SCMN 77007706 Demand Fulfillment

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SCMN 7700/7706Demand Fulfillment Segment
10 Transport Mgt.
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Transportation Why Worry About It?
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Transportation Plays a Key Role in Supply Chain
Management

• Transportation Management
• Planning, implementation, and control of
  transportation services to achieve organizational
  goals and objectives
• Key goals
• Integrate inbound and outbound freight flows
• Balance cost and service

If a good supply chain is constructed like a
house, then transportation is the foundation on
which the house is built. Jim Giblin,
Transportation The Forgotten Link in the
Supply Chain, ASCET, 2002.
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Transportation is not a Simplistic, Isolated
Activity

• Transportation strategy must be based upon
  organizational needs
• Numerous issues must be addressed by
  transportation managers

• Transportation decisions and capabilities impact
• Market area opportunities
• Purchasing options and practices
• Network design and facility location
• Product pricing
• Supply chain participants

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Transportation is the Lynchpin of Perfect Order
Fulfillment

• The efficient, effective flow of materials and
  finished goods through the supply chain depends
  upon your transportation network
• Transportation provides the physical links across
  the supply chain
• Transportation disruptions can cause supply chain
  failures and unhappy customers
• Note transportation disruptions may be symptoms
  of other supply chain problems

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Your Supply Chain Could Focus on Single Mode
Options
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Although Multimodal Options May Be More
Appropriate
Intermodal transportation (the use of two or more
carriers of different modes in the origin to
destination movement of freight) provides a
number of benefits  - Improves global access -
Uses inherent strengths of multiple modes to
create efficiencies - Offsets accessibility
problems
Pick up Linehaul Delivery
Containerization technology makes intermodal
transportation a flexible, competitive option
especially for international freight movement
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Transportation Optimization is Needed

• Minimize Total Transportation Cost
• Subject to Customer Service Policy

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The Transportation Marketplace

• Whats Happening in the World of Transportation?

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Transportation Operates in a Dynamic Environment

• What do all these events have in common?

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Key Trends and Issues in Freight Transportation

• Cost of doing business is on the rise
• Higher insurance costs
• Volatile diesel fuel prices
• New hours-of-service rules
• Environmental mandates
• Net effects
• Carrier bankruptcies
• Loss of capacity
• Higher rates for shippers
• Fuel surcharges

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Key Trends and Issues in Freight Transportation

• The rules of the game are changing
• Property-Carrying CMV drivers may not
• Drive more than 11 hours, following 10 hours
  off-duty.
• Drive beyond the 14th hour after coming on-duty,
  following 10 hours off-duty.
• Drive after 60/70 hours on-duty in 7/8
  consecutive days.
• HOS implications are far reaching for shippers
• If the supply chain becomes no more efficient,
  HOS regulations are estimated to reduce
  productivity by 4.5.
• Drivers have traditionally been the buffer for
  inefficiencies in the supply chain.
• Carriers are 15-20 less efficient higher rates

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Key Trends and Issues in Freight Transportation

• Larger carriers absorbing competitors
• One-stop shopping solutions are growing
• Multi-modal services 3PL capabilities
• Consolidation of LTL, air, rail, ocean networks
• Security regulation, rationalization, and balance
  issues cause problems for global freight flows
• Service rationalization has occurred
• Capacity is constrained
• Equipment and port challenges

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Market Responsive Transportation Strategy

• How Can Organizations Manage the Transportation
  Realities of Today and Tomorrow?

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Key Transportation Challenges

• Efficiently supporting SC requirements
• Creating visibility of shipments in the field
• Taking a long term view towards carriers
• Using service contracts advantageously
• Leveraging/locking in capacity at ideal rates
• Minimizing security related delays

The focus is moving away from reducing
transportation costs and toward creating a more
efficient supply chain at a reduced cost. In
other words, the transportation element may cost
more - but the entire process ends up costing
less. SCM Moves Logistics, Apparel Industry
Magazine
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Formalize Your Freight Transportation Processes
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How Others Are Responding

• Numerous organizations use transportation
  scorecards to capture and analyze critical
  transportation data regarding processes and
  outputs.
• Emerging functionality
• Automated KPI calculation reporting
• 24/7 access
• Dynamic, customizable dashboards
• Detailed graphics

Historically, companies are data rich and
information poor. If you cant use the data to
produce a report that you can use to see a trend
and make a decision, then you have just
data. Gary Seyer, Hayes Lemmerz
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Control Leverage Your Freight Spend

• Current Strategy
• Buy FOB Origin and sell FOB Destination
• Consolidate your carrier base
• Gain control, visibility, clout
• Use contracts whenever possible
• Access tailored services, lower rates, guaranteed
  capacity
• Emerging Strategies
• Rethink the core carrier concept
• Manage fuel spend

