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Overview of Chainalytics Model-Based Benchmarking Consortium of Truckload Transportation.

Overview of Chainalytics Model-Based Benchmarking Consortium of Truckload Transportation.

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    Chainalytics Model Based Benchmarking Upload Chainalytics Model Based Benchmarking Upload Presentation Transcript

    • Model-Based Benchmarking Consortium 2010
    • Some of Our Consulting Clients RETAIL FOOD AND BEVERAGE HOME/OFFICE NON-DURABLES HEALTHCARE HOME/OFFICE DURABLES Utilities/ Packaging Auto/Industrial Chemical/Process LSP Telecomm/Media OTHER INDUSTRIES SERVED • 62 of the Fortune 500 • 11 of AMR’s Top 25 Supply Chains • 8 of the World’s 25 Largest Food & Beverage Mfgs • 9 of the Top 15 US Retailers • 5 of the Top 20 Global Forest and Paper Companies • 9 of the Top 10 Consumer Goods Supply Chains., SCDigest
    • Transportation Master Planning Cycle Model-Based Benchmarking
    • Benchmarking is a Critical Step in the Procurement Process Typical Procurement Process, Top 10 Check List: 1. Benchmark your performance 2. Leverage your entire network 3. Leverage your network assets 4. Executive buy-in 5. Provide more information to carriers 6. Multiple Round Bidding 7. Optimize your responses 8. Standardize your charges (keep it simple for carriers) 9. Measure performance 10. Green – Improved efficiency reduces costs No matter what your process is, Benchmarking needs to be included!
    • How do companies benchmark? • Results from Chainalytics polls at public webinars: How Does Your Company Benchmark Transportation Costs? MBBC Members Non-Members Don't benchmark, or don't know 2% 8% Research public information 4% 8% Rely on carriers and service 9% providers 17% Compare with other shippers 72% 14% Measure against last year's rates 13% 53%
    • Logistics Cost – Moving Target Logistics Costs $1,400 $1,200 $1,000 $800 $600 $400 $200 Trans Costs Inv Costs Total Logistics Cost Source: 19th & 20th Annual “State of Logistics Report” - CSCMP
    • “Am I Paying Fair Rates?” In 2003 there was no way to answer that question • Publicly available information was not sufficient – Neither accurate nor timely – Not robust enough to capture idiosyncrasies of the freight • Traditional benchmarking does not capture cost drivers – Database models do not isolate the individual characteristics of the lanes that determine the cost of service – Metrics based approaches such as Activity Based Costing do not capture the impact of external market conditions
    • Model-Based Benchmarking • Chainalytics Created the Model-Based Benchmarking Consortium – A collaborative membership based organization for confidentially sharing transportation rate information for the purpose of benchmarking against market costs • MBBC Goals – Build a representative model of the market – Understand carrier cost drivers – Quantify impact of freight characteristics – Provide a bellwether to validate procurement performance – Identify need and plan procurement – Quantify value for sourcing events
