Logistics Coping Skills For a World of $4 Gas Drew Forte Director, Supply Chain Improvement, FORTE
Poll question: <ul><li>A. They both do a lot of business in north Jersey </li></ul>Courtesy of HBO D… B. They’re afraid of...
D. We all need some good “coping skills” for today’s painful, stressful times.  Courtesy of HBO
Macro-economic conditions have changed <ul><li>Oil prices have doubled in the last two years, and tripled since 2000 </li>...
Macro-economic conditions have changed <ul><li>Customer service expectations  are permanently elevated </li></ul><ul><ul><...
Macro-economic conditions have changed <ul><li>We’ve known the underlying reasons since 2004: </li></ul><ul><ul><li>The fa...
Macro-economic conditions have changed <ul><li>Impact on us in 2008? </li></ul>Courtesy of The Boston Globe Price increase...
Macro-economic conditions have changed <ul><li>Price increases alone can never fully offset higher logistics costs. </li><...
Companies shift to a tactical view of logistics |   #1 Pressure: Increasing freight rates and/or accessorial charges  2008...
7 “Coping Skills” to contain freight costs |   “ Coping Skills” to contain freight costs 7
7 “Coping Skills” to contain freight costs <ul><li>No hub constraints </li></ul><ul><li>Calculate True Total Landed Cost  ...
7 “Coping Skills” to contain freight costs <ul><li>Hub-constrained model </li></ul><ul><li>More dynamic decision making ab...
7 “Coping Skills” to contain freight costs <ul><li>Improved trailer cubing for private/dedicated fleet </li></ul><ul><li>S...
7 “Coping Skills” to contain freight costs <ul><li>Large companies need to have freight costs accrue to department level b...
7 “Coping Skills” to contain freight costs <ul><li>Properly analyze spend </li></ul><ul><li>Practice expressive bidding  <...
7 “Coping Skills” to contain freight costs 5 Figure 5: The Transportation  Management Wheel Source: Aberdeen Group, Januar...
7 “Coping Skills” to contain freight costs <ul><li>Measure, measure, measure! </li></ul><ul><li>Carrier score-carding </li...
7 “Coping Skills” to contain freight costs <ul><li>Don’t drop small carriers – make it easier for them to be compliant </l...
7 “Coping Skills” to contain freight costs |   Audit and pay invoices more efficiently (continued) 7
Don’t forget the bigger picture… |   Don’t forget the bigger picture…
Don’t forget the bigger picture… |   #1 Pressure: Increasing freight rates and/or accessorial charges  2008 #1 Pressure: N...
Don’t forget the bigger picture… |   Transportation management is the linchpin in a comprehensive strategy of supply chain...
Don’t forget the bigger picture… Connectivity Visibility Reliability Agility Efficiency Service Supply chain efficiency an...
Don’t forget the bigger picture… |   Does your TMS play well with others? TMS WMS OMS YMS POS SCV DOM SCM
Don’t forget the bigger picture… |   Example…
Supply Demand OMS Fulfillment Plan WMS SCV TMS TMS TMS SCV SCV DOM Rail Shipment Inter-facility Truck Ocean Vessel Warehou...
Thank You! Drew Forte Director, Supply Chain Improvement FORTE [email_address]
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Transportation Coping Skills

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How to decrease costs within transportation.

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Transportation Coping Skills

  1. 1. Logistics Coping Skills For a World of $4 Gas Drew Forte Director, Supply Chain Improvement, FORTE
  2. 2. Poll question: <ul><li>A. They both do a lot of business in north Jersey </li></ul>Courtesy of HBO D… B. They’re afraid of electronic communication C. You’d better pay them on time What do neurotic mobsters and logistics professionals have in common?
