Empowering Fact-Based Decisions Across Your Supply ChainBest Practices in Transportation         Procurement        Dr. Ch...
Who is Chainalytics?                                                                       Empowering Fact-Based Decisions...
Agenda                                      Empowering Fact-Based Decisions Across Your Supply Chain• How should shippers ...
Guiding Principals –                                 Procuring Transportation Services                                    ...
Procurement Best Practices:                                     Procurement Life Cycle                            Empoweri...
Procurement Best Practices:                                                               Getting Ready – Benchmarking Rep...
Procurement Best Practices:                                                Getting Ready – Partner Carrier Criteria       ...
Procurement Best Practices:              Getting Ready – Capacity Problem Areas Example                                 Em...
Procurement Best Practices:                    Procurement Life Cycle           Empowering Fact-Based Decisions Across You...
Procurement Best Practices:                                                                        Collecting Rates       ...
Procurement Best Practices:                     Procurement Life Cycle            Empowering Fact-Based Decisions Across Y...
Procurement Best Practices:                                                                      Scenario Analysis        ...
Procurement Best Practices:                     Procurement Life Cycle            Empowering Fact-Based Decisions Across Y...
Procurement Best Practices:                                                                                  Post Awarding...
Bid Leakage                                                                 Empowering Fact-Based Decisions Across Your Su...
The PVA Story                                                                        - Accomplishments to Date            ...
Procurement Best Practices:                                                                 Post Awarding – Process Overvi...
Summary                                                       Empowering Fact-Based Decisions Across Your Supply Chain• Tr...
Agenda                                      Empowering Fact-Based Decisions Across Your Supply Chain• How should shippers ...
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2009 Best Practices In Transportation Part 1

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You are viewing presentations from conferences that I have attended. Please enjoy & if we can help you with any logistics projects in the Americas please contact me at 678.364.3475

Bill was also on the Board of Directors for the St.Vincent DePaul Foodbank in Roseville California helping with the fund raising and meals to the poor program. While based in Northern California he was successful in fund raising programs for the Crusade of Mercy and helped Father Dan Madigan at the Sacramento Food Bank also. For 2008, Bill is a member of the Board for WORKTEC on also an Advisory Board Member for Boys and Girls Club for Metro Atlanta-Clayton County Chapter. See www.worktec.biz or www.bgcma.org . Bill is also on the Board of Directors for the Southeastern Warehouse Association & represents Georgia for 2010-2012.

Regards,

Bill Stankiewicz
Vice President and General Manager
Shippers Warehouse
Email: williams@shipperswarehouse.com
www.shipperswarehousega.com
http://www.linkedin.com/in/billstankiewicz2006
http://twitter.com/BillStankiewicz
http://www.topexecutivesnet.com/index.aspx

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2009 Best Practices In Transportation Part 1