    • Truckload Consortium Membership • Model Statistics Jan 2010 Release – Over $13.8 billion in transportation spend – Nearly 14 million loads – 75 model participants with TL spend ranging from $10M to over $500M – Covers USA, Canada and in and out of Mexico – 7 separate models (Dry, Temp, Intermodal, Flatbed, 3 short haul models) – Equivalent to 5% of the total North American for-hire truckload market Primary Business Sector Membership Freight Spend Food Producers 3% 5% Retail 8% 13% 7% 26% Beverages $0-10M 8% $10-50M Industrial Goods & Services $50-100M 8% Personal & Household 25% $100-250M Goods 32% Other $250-500M 12% 19% $500M+ Forestry and Paper 15% Construction & 19% Materials
    • Building the Models CPL Distance How can we describe this relationship? $ $ 1,028 1,300 703 961 1. Draw a best fit line $ 511 322 2. Write equation for the line (y= ax + b) $ 889 685 $ 1,164 797 Fixed Cost $ 1,059 747 y = 1.0485x + 259.32 per Load $1,600 $ 1,072 621 $ 784 570 $1,400 $ 1,174 874 Variable Cost $1,200 $ 615 398 per Mile $ 1,004 753 $1,000 $ 1,198 913 $800 $ 1,045 897 $ 1,031 670 $600 $ 968 558 $400 $ 736 483 $ 731 469 $200 $ 798 521 $- $ 1,379 998 $ 658 357 250 350 450 550 650 750 850 950 1,050 $ 891 477 $ 904 740 $ 1,035 755
    • Building the Models • Example: Contract Carrier vs.. Spot Market Rate – This can be modeled either as an increase in: • Cost per load (Fixed Cost) or Fixed Cost: Variable Cost: Slope is same, Slope is higher, • Cost per mile (Variable Cost) Intercept is higher Intercept is same y = 1.0485x + 259.32 $1,600 $1,400 $1,200 Both an art and a science $1,000 Engineering the cost of a $800 shipment based on its own $600 characteristics $400 $200 $- 250 350 450 550 650 750 850 950 1,050
    • Building the Models But what about the regional effect? • So far . . . – A shipment from OH to FL will cost as much as FL to OH! • Regional Values – Capture impact of a truck entering / leaving an area – Separates the regional effect from other factors (miles, etc) – Can be estimated by ALL loads in/out of a region – Eliminates need for lane by lane comparisons – Allows estimation of new lanes
    • Building the Models • Regional Value Guidelines – More regions are better – But must have critical mass – Only the relative value matters • Calculating the impact: – Move from OH to FL • $539.11 = 153.17 + 385.41 – Move from FL to OH • $87.01 = 39.91 + 47.10 • Moving South is approximately ~ $452 more per load! In Out Ohio 47.10 153.71 Florida 385.41 39.91
    • Benchmarking Report Output
    • Benchmarking Report Output FUEL SURCHARGE PROGRAM DATA Dry Van Temperature-Controlled Intermodal Flatbed MBBC Reported MBBC Reported MBBC Reported MBBC Reported Base Price in $/Gallon $ 1.131 $ 1.800 $ 1.276 $ 2.000 $ 1.157 $ 1.240 $ 1.223 $ 1.200 Escalator $ 0.058 $ 0.060 $ 0.053 $ 0.050 $ 0.086 $ 0.040 $ 0.057 $ 0.100 Rate Per Mile Increase $ 0.010 $ 0.020 $ 0.010 $ 0.025 $ 0.010 0.50% $ 0.010 $ 0.020 Median Cost of Fuel for the Model $ 2.496 $ 2.496 $ 2.496 $ 2.496 $ 2.496 $ 2.496 $ 2.496 $ 2.496 Average Annual Fuel Surcharge Paid Per Mile $ 0.23 $ 0.22 $ 0.23 $ 0.23 $ 0.15 15.5% $ 0.22 $ 0.24 Fuel surcharge Differential Per Mile $ (0.010) $ (0.005) $ 0.020
