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Sharing the Load
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Collaborative Transportation
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With today's focus on reducing costs and protecting the
environment, the time for collaborative transportation
management may be here.
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Canada, the second largest country in the world - about
5,000 km from Vancouver to Conception Bay - is one of
the most challenging, high-cost countries in which to
distribute goods.
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Forty-two percent of the population inhabit five urban
areas where manufacturing and distribution facilities
face common transportation challenges. Meanwhile,
disproportionate shares of transportation resources
are required to service the balance of the population,
scattered over 10 million square kilometers. The
situation dictates a high use of less-than-truckload
delivery, and all-too-frequently, pick-up and delivery
trucks simply aren't full.
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Rate and Wrong
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Consumption Based Fuel Surcharge
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Fuel needs to be a flow-through consumption-based charge
- a system that would fair for everyone.
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Fuel costs are the largest ongoing financial concern
for both carriers and shippers. Fluctuating fuel costs
create challenges for companies to remain on budget,
which ultimately impacts bottom lines.
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The current recession has tempered the volatility we've
seen creating chaos in previous years. Rack fuel prices
this year have been trending between $0.692/litre and
$0.792/litre, according to Freight Carriers Association
(FCA) data. The truckload rate for fuel surcharges ranges
from 16% to a recent high of 21.4%. Compare this to July
2008 when fuel peaked at a rack price of $1.33/litre with
the truckloads surcharged at 49.9%.
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Finding The Win Win Deal
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Freight Negotiations
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Freight negotiations don't need to be like poker games,
where only one side can win the pot.
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Negotiation is something logistics professionals will
be called upon to conduct many times throughout their
careers. It comes with the territory. Successful
negotiation is essential in business - especially when
the economy is struggling. Everyone strives for the
best value and the lowest costs when obtaining the best
service possible.
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Unfortunately, however, when it comes to freight
negotiations, many companies specialize in the
"win-lose" approach - a positional or distributive
negotiation whereby one party's gain is another
party's loss.
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Inbound Freight Programs
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Fuelling Your Supply Chain
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When purchasing and transportation come together
they are not only helping to improve operations, they
are also contributing to the bottom line.
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One of the hottest trends in business by large
corporations is Inbound Freight Programs. Most
perceive this program as a means to reduce costs
by capturing the transportation component included
in the line item price by receiving a discount or
refund from the vendor which creates a revenue stream.
The revenue stream is then applied to the costs of
transportation for the goods which returns a margin
due to their buying power with their carrier(s) of
choice. At Aptitude4 our perception of an "Inbound
Freight Program" has more opportunities then the
transportation savings.
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The primary change which occurs in an IFP is taking
the vendor's LTL (less than truckload) shipments
which originate in the same area/zone & combining
them into a TL (truckload) shipment. The LTL
shipments which are likely handled by a number of
different carriers are consolidated with one (1)
carrier creating leverage/buying power to negotiate
a better rate. This changes the payment terms for
the freight from prepaid to collect meaning that the
vendors are no longer responsible for the payment of
the transportation costs which has been built into
the line item cost. The IFP company negotiates a
discount/refund for the transportation portion of
the line item cost which will be used in part to pay
the carrier. But this is only a small part of the
savings derived from an IFP.
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With today's environmental concerns, many companies are
adding GREEN programs to their corporate initiatives.
IFP's are very beneficial to reducing your green footprint.
Consider the distance travelled for eight (8) orders/
individual shipments from the same area to the same
destination versus one (1) shipment of eight (8)
consolidated orders. A reduction in greenhouse
emissions of 87.875%. Expand this further to long
distance shipments being consolidated & moved using
alternative modes of transportation which allow for
greater weights such as ocean, rail or heavier class
trailers & the percentage of reduction will increase
exponentially.
