the largest and fastest growing co-op freight associations in the nation.
Cooperative buying power has traditionally been associated with agricultural and food co-ops. MESCA is applying the old-school business model to the trucking industry, using the volume it can offer trucking companies to get businesses better deals on freight transportation.
“We work a basic quid pro quo – we go out there and use our buying power to get savings for large and small businesses. And we bring business opportunities to the trucking companies that they wouldn’t necessarily uncover themselves,” said James Gunning, vice president of marketing for MESCA. “We save money for the businesses when they ship goods, and we spoon-feed the carriers a nice steady stream of revenue.”
MESCA was formed in 1979 by a group of former trucking executives in Maine who realized businesses could band together to obtain discounts on trucking shipments regardless of volume or season. The association’s cooperative buying power and knowledge of the trucking industry allows its members to save an estimated 10 percent to 40 percent on shipping costs in a notoriously hard-nosed, price-driven industry.
The idea of banding businesses across the nation together in a co-op to battle rising transportation costs has taken off in recent years. The cost of shipping cargo has ballooned recently, fueled by a powder-keg combination: volatile diesel fuel prices, rising fuel taxes and expensive new environmental standards.
Companies in Rhode Island that are MESCA members include Cranston-based Accent Display Co., the sporting apparel chain Olympia Sports, Southworth-Milton Co., Eastern Bearings Co. and E J. Prescott Co.
“They improved our rates with LTL (truckers) by 40 to 45 percent,” said Dana Pelletier, purchasing agent and freight coordinator for E.J. Prescott Co., a water, sewer and drain products distributor with a facility in Warwick. The company’s annual freight account is in excess of $1.5 million.
“MESCA’s rapport with these LTL carriers goes right to the top of the companies. They don’t deal with customer reps, they deal with the big guys, so they get results. If I have a problem, which is not very often, I pick up the phone and the problem gets resolved within a day.”
Aside from negotiating low shipping rates, MESCA’s intimate knowledge of the shipping industry allows it to serve as a consultant for its members. As an example, Gunning said that many manufacturers are saving money by eliminating warehouse inventory and instituting just-in-time shipping.
But just-in-time shipping requires fast – often overnight – transportation of a product, often as much as 1,200 miles away. So MESCA only matches businesses that do just-in-time shipping with carriers that can guarantee they will transport a product halfway across the country in 24 hours, said Gunning.
“They are very much the experts in the transportation industry, we are not. We don’t have our own transportation department, so we really rely on MESCA to supply us with our transportation requirements,” said Alan Perry, vice president of parts operations for Southworth-Milton Co., a Caterpillar dealership. “We absolutely need to provide that transportation service, especially when you’ve got a half-million-dollar machine tied up waiting for a part, you need that reliability.”
Truckers focus on the extra business and the ease that comes with dealing with an association that understands their industry and manages their client relationships.
“They’re not necessarily driving the price down. They’re very price conscious,
they manage the price very well. We like the association because … we find them
easy to do business with. They have been able to bring a significant amount
of business to us at what we consider to be a reasonable price. We profit from
the connection,” said Tom Wager, vice president of international sales for New
England Motor Freight, an Elizabeth, N.J.-based, $300,000 million carrier in
the U.S. Northeast, Quebec and Ontario with a facility in Pawtucket.
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