Is Your Transportation at Its Best 2011

Is Your TransportationAt Its Best?The Top 10 Transportation Management Best Practices

nulogxTransportation Management Solutions

WHITEPAPERJANUARY 2010

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX

FACILITATOR

Scott Irvine, VP Business Development, Nulogx Inc.

CONTRIBUTORS

Gary Breininger, President, Breininger AssociatesRob Fenwick, VP Transportation, Maple Leaf Consumer FoodsSylvie Messier, Corporate Transportation & Customs Manager,Ipex Management Inc.

Doug Payne, President & COO, Nulogx Inc. Alan Saipe, President, Supply Chain Surveys Inc.Jorge Villalobos, National Transportation Manager, Acklands-Grainger Inc.

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX PAGE 1

Is Your Transportation At Its Best?The Top 10 Transportation Management Best Practices

As your business grows, it’s only natural that it becomes more complex and challenging to manage. Your transportation processes are no different. Freight costs can represent a significant component of your supply chain – often around 5-7% of sales for manufacturing, retail and wholesale/distribution companies. For many firms the fact is this responsibility is not managed as well as it could be — which means fertile ground for significant improvements.

Freight costs can represent a significant component of your supply chain — often around 5-7% of sales for manufacturing, retail and wholesale/distribution companies. For many firms the fact is this responsibility is not managed as well as it could be — which means fertile ground for significant improvements.

Here’s what the best in the business are doing to succeed. Typically, they have significant freight spends (annual budgets greater than $10 million). But that doesn’t mean if your operation and budget are smaller there’s not a lot to learn—and many good reasons to follow their lead.

1. Pay Attention (Or, Pay More For Your Freight)What you’re overlooking may be costing you more than it should. Much more. One of the biggest mistakes companies make is to assume that everything is in order because their transportation costs are in line with past experience. “Sales are up 10%, so transportation will be up 10%” is a usual approach to managing this function. “Not necessarily so”, say best practice leaders.

Understanding the strategic and cost implications of your company’s transportation operations—then forming and implementing a comprehensive transportation plan—can play an important part in your success.

And most importantly, pay attention to your customers!

What you are overlooking may be costing you more than it should.


2. Measure. Monitor. ManageYou can’t manage what you can’t measure. And today, most Transportation Managers are missing the timely and accurate information they need to track trends, identify problems and take action proactively. That’s because the spartan and much-delayed data pulled from an Accounts Payable or ERP system does not typically provide the right numbers in time to make a significant difference.

To capture meaningful data within an actionable time frame, some sort of business intelligence system is required at a minimum. This could range from a Freight Auditing Solution, to a Data Warehouse linked to an ERP application, or most comprehensively to a full blown Transportation Management System.

Such a system supports and drives management decisions by collecting accurate data, consolidating it and delivering as close to real time feedback as possible. So, a Transportation Manager can take confident action knowing what factors (eg routing guide compliance, fuel surcharges, accessorial charges, weights and shipment counts) are changing in the mix—and why—without spending hours, if not days, extracting data and creating complex spreadsheets.

3. Align Transportation Strategy with Corporate GoalsIs your company’s success dependent on customer service and speed to market? Or, on strict cost containment and price competitiveness? The business you’re in, and the role shipping plays within your operations, should directly shape your transportation strategy.

With an appropriate transportation strategy in place, all involved in making day-to-day operating decisions will understand the company’s goals and priorities—and make the right calls. For example, it may make sense to spend hundreds of dollars extra for a faster level of service if the result is a reduction in inventory worth thousands of dollars. Alternatively, it probably does not make sense to use expedited road carriers for stock transfers when intermodal service would meet delivery requirements.

You can’t manage what you can’t measure.

Working effectively with your carriers takes strong relationships.


4. Strong Relationships Are Worth More Than MoneyFor most shippers, getting good value means building a customized and integrated solution consisting of multiple modes and carriers. Doing this well requires developing excellent relationships with your carriers and understanding the relative strengths and weaknesses of each so you build the best network for your needs.

Also, as you are building your solution, your logistics providers should be customizing their solutions to meet your needs too. Good ones will understand your business and work to develop process improvements that benefit both your operation and theirs. And when things go wrong, it is far easier to fix the service with the current provider than replace them. Building your network, and working effectively with your carriers takes strong relationships based on mutual trust and open communication. Good relationships such as these extend far beyond the bottom line.

5. Tender Freight On A Regular Basis (Controlling Cost and Quality)Yes, good working relationships with your carriers are extremely valuable. But you still need to pay a fair rate for the service you are receiving. The only way to know for certain, is to tender (or RFP, Request for Proposal) all of your freight—though not necessarily all at the same time. The frequency that you do this will depend on a number of factors such as market conditions, changing operating conditions and corporate procurement policies.