  3. 3. D. We all need some good “coping skills” for today’s painful, stressful times. Courtesy of HBO
  4. 4. Macro-economic conditions have changed <ul><li>Oil prices have doubled in the last two years, and tripled since 2000 </li></ul>|
  5. 5. Macro-economic conditions have changed <ul><li>Customer service expectations are permanently elevated </li></ul><ul><ul><li>In-stock </li></ul></ul><ul><ul><li>Same-day shipping </li></ul></ul><ul><ul><li>On-time </li></ul></ul><ul><ul><li>Accurate </li></ul></ul>|
  6. 6. Macro-economic conditions have changed <ul><li>We’ve known the underlying reasons since 2004: </li></ul><ul><ul><li>The fall of the Berlin wall in 1989 </li></ul></ul><ul><ul><li>Netscape goes public (1995) </li></ul></ul><ul><ul><li>Work Flow Software </li></ul></ul><ul><ul><li>Open-Sourcing </li></ul></ul><ul><ul><li>Outsourcing </li></ul></ul><ul><ul><li>Offshoring </li></ul></ul><ul><ul><li>Supply Chaining </li></ul></ul><ul><ul><li>Insourcing </li></ul></ul><ul><ul><li>In-forming </li></ul></ul><ul><ul><li>The “steroids” (digital, mobile, personal, virtual) </li></ul></ul>| Courtesy of Farrar, Straus and Giroux, New York OLD NEWS
  7. 7. Macro-economic conditions have changed <ul><li>Impact on us in 2008? </li></ul>Courtesy of The Boston Globe Price increases bolster Kraft July 29, 2008 Kraft Foods Inc. reported earnings that topped analysts' estimates and said full-year profit may be higher than it forecast after increasing cheese, chocolate, and Planters peanut prices to cover rising energy and grain costs. Courtesy of The Boston Globe P&G will boost product prices by up to 16% | Courtesy of Kraft Foods
  8. 8. Macro-economic conditions have changed <ul><li>Price increases alone can never fully offset higher logistics costs. </li></ul><ul><li>Top companies like Kraft and P&G are also making real changes to they way they manage transportation </li></ul><ul><li>Smaller companies must make similar moves to remain competitive. </li></ul>|
  9. 9. Companies shift to a tactical view of logistics | #1 Pressure: Increasing freight rates and/or accessorial charges 2008 #1 Pressure: Need to use transportation to improve overall supply chain performance 2007 STRATEGIC TACTICAL
  10. 10. 7 “Coping Skills” to contain freight costs | “ Coping Skills” to contain freight costs 7
  11. 11. 7 “Coping Skills” to contain freight costs <ul><li>No hub constraints </li></ul><ul><li>Calculate True Total Landed Cost (TLC) </li></ul><ul><ul><li>Cost of goods, Transportation, Customs & tax, Interest, Insurance, Handling, Quality, Risk, Inventory </li></ul></ul><ul><li>Adequately price in risk </li></ul><ul><li>Normalization of labor cost delta </li></ul><ul><li>Inventory and labor savings used to trump transportation savings and service </li></ul><ul><li>Ways to still achieve inventory savings with hubs closer to customer base </li></ul><ul><li>Re-rationalize with current fuel costs </li></ul><ul><li>Source in a “Profitable Proximity” (IDC Corp.) </li></ul>| Re-rationalize your supply chain network 1
  12. 12. 7 “Coping Skills” to contain freight costs <ul><li>Hub-constrained model </li></ul><ul><li>More dynamic decision making ability allows the selective use of lower cost modes where practical </li></ul><ul><li>Utilize 3PLs to cross dock or hold inventory closer to demand </li></ul><ul><li>Private fleet </li></ul>| Re-evaluate your transportation network 2
  13. 13. 7 “Coping Skills” to contain freight costs <ul><li>Improved trailer cubing for private/dedicated fleet </li></ul><ul><li>Shipment consolidation </li></ul><ul><li>Improved mode selection </li></ul><ul><li>Pool points; zone skipping </li></ul><ul><li>Inbound/outbound optimization </li></ul><ul><li>Backhaul utilization </li></ul><ul><li>Continuous moves, merge in transit </li></ul>| Practice load optimization 3 Fast Fact: 70% of Best-in-Class companies have programs in place to shift LTL shipments to TL where applicable; only 56% of Industry Average companies do. (AberdeenGroup, August, 2008)