  1. 1. Empowering Fact-Based Decisions Across Your Supply ChainBest Practices in Transportation Procurement Dr. Chris Caplice Executive Director, MIT-CTL Gary Girotti Vice President, Chainalytics LLC March 3, 2009 1 © Copyright 2009 Chainalytics, LLC.
  2. 2. Who is Chainalytics? Empowering Fact-Based Decisions Across Your Supply Chain• Chainalytics formed in 2001 – HQ in Atlanta, GA, with second office in Bangalore, India Realize – 50 FTEs in US and India• Two Practice Areas: Continuous – Supply Chain Strategy Analysis – Transportation Planning• Recent Accolades – “Great Supply Chain Partner” Global Logistics and Supply Chain Strategies – Named for five years running: 2004-2008 – “10 Coolest Supply Chain Boutiques” ARC Advisory Group in July, 2007 – “Top 100 Innovations” Supply and Demand Chain Executive – 2006 Award for Model-Based Benchmarking – “Pros to Know” Supply and Demand Chain Executive – Gary Girotti (2007), Jeff Metersky (2006), Michael Kilgore (2005) 2 © Copyright 2009 Chainalytics, LLC.
  3. 3. Agenda Empowering Fact-Based Decisions Across Your Supply Chain• How should shippers procure transportation?• What impact do policies and practices have on rates?• How should a shipper handle fuel volatility? 3 © Copyright 2009 Chainalytics, LLC.
  4. 4. Guiding Principals – Procuring Transportation Services Empowering Fact-Based Decisions Across Your Supply Chain• Transportation is not a commodity – it is a service• A transportation procurement event is as much a relationship management process as a pricing event• Going to market, or market testing your rates, should be a healthy part of the relationship management process 4 © Copyright 2009 Chainalytics, LLC.
  5. 5. Procurement Best Practices: Procurement Life Cycle Empowering Fact-Based Decisions Across Your Supply Chain These areas get all the focus DataBut theseareas have thebiggest impacton actualsavingsrealized 5 © Copyright 2009 Chainalytics, LLC.
  6. 6. Procurement Best Practices: Getting Ready – Benchmarking Report Example Empowering Fact-Based Decisions Across Your Supply Chain Rate Benchmarking: • Look at lanes that are both over market and below market – Why? • Investigate by facility – Are inbound and outbound lanes above market? • Estimate the saving expectations – ‘Above market’ lanes move to ‘Market’, ‘Below market’ lanes increase ½ way to ‘Market’Origin Origin Dest Distance Annual Service Move Contrac Actual Actual Actual Est. Est. Annual Diff.State Region State Dest Region (miles) Volume Type ment t Type RPM CPL Annual Cost RPM Est. CPL Cost Diff. CPL Percent Status FL FL_TAM GA GA_ATL 474 12 S OB CC $ 0.71 $ 336 $ 4,032 $ 0.77 $ 367 $ 4,399 ($31) -8% BELOW FL FL_TAM NC NC_RAL 662 8 S OB CC $ 0.83 $ 549 $ 4,390 $ 0.93 $ 617 $ 4,935 ($68) -11% BELOW MO MO_SPR MN MN_RCH 566 6 S OB CC $ 1.39 $ 786 $ 4,717 $ 1.44 $ 813 $ 4,879 ($27) -3% BELOW OK OK_TUL TX TX_HOU 485 6 S OB CC $ 1.85 $ 899 $ 5,396 $ 1.58 $ 765 $ 4,587 $135 18% ABOVE OK OK_TUL IA IA_DES 462 8 S OB CC $ 1.47 $ 680 $ 5,443 $ 1.36 $ 629 $ 5,028 $52 8% ABOVE IN IN_IND MI MI_RAP 299 11 S OB CC $ 1.80 $ 538 $ 5,914 $ 1.79 $ 534 $ 5,878 $3 1% AT OK OK_TUL MO MO_STL 403 13 S OB CC $ 1.53 $ 616 $ 8,008 $ 1.44 $ 580 $ 7,542 $36 6% ABOVE OK OK_TUL IL IL_CHI 701 8 S OB CC $ 1.46 $1,023 $ 8,184 $ 1.28 $ 894 $ 7,152 $129 14% ABOVE MO MO_SPR TX TX_HOU 660 8 S OB CC $ 1.65 $1,088 $ 8,700 $ 1.57 $ 1,038 $ 8,304 $50 5% ABOVE FL FL_TAM TN TN_MEM 823 16 S OB CC $ 0.78 $ 644 $ 10,304 $ 0.86 $ 711 $ 11,370 ($67) -9% BELOW CA CA_SAC CA CA_SDI 542 17 S OB CC $ 1.22 $ 660 $ 11,220 $ 1.43 $ 774 $ 13,162 ($114) -15% BELOW CA CA_SAC AZ AZ_TUC 918 8 S OB CC $ 1.58 $1,450 $ 11,603 $ 1.50 $ 1,374 $ 10,990 $77 6% ABOVE IN IN_IND OH OH_CLE 321 21 S OB CC $ 1.78 $ 571 $ 11,995 $ 1.81 $ 580 $ 12,178 ($9) -2% AT MO MO_SPR CO CO_DEN 759 8 S OB CC $ 2.04 $1,550 $ 12,404 $ 1.85 $ 1,404 $ 11,234 $146 10% ABOVE CA CA_SAC NV NV_VEG 613 13 S OB CC $ 1.61 $ 989 $ 12,856 $ 1.75 $ 1,072 $ 13,932 ($83) -8% BELOW FL FL_TAM AL AL_BIR 608 30 S OB CC $ 0.72 $ 440 $ 13,200 $ 0.83 $ 507 $ 15,203 ($67) -13% BELOW FL FL_TAM LA LA_ALE 823 19 S OB CC $ 0.91 $ 750 $ 14,258 $ 0.93 $ 764 $ 14,507 ($13) -2% AT IN IN_IND MN MN_RCH 617 19 S OB CC $ 1.29 $ 799 $ 15,173 $ 1.31 $ 808 $ 15,356 ($10) -1% AT OK OK_TUL TX TX_ANT 426 19 S OB CC $ 1.99 $ 849 $ 16,124 $ 1.76 $ 748 $ 14,207 $101 13% ABOVE CA CA_BAK OR OR_POR 978 10 S OB CC $ 1.76 $1,723 $ 17,233 $ 1.61 $ 1,579 $ 15,791 $144 9% ABOVE PA PA_HAR WI WI_MIL 817 21 S OB CC $ 1.03 $ 842 $ 17,687 $ 0.99 $ 805 $ 16,912 $37 5% ABOVE CA CA_SAC UT UT_SLC 683 11 S OB CC $ 2.37 $1,621 $ 17,829 $ 1.72 $ 1,177 $ 12,949 $444 38% ABOVE OK OK_TUL CA CA_SAC 1,825 8 S OB CC $ 1.31 $2,390 $ 19,118 $ 1.19 $ 2,172 $ 17,380 $217 10% ABOVE CA CA_SAC AZ AZ_FLA 813 13 S OB CC $ 1.84 $1,494 $ 19,427 $ 1.58 $ 1,286 $ 16,724 $208 16% ABOVE PA PA_PHI NC NC_RAL 456 40 S OB CC $ 1.09 $ 496 $ 19,860 $ 1.16 $ 529 $ 21,146 ($32) -6% BELOW MO MO_SPR IL IL_CHI 512 30 S OB CC $ 1.41 $ 722 $ 21,672 $ 1.50 $ 767 $ 23,020 ($45) -6% BELOW CA CA_BAK UT UT_SLC 751 17 S OB CC $ 1.84 $1,383 $ 23,514 $ 1.81 $ 1,356 $ 23,054 $27 2% AT 6 © Copyright 2009 Chainalytics, LLC.