A structured and disciplined procurement event will ensure that carriers put forward their most competitive proposal. It is important to bundle as much similar freight as possible into your bid (a company-wide aggregation) so carriers are bidding on the largest opportunity possible. This may require aligning contracts to expire either at the same time, or on a staged basis depending on your scope of operations and procurement strategy. Provide honest and accurate information on your shipping requirements and patterns. It is important to note that the intent should be to get “fair” rates from carriers. (Proposed rates that do not reflect your actual operating conditions, or that are not compensatory, can ultimately result in poor service and additional costs that extend well beyond dollars saved on cheap transportation.) Keep in mind, changing providers can cause disruptions in your supply chain. So frequent switching is not recommended unless there are significant service or cost issues.

Thankfully there are systems available to assist in this.

In reality, most companies don’t tender their freight as often as they should.


In reality, most companies do not tender freight as often as they should – mostly because bids are very complex and time consuming. Evaluating and ranking each bid’s impact on your business, and ultimately selecting the right mix of carriers could require an enormous number of ‘What If?’ scenarios. Thankfully there are systems available to assist in this analysis.

Good transportation managers are adept at negotiating well with carriers to secure competitive contract rates. However “great” transportation managers will also seek to understand the detailed accessorial charges that might increase overall costs, and work to find opportunities to reduce or eliminate the cost of variable, seasonal or incidental charges that may result.

Another complexity, is actually knowing if you saved any money as a result of your bid. With so many changing factors it can be tough to tell if your changing transportation expenses are due to good negotiations or changes in volume, distance travelled, or accessorial charges.

The good news is that the same systems that can help you analyze the bids, can also be very helpful in providing ongoing monitoring and ultimately determine if you achieved your objective.

6. Create A Corporate Routing Guide—And Stick To ItHaving tendered, and selected your transportation partner(s), actualizing your new found benefits relies on creating a Corporate Routing Guide —and complying with it. National, and regional, freight managers use the Routing Guide to determine which carrier is used for a particular shipment. For some companies this takes a shift in operations at a minimum, and a change in culture more broadly. If freight managers stray from the guide “leakage” occurs; your company won’t ship the volume it has promised its carriers, so in turn it doesn’t qualify for the negotiated volume discounts.

Large companies, in particular those with multiple shipping locations and a large number of freight users, will need to invest time educating and informing their internal stakeholders on optimal transportation practices. In addition, these users will need a comprehensive set of tools to assist them in making the correct carrier choice and ensure the delivery is made in the most cost effective way. In addition to routing guides, these tools could include standardized freight reports, process manuals, as well as rating engines and potentially a Transportation Management System.

Routing Guide compliance is important because transportation companies will often be more responsive with both price and service proposals to shippers

If freight managers stray from their routing guide, leakage occurs.


that represent a larger share of their business. Therefore consolidating your spend with a core carrier program often results in both better service and better prices. In addition, LTL and Small Parcel carriers with fixed networks generate economies of scale when they channel large volumes of freight through their networks, which can be passed on to their preferred/high volume customers as discounts.

7. Audit Every Carrier Invoice (The Devil is in the Details)The simplest way to drive out 2-5% of your freight costs is to audit your invoices. That’s because this fast and furious business is rife with billing mistakes. According to a recent CITA benchmarking study, more than 14% of shippers surveyed stated that more than 5% of their LTL and TL invoices contained errors, while more than 50% of LTL shippers reported error rates of greater than 1%. Incorrect weights, inappropriate contract rates, duplicate invoices, missed consolidations, and unapproved accessorial charges are a few errors (unintentional or otherwise) that run up your bills.

While auditing can be done manually, rating shipments can be mindboggling. The most efficient way to measure and monitor activities is with a computerized Audit System, or Transportation Management System (TMS)—your own, or outsourced. These systems can capture every detail of every shipment in a database for review and analysis. Such a system may not only pay for itself by generating savings—every invoice is compared to the contract—once implemented it becomes a strategic management tool: providing analytics and insight into your transportation activities.

8. Eliminate Manual Processing (Benefit from TMS & EDI)Increasing the efficiency and effectiveness of your transportation operations is key to your success. One option to accomplish this is using a Transportation Management System that leverages 2-way electronic information exchanges such as EDI (Carrier <-> Shipper). Another option is an Audit System that receives electronic invoices—streamlining work and eliminating manual processes. Such systems can rapidly and seamlessly create load plans, select carriers, rate and tender shipments, audit invoices and more. In a recent case study, the efforts of 3 people optimizing loads and managing shipments, was done by a new TMS in a 5 minute daily routine; with superior results—saving the company $250,000 in annual freight costs alone.