    • Benchmarking Report Output Lane-by-Lane Analysis (long haul, dry van): Annual Average Origin Origin Destination Dest Dest Distance Annual Corridor Num Route Equipment Equipment Service Movement Contract Origin City State Country City State Country (miles) Volume Volume Stops Type Type Size Type Type Type Mankato MN US LOVES PARK IL US 347 180 450 1.00 DM D 53 S OB CC PARIS IL US NEWPORT AR US 404 179 190 1.00 DM D 48 S OB CC Lubbock TX US Pasadena TX US 541 178 1485 1.00 DM D 53 S IB CBK Mankato MN US CHICAGO IL US 420 175 773 1.00 DM D 53 S OB CC Annualized Annualized Total CPL paid by Chattanooga TN US WAYCROSS GA US 350 175 175 2.00 DM D 53 S OB CC Fuel Fuel Difference Company (Average Reported Estimated Difference Topeka KS US BARTLETT IL US 549 169 540 1.00 DM D 53 S OB CC Average Average Reported Surcharge Surcharge Annualized Reported CPL + Annual Cost Total CPL Percent Status FULLERTON CA US SUMNER WA US 1,135 167 274 1.00 DM D 48 S OB SM Reported Reported Annual paid by paid by Fuel Annualized Fuel (Includes Fuel (Includes Fuel (Includes Fuel (Includes Fuel Saginaw TX US SAN ANTONIO TX US 275 167 198 1.00 DM D 53 S OB CC CPL CPM Linehaul Cost Company Market Surcharge Surcharge) Surcharge) Surcharge) Surcharge) Surcharge) CLEVELAND OH US WATKINS GLEN NY US 299 164 234 1.00 DM D 53 S IP CC $ 500 $ 1.44 $ 90,000 $ 40 $ 80 $ (40) $ 540 $ 97,164 $ 681 -20.74% BELOW WATKINS GLEN NY US UXBRIDGE MA US 325 161 729 2.00 DM D 53 S OB CC $ 701 $ 1.74 $ 125,546 $ 46 $ 93 $ (47) $ 748 $ 133,840 $ 783 -4.47% BELOW AKRON OH US WHITE MARSH MD US 351 159 226 1.00 Difference D DM 53 S IP CC $ 778 $ 1.44 $ 138,492 $ 62 $ 124 $ (62) $ 840 $ 149,538 $ 931 -9.72% BELOW AKRON OH US Estimated IRVING TX US Estimated 48 $Estimated 1,154 Difference 151 151 Annual Cost 573Percent 100,305 $ 53 1.00 DM D S OB CC $ 525 $ 1.25 $ 91,875 $ 97 $ (48) $ $ 777 -26.25% BELOW Mankato MN US Linehaul Cost Linehaul CPM US MENOMONEE FALLS Annual Linehaul WI 333 Total151CPL $ 450 Difference 715 DM not125,150 $ 53 1.00 (Does D Status S OB CC $ 675 $ 1.93 $ 118,125 $ 40 $ 81 $ (40) $ 787 -9.11% BELOW WORLAND WY US (Does not LAYTON UT US 388 147 244 1.00 DM D (Does not 48 S OB CC $ 725 $ 1.32 $ 122,525 (Does not 63 Cost (Does126 $ (Does (63) $ (Does not 788 include 133,167 $ $ $ not not $ 864 -8.78% BELOW Ogden UT US include Fuel HAYWARD include Fuel US include Fuel 777 $ CA include Fuel $ 314 146 2.00 DM include Fuel Fuel 380,147 Fuel 53 2,135 S D include $ OB CC $ 2,146 $ 1.89 $ 358,406 $ 130 $ 261 (131) 2,276 $ 6.64% ABOVE GAINESVILLE GA US Surcharge) SIDNEY Surcharge) US Surcharge) 521 Surcharge) 1067 OH 145 Surcharge) 628 DM 1.00 Surcharge) D Surcharge) 48 S IP CC $ 597 $ 2.17 $ 99,657 $ 32 $ 63 $ (32) $ $ 104,925 $ 537 16.95% ABOVE NEWARK CA US $ SANTA FE SPRINGS US 601 CA $1.73 $ $ 376 108,229 $ 145 (101) 1802 (18,229) DM 2.00 D BELOW 53 S OB CC $ 542 $ 1.81 $ 88,851 $ 75 69 $ 6 $$ 617 -16.8% $ 101,110 $ 872 -29.31% BELOW $ 791 $ $ 690 2.43 $ 127,343 $ $1.71 $ $ 81 123,474 $ 75 $ 712 $ $ 2,072872 $ 1.7% 140,424 AT$ 923 -5.53% BELOW $ 749 $ $ 806 2.13 $ 119,148 $ $1.49 $ $ 88 143,483 $ 81 $ 7 $ $ (28) (4,991)837 $ -3.5% BELOW 133,100 $ 893 -6.26% BELOW $ 1,674 $ $ 681 1.45 $ 252,797 $ $1.62 $ $ 289 119,110 $ 265 $ 23 $ $ (156) (27,235) 1,963 -22.9% $ BELOW 296,361 $ 1,777 10.44% ABOVE $ 490 $ $ 1.47 $ 706 73,990 $ $2.02 $ $ 38 123,605 $ 77 $ (38) $ $ (31) (5,480)528 $-4.4% 79,757 $BELOW 660 -19.97% BELOW $ 680 $ $ 1.75 $ 737 99,960 $ $1.34 $ $ 45 124,637 $ 89 $ (45) $ $ (12) (2,112)725 $ -1.7% 106,502AT$ 747 -2.98% BELOW $ 839 $ 1.08 $ 1,874 $ 122,494 $ $1.65 $ 89 $ 312,878 $ 179 $ (90) $ $ 273 45,528 928 $ 14.6% ABOVE 135,506 $ 958 -3.16% BELOW $ 474 $1.72 $ 79,152 $ 123 $ 20,505 25.9% ABOVE $ 624 $ 1.20 $ 90,542 $ 60 $ 120 $ (60) $ 684 $ 99,207 $ 764 -10.41% BELOW $ 803 $2.69 $ 131,745 $ (262) $ (42,894) -32.6% BELOW $ 373 $ 0.99 $ 54,102 $ 94 $ 86 $ 8 $ 467 $ 67,732 $ 563 -17.01% BELOW $ 849 $2.61 $ 136,614 $ (58) $ (9,271) -6.8% BELOW $ 812 $2.31 $ 129,146 $ (63) $ (9,998) -7.7% BELOW $ 1,512 $1.31 $ 228,276 $ 162 $ 24,521 10.7% ABOVE $ 583 $1.75 $ 88,088 $ (93) $ (14,098) -16.0% BELOW $ 658 $1.69 $ 96,657 $ 22 $ 3,303 3.4% ABOVE $ 780 $1.00 $ 113,833 $ 59 $ 8,661 7.6% ABOVE $ 644 $1.24 $ 93,353 $ (19) $ (2,811) -3.0% BELOW $ 476 $1.27 $ 69,076 $ (103) $ (14,973) -21.7% BELOW
    • Online Estimators for all Models
    • Online “Batch” Estimator
    • Benchmarking Report Output Market Report -Includes rate trend analysis -Surcharge analysis -Specific studies on relevant topics
    • Customer Comments “We realized what we thought were extremely competitive lanes… were actually well above market. We saved $65,000 annually on only 4 lanes!” “This is vital information to help us determine the most effective procurement strategies for our company.” “We are on target to save 8 Million Dollars in our first year of membership in the MBBC. “Not only do we use it for a sanity check among the transportation group, but we share with executive management, especially in these times. “MBBC has helped us compare our total landed cost to our competitors.” “There is no doubt that we have validated how well the business units are doing… we now have the ability to benchmark internally and externally.” “We got our first report. Addressed just two lanes - saved $150,000!” “We achieved an annual rate reduction of $100,000 with just one carrier”
    • Membership Process • Annual Membership – Includes two (2) model runs (April, October) • Members must provide minimum 12 months data – Historical transaction data every 6 months – We do not „sell‟ the data – members are obligated to contribute data • Reports include: – Lane-by-lane comparisons to market – “Above”, “At” and “Below” market indication – “At” is a 5% band which is +/-2.5% the benchmark rate – Rate Estimator tools for each model – Market analysis report – Optional Summit (visible members, only)
    • Chainalytics Contact: John Schnorf jschnorf@chainalytics.com 770-433-1566
    • Ocean Consortium Membership Model Statistics – December, 2009 Release – 12 exporters and 10 importers – 171,000 TEUs shipped annually – Members‟ spend ranges from under $5M to over $50M – Consumer Goods 42% of membership and 56% of the spend – Major Trade Lanes: Europe, Asia, Latin America and Pacific Over 15% Under 14% $25M Retail $5M 17% 25% Consumer Goods 14% Automotive $10-25M Healthcare $5-10M 14% 43% 33% 25% Industrial Goods
    • LTL Consortium Membership • First Model Q4 2009 – Multiple beta/test models in „06, „07, „08 • 2009 LTL benchmark stats – $405 million in spend – More than 4.5M shipments – 14 companies – 3.15 billion pounds – US market, only – Industries • Retail • Food and Beverage • Consumer Package Goods • Healthcare • Industrial Products