  7. 7. Procurement Best Practices: Getting Ready – Partner Carrier Criteria Empowering Fact-Based Decisions Across Your Supply ChainSegment your carrier base into Partners, Core Carrier and others. This segmentation is not about pricing leverage, its about security and risk mitigation. “Partner carriers: the 1 – 4 carriers that you need to be successful” Criteria Description Categorization: Is the carrier currently providing a service that, if disrupted, could have a significant impact on service or cost? - Scope of Service Example: • Is the carrier currently handling a significant portion of freight such that a substantial change would be an implementation risk? • Is the carrier providing a critical service that is in or out of the scope of the negotiation? – Store support, customer support, dedicated support, on-site personnel Risk Assessment: Does the carrier have the capability to support you over the long term? - Organizational Strength • Planning, Operations, Technology Risk Assessment: Is the carrier financially sound? - Financial Strength Is the carrier too financially dependent on your company? After you release the negotiation package, meet individually with partner carriers, re-iterate what you are trying to accomplish and get an understanding of their objectives. 7 © Copyright 2009 Chainalytics, LLC.
  8. 8. Procurement Best Practices: Getting Ready – Capacity Problem Areas Example Empowering Fact-Based Decisions Across Your Supply Chain 4 Venders 746 Loads 55 Venders 7,054 Loads 2 Venders 1,956 Loads57 Venders3,712 Loads 13 Venders 4,640 Loads 8 © Copyright 2009 Chainalytics, LLC.
  9. 9. Procurement Best Practices: Procurement Life Cycle Empowering Fact-Based Decisions Across Your Supply ChainData 9 © Copyright 2009 Chainalytics, LLC.
  10. 10. Procurement Best Practices: Collecting Rates Empowering Fact-Based Decisions Across Your Supply ChainRate Collection and Communication:1. After you release the negotiation package, meet individually with partner carriers, re-iterate what you are trying to accomplish and get an understanding of their objectives2. Think through the optimization scenarios you want to see before the carriers submit their pricing • Carrier constraints: Limits on volume to brokers, minority carriers, Smartway carriers, etc. • Geographic constraints: Number of carriers per region, per DC, etc. • The objective is to understand how the cost curve will behave3. Check, Check, and Re-check carrier inputs • Carriers complete 100s to 1,000s of bids a year • There is a lot of turnover in their pricing groups • They make errors 10 © Copyright 2009 Chainalytics, LLC.
  11. 11. Procurement Best Practices: Procurement Life Cycle Empowering Fact-Based Decisions Across Your Supply ChainData 11 © Copyright 2009 Chainalytics, LLC.
  12. 12. Procurement Best Practices: Scenario Analysis Empowering Fact-Based Decisions Across Your Supply ChainScenario Analysis:1. Review initial results to get a lay of the land • Who bid aggressively and who did not? • Does this make sense? • How sensitive are the results to the number of carriers, to particular carriers, etc.2. Begin the process of engineering the results • How balanced are the flows in and out of different DCs and regions? • Meet with the partner carriers and begin pressure testing the results – Before the meeting, run some analyses to develop an understanding of what would and would not be costly to adjust – Do not chase the pennies3. Be prepared to be stick to your published schedule • Nothing aggravates a carrier more than an awarding process that drags out for several months 12 © Copyright 2009 Chainalytics, LLC.
  13. 13. Procurement Best Practices: Procurement Life Cycle Empowering Fact-Based Decisions Across Your Supply ChainData 13 © Copyright 2009 Chainalytics, LLC.