While it may never be possible to completely replace all manual aspects, leaders continually move in that direction. In the most productive systems

In a recent case study, the efforts of 3 people working all day, every day, to optimize loading and shipping was done by a new TMS in 5 minutes with superior results.

The devil is in the details – Audit every invoice.


80% or more of carrier communications is electronic. Making that happen may require shifting the burden of data input to your carriers and vendors. With a web-based TMS, you can direct both your carriers and possibly vendors shipping to you to a web page where they are responsible for entering all required information. While rewarding, implementing such a system on your own can be difficult and time consuming. An option is to partner with a provider that has pre-existing connections to carriers, specialized resources and industry expertise.

9. Optimize Everything: Shipments and Carriers (Baby Steps to Perfection)To optimize everything, a Transportation Management System (TMS) is an absolute necessity. In the best case scenario, your Enterprise Resource Planning (ERP) system will interface directly with your TMS and your Warehouse Management System. This level of systems integration provides strategic, planning, cost and operational benefits. With the myriad of rates, modes and lanes it is difficult to know which carrier is the best choice for any given shipment. Charges can vary based on weight, destination and service level required. An integrated system will help you capture, analyze and fine tune all aspects of your shipping operations on a daily and/or shipment-by-shipment basis.

The key in transportation is to consolidate shipments as much as possible – the larger the shipment, the lower the relative cost. There are numerous consolidate strategies – some are as simple as grouping same Origin-Destination shipments together, others include building a multi-stop truck load, or can be even more complex like setting up a consolidation point, cross dock or pool point operation. These processes are very complex, and computer dependent. The bottom line however, such a solution can generate freight savings of 5 – 15%.

To optimize everything, a TMS is an absolute necessity.


10. Continuous Improvement (Test. Learn. Integrate. Repeat)Best practice leaders focus on process improvements wherever they can be found. At this level of refinement, your greatest strength is an open mind—a willingness to ask ‘What If?’— to challenge ‘Because we’ve always done it that way.’ Nothing is sacred. A few of the popular areas where leading companies are finding improvements are:

• Managed In-Bound Programs• Network Modeling/Review• Consolidation Strategies • Multi-shipper Collaboration• Cube and Load Maximization• Customer Cost-to-Serve Analysis• Modal Alternatives

As optimization strategies like these become more and more complex, there is an increasing need for data analysis and systems to support learning and understanding, and in executing on identified opportunities.

Given the interdependent nature of the business, such improvements often happen in collaboration with internal departments (eg marketing & production), logistics providers, or other supply chain partners. Their input can be very valuable—sparking new ideas and uncovering hidden opportunities.

An objective and candid self-assessment of your current Transportation Management practices is the starting point for determining the potential for your company to improve.

How do your processes stack up?An objective and candid self-assessment of your current Transportation Management practices is the starting point for determining the potential for your company to improve the productivity of this function.

Cost reductions in the neighborhood of 20% are not unheard of, all of this flowing directly to the bottom line.


Helping You Be Your Best: These 10 best practices in transportation management have been compiled by Nulogx through discussions with a number of industry leading Transportation Managers and consultants. Nulogx is a Canadian-based leader in North American transportation management solutions, and has distinguished itself by providing unparalleled insight, and best-in-class transportation solutions, to over 100 North American shipping clients. The end result: improving clients’ transportation processes and reducing costs.

Nulogx delivers unprecedented levels of service to North American shippers through the combined value of a best-in-class TMS Application, expert Managed Services, and the largest Freight Audit and Payment service in Canada. Nulogx’s business model is “Save As You Go”. There is minimal up-front investment in systems, staff or other resources—so you generate savings almost immediately. Its transaction-based pricing is quickly off-set by freight savings, creating an instantaneous and low-risk ROI for your company.

Contact Us:To learn more about how your company can implement Transportation Best Practices and directly benefit from working with Nulogx, contact Scott Irvine, VP Business Development at [email protected] or call 905.486.1162 x 208

http://www.nulogx.comhttp://www.cgfi.ca

nulogx

SPECIAL LIMITED TIME OFFER:For a limited time Nulogx is offering qualified companies a free benchmark of their shipping costs against the CGFI index. By doing this you will learn how your costs compare to the market in general, as well as the source of this variance (e.g. carriers, regions, origins).

With one simple and easy assessment you will have the ability to gain insight into potentially large cost savings opportunities.

Request yours here: http://www.nulogx.com/transportation-assessment.html

Documents

Is Your Transportation at Its Best 2011