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How Others are Responding

• Use OSRAs contracting flexibility
• Bayer is using web based auctions to procure
  ocean freight service contracts. This expressive
  bidding model creates benefits for both parties
• Carriers can build bundled capacity-based bids
• Bayer dramatically reduces contract development
  time
• Bayer achieves savings in excess of ten percent.
• Plan for contingencies
• Toyota has identified alternative ports and
  carriers to counter capacity service problems

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Use Technology to Support Strategy and Execution

• Transportation Management Systems
• Continuous moves
• Capacity sharing
• Contract compliance
• Route design optimization
• Online freight management
• Rules based decision making

The typical TMS offers a payback of one year or
less. It is not unusual to find businesses saving
nearly 20 off their current transportation-relate
d costs by automating key processes. Schell,
Integrated Solutions, February, 2003.
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How Others are Responding

• Adopt tools that support your needs
• The Home Depot has installed GT Nexus software to
  help them optimize and manage the entire
  international transportation process, from
  procurement and contract management to shipment
  planning, optimization, execution and freight
  payment
• Barthco Intl. uses a searchable contract database
  from Management Dynamics to access and manage
  transportation agreements

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Substitute Transportation for Storage

• Find alternatives to static regional warehouses
• Use crossdocking, pool distribution, and
  transshipment to speed the flow of goods
• Centralize facilities to reduce inventory
• Use faster modes of transportation to maintain
  quality service to customer base
• Use containers as moving warehouses
• Put goods in transit toward marketplace(s),
  establish final destinations while en route

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How Others are Responding

• Milkruns Crossdocking Efficiency
• NUMMI plant in California uses cross-docks in
  Chicago and Memphis to collect, consolidate, and
  sort freight from multiple vendors into
  containers that are shipped via rail to the plant
• One DC for the US
• GlaxoSmithKline uses a centralized DC in
  Knoxville, TN and expedited transport service for
  their prescription-based pharmaceutical supply
  chain.

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Managing in a Difficult Transportation Environment
Five Emerging Strategies 1. Manage fuel
surcharges 2. Rethink the core carrier
concept 3. Make freight carrier friendly 4.
Revise negotiation perspective 5. Change the
freight mix
PEOPLE PROCESSES TECHNOLOGY


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Emerging Strategies Fuel

• Understand basis of fuel surcharges
• Index based vs. flat-fee
• Choose modes routing wisely
• Significant price variation exists
• Make sure that you are paying surcharges on
  MILEAGE ONLY!
• The calculation for fuel surcharge includes the
  following fees (where applicable) On Demand
  Pickup Delivery Area Service Remote Area
  Service Residential Delivery DHL Next Day 1030
  AM Service Saturday Delivery and Saturday
  Pickup.
• Read the fine print
• For the purposes of this item, 'TL' shall be
  defined as any shipment
• A.   effectively occupying more than 28 linear
  feet of line-haul      equipment space
  orB.   having actual weight of 20,000 lbs or
  more (Note 1) orC.   moving as a Capacity Load
  (Items 390 and 390-1) (Note 2).

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Emerging Strategies Carrier Base
Now that so many carriers have initiated
tailored rates, the time has come for shippers to
reconsider their carrier-reduction programs.
Simply put, it behooves a shipper these days to
contract with separate carriers to move different
commodities on different lanes To accomplish
this, shippers may find themselves once again
having to hire 100 carriers. That might have
posed problems in the past. But today's
sophisticated transportation management software
makes it easier for a shipper to manage and
monitor the performance of a bevy of carriers.
Even with a lean-and-mean distribution staff,
shippers can use software to track dozens of
carriers across the globe.
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Emerging Strategies Carrier Relations
The Goal. Keep drivers behind the
wheel

• Rationalize paperwork
• Minimize dwell time
• Unitize freight
• Provide proper MH equipment
• Stagger appointments
• Strip trailers quickly
• Limit stop-offs
• Reduce delivery frequency
• Leverage 16-hour exception

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Emerging Strategies Contracting

• Learn everything possible about freight
  characteristics and how they are used in the
  negotiation process.
• How do carriers view this business?
• Is it the freight they want?
• The more favorable your freight, the more demand
  there is for it, and in turn you receive better
  discounts and prices.
• Consider alternative purchasing methods

Request for Proposals Competitive
Bidding Consortium Buying
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Emerging Strategies Modal Mix
Change in Shipments by Transportation Mode
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Managing Transportation ComplexitySome Closing
Thoughts

• Take widely accepted practices with a grain of
  salt
• "It is not necessary to change. Survival is
  not mandatory." W. Edwards Deming
• Take a creative approach to emerging problems
• You cant depend on your judgment when your
  creativity
• is out of focus.
• Mark Twain
• Recognize the challenge of change management
• Consider how hard it is to change yourself, and
  youll
• understand what little chance you have of
  changing others.
• Albert Einstein