  14. 14. Procurement Best Practices: Post Awarding Empowering Fact-Based Decisions Across Your Supply ChainPost Awarding:1. Have a documented and well supported transition plan in place • Communicate the plan internally • Document information flows and communication protocols with the carriers • Be prepared to visit your sites with the carrier and introduce the operations personnel to the local carrier reps2. Track performance to plan • Loads tendered to carriers other than the awarded carrier, by lane • Carrier tender acceptance / decline rate, by lane • Variances in volume of freight flows vs. the projection • Loads executed in a way that resulted in a post-tender carrier change (e.g. missing an Inter-modal cut time)3. Establish and communicate a regular market testing schedule • Go to market regularly • Carrier networks change more than shippers • A bid does not mean you have to change carriers but as a responsible procurement manager you should test the market regularly 14 © Copyright 2009 Chainalytics, LLC.
  15. 15. Bid Leakage Empowering Fact-Based Decisions Across Your Supply Chain Procurement Events Savings Leakage Theoretical Operational Implementation Base Costs Carrier Failure Savings Target Reality FailureHistorical average Bid rate result Expedites and outliner New carrier not Incorrect tenderingcosts per lane prior to assuming perfect events that need to be working out or be that by mode orprocurement event execution cleaned out of the carriers not accepting carrier or lane saving potential tenders definition, etc.WhereLeakageOccurs Starting point Uncontrollable Typically a function Easy to correct but Not real Typically 3-5% of of laps in tough to find savings potential relationship mgmt Can be 5%-10% of Can be 25%-50% of potential savings potential savings Savings “leakage” typically occurs as a result of poor carrier relationship management or errors in new rate implementation 15 © Copyright 2009 Chainalytics, LLC.
  16. 16. The PVA Story - Accomplishments to Date Empowering Fact-Based Decisions Across Your Supply ChainComparison of actual post bid analysis of expected saving to real savings Percentage "Leakage" 70.0% 58.5% 60.0% Attributed to strong carrier 50.0% 47.5% relationship management and active cost vs service analysis 40.0% during bid awards 30.0% 20.0% Attributed to rigorous and 10.0% systematic post-bid analysis and 3.1% 2.7% 2.5% 1.6% 0.6% management 0.0% Study #1 Study #2 M1 M2 M3 M4 M5 By month saving leakage for PVA client• Study #1 and #2 post bid analysis shows that roughly half the potential (or theoretic) bid savings was lost• Through rigorous carrier management and communication during the bid process and systematic monitoring and action planning post bid, the PVA client retained that vast majority of the bid potential 16 © Copyright 2009 Chainalytics, LLC.
  17. 17. Procurement Best Practices: Post Awarding – Process Overview Empowering Fact-Based Decisions Across Your Supply ChainCycle Procurement FunctionsAnnual Network BidPer Event Mini Bid Mini Bid Mini Bid(Seasonal, etc) Months 1 2 3 4 5 6 7 8 9 10 11 12 Integrated Carrier/Transportation Management DeliverablesSemi-Annually Benchmark BenchmarkQuarterly/ Plan Audit Plan Audit Plan Audit Plan AuditMonthlyMonthly/ Score Score Score Score Score Score Score Score Score Score Score Score cards cards cards cards cards cards cards cards cards cards cards cardsWeekly Fore Fore Fore Fore Fore Fore Fore Fore Fore Fore Fore Fore cast cast cast cast cast cast cast cast cast cast cast cast A continuous integrated process of sourcing, carrier management and analysis 17 © Copyright 2009 Chainalytics, LLC.
  18. 18. Summary Empowering Fact-Based Decisions Across Your Supply Chain• Transportation is not a commodity – it is a service – The subjective aspect of the quality of the service needs to be included in the analysis – Shippers need to consider all costs (direct and indirect) when trading-off of these soft aspects• A transportation procurement event is as much a relationship management process as pricing event – The outcome of a typical transportation procurement event is a non-binding agreement on both sides § Shippers do not contractually guarantee volume and carriers do not contractually guarantee they will take the volume tendered – As such, the procurement event must be looked at as part of a continual process of relationship management with your service providers• Going to market, or market testing your rates, should be a healthy part of the relationship management process – Carriers’ networks change as much, if not more than the average shippers’ – These events should be well communicated, regularly scheduled, and fair 18 © Copyright 2009 Chainalytics, LLC.
  19. 19. Agenda Empowering Fact-Based Decisions Across Your Supply Chain• How should shippers procure transportation?• What impact do policies and practices have on rates?• How should a shipper handle fuel volatility? 19 © Copyright 2009 Chainalytics, LLC.

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