  14. 14. 7 “Coping Skills” to contain freight costs <ul><li>Large companies need to have freight costs accrue to department level budgets to incentivize mode optimization </li></ul><ul><li>Improved supplier connectivity allows for advance warning of late shipments, reaction time </li></ul><ul><li>Requires inter-disciplinary skills </li></ul>| Reduce the need for expedited freight 4 <ul><li>Case in point: </li></ul><ul><li>A large medical device manufacturer with $400MM in annual spend was seeing $100MM of that money go to expedited air shipments. </li></ul><ul><li>Drove costs to department level and expects to save $6MM yearly </li></ul>
  15. 15. 7 “Coping Skills” to contain freight costs <ul><li>Properly analyze spend </li></ul><ul><li>Practice expressive bidding </li></ul><ul><li>Multi-dimensional scenario analysis </li></ul><ul><li>Community benchmarking </li></ul><ul><li>Fluid data flow: bid analysis/awarding/contracts/ rate tables </li></ul>| Run more effective bid processes 5
  16. 16. 7 “Coping Skills” to contain freight costs 5 Figure 5: The Transportation Management Wheel Source: Aberdeen Group, January 2008 Run more effective bid processes (continued) |
  17. 17. 7 “Coping Skills” to contain freight costs <ul><li>Measure, measure, measure! </li></ul><ul><li>Carrier score-carding </li></ul><ul><li>Electronic tendering and acceptance </li></ul><ul><li>Mid-course corrections </li></ul><ul><li>Drop non-compliant carriers </li></ul>| Improve rate of first choice carrier acceptance 6 Fast Fact: 85% of Best-in-Class companies monitor carrier performance regularly; only 44% of average companies do. (AberdeenGroup, June, 2007)
  18. 18. 7 “Coping Skills” to contain freight costs <ul><li>Don’t drop small carriers – make it easier for them to be compliant </li></ul><ul><li>Use web portal technology to force carriers to invoice electronically and close-out loads promptly </li></ul><ul><li>Perform root-cause analysis for repeat errors </li></ul><ul><li>Self invoicing </li></ul><ul><li>Outsourcing is fine, but how is your provider doing? </li></ul><ul><ul><li>Mapping BOL codes to GL </li></ul></ul><ul><ul><li>Integrity of the audit process </li></ul></ul><ul><ul><li>Multi-field track and trace </li></ul></ul><ul><ul><li>Reporting </li></ul></ul>| Audit and pay invoices more efficiently 7 Case in point: A large CPG company has saved over $120,000 annually by bringing the audit-and-pay process in-house and automating it
  19. 19. 7 “Coping Skills” to contain freight costs | Audit and pay invoices more efficiently (continued) 7
  20. 20. Don’t forget the bigger picture… | Don’t forget the bigger picture…
  21. 21. Don’t forget the bigger picture… | #1 Pressure: Increasing freight rates and/or accessorial charges 2008 #1 Pressure: Need to use transportation to improve overall supply chain performance 2007 STRATEGIC TACTICAL
  22. 22. Don’t forget the bigger picture… | Transportation management is the linchpin in a comprehensive strategy of supply chain improvement.
  23. 23. Don’t forget the bigger picture… Connectivity Visibility Reliability Agility Efficiency Service Supply chain efficiency and service don’t appear overnight – they are the result of a calculated strategy that often begins with improved transportation management. |
  24. 24. Don’t forget the bigger picture… | Does your TMS play well with others? TMS WMS OMS YMS POS SCV DOM SCM
  25. 25. Don’t forget the bigger picture… | Example…
  26. 26. Supply Demand OMS Fulfillment Plan WMS SCV TMS TMS TMS SCV SCV DOM Rail Shipment Inter-facility Truck Ocean Vessel Warehouse A Warehouse B Offload Load to Rail Consolidated Full Truckload Cross Dock Direct Less-Than-Truckload Shipment Deconsolidate Load !
  27. 27. Thank You! Drew Forte Director, Supply Chain Improvement FORTE [email_address]

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