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Although the environmental benefits are well worth
considering an IFP, the main objective is to reduce
costs & improve the bottom line performance for the
company. Many of the cost benefits are not as visible
as the direct savings in transportation. The costs
that are impacted by an IFP can range from administration
to insurance premiums. As an example, by reducing the
number of trailers required to transport the goods the
IFP company has reduced the amount of yard traffic in &
out of the receiving location. With less traffic in the
yard the cost of errors or incidents will be greatly reduced
which could add further savings through a reduction in
insurance premiums. The following is a short list of other
areas that could be impacted by an IFP:
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1) reduction in yard personnel required for
shunting the trailers to & from the receiving doors
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2) reduction in receiving personnel required
for unloading the trailers
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3) less requirement for/better usage of square
footage demands inside the receiving facility
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4) reduction in administrative personnel/time to
manage the number of appointments
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The list above demonstrates that an IFP really falls
under the roles and/or responsibilities of the Supply
Chain Management group. Taking this further the IFP
company can gain additional efficiencies & savings by
planning their inbound freight within the movement of
their outbound freight. By adding pickups to their
deliveries an IFP company shares the cost of the
inbound and outbound freight. The cost of a round
trip is substantially less then the cost of each as
an individual by removing the empty mileage component.
In rough terms the current cost for delivering the
goods to market would be halved or, in other words,
virtually free as the inbound freight for which the
company is receiving a benefit from the vendor would
be sufficient to pay the bill. Round trips will also
add benefit to your green emission reduction by utilizing
the same mileage travelled for both pickups & deliveries.
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Currently business requires companies to be data
savvy. Many companies have become very good at
managing the data that they are responsible for,
outbound. Since they are not required to pay the
bill for the inbound freight the information that
should be managed today is treated with the same
regard, not our responsibility. Finance departments
need to be aware of the company's revenues (in) &
expenses (out) in order to present realistic numbers
for their executives to make educated decisions.
It only makes sense that the Supply Chain Department
needs to monitor both sides equally as well & a
properly executed IFP will create an environment
that balances the information between inbound &
outbound freight movement. By becoming more data/
information savvy the Supply Chain Management group
will have better control & understanding of inventory
lead times & levels which leads to better planning &
improved bottom line performance
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One of the concerns with an IFP is the impact it
has on vendor relations. Many vendors perceive an
IFP as a negative as it will reduce the amount of
freight they have to negotiate competitive rates
with their carriers & reduced revenue in the amount
of the freight allowance. Vendors will also derive
benefits from the IFP which in many cases will outweigh
their concerns. Administrative costs will be reduced
by the amount of time it takes to plan for, contact &
expedite the shipping of the orders plus the costs
associated with verifying the charges, processing &
payment of the carrier's invoices. In some cases the
need for a transportation department of their own may
be reduced or eliminated. Some additional costs that
will also be reduced are late delivery charges, waiting
times by the carrier & damaged goods in transit to
mention a few. The reduced revenue is not a valid
concern as the negotiated freight allowance should be a
direct ratio of 1:1 with the current transportation cost
being paid by the vendor today.
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Most of us are aware of Customer Service but what
about Vendor Service. Creating a proper IFP will
foster an environment that will grow your relationship
with your vendor. To optimize your IFP purchasing
will need to adjust stock replenishment based on
the best mode, method & cost. The best information
source for understanding the product lead-times &
optimal packaging is the vendor. Working more closely
with the vendor in the planning stage will enable the
IFP company to reduce inventory levels creating more
turns & increase working capital, reduce transit times
& improved appointments for pickups, in other words,
Vendor Service.
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These are a few of the points which are important
to Aptitude4 for you to consider & why we feel
confident in providing you with a successful Inbound
Freight Program!!!
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Green Your Logistics
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Reducing Emissions
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GHG emission reductions must be tackled the same
way you achieve safety in the workplace. You need
to implement a strategic plan and stick to it.
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10 ways to reduce your environmental footprint and
improve profitability.
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Many companies talk about reducing greenhouse gas (GHG)
emissions, but too often there's a large gap between
words and action. Most companies seem to be holding off
on taking any real steps to reduce their environmental
footprint because they believe the investment cost is
too high.
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Out Of The Woods
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Lean Logistics
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Lean logistics will help any company - during hard
times and hay-days alike.
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Recent business reports indicate that the recession is
over. This may be the case for some leading companies,
but not all. Many businesses are still just barely
holding their own. Others are in obvious distress.
They'd take great exception to overstated optimism.
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The true sign that we've come out of the recession is
when businesses begin adding full-time jobs again. This
will restore consumer confidence and spending. But even
then, we will have to continue applying lean principles
to our logistics operations.
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Putting Out the Call
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Request for Proposals
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Requests for proposals and quotations show suppliers
that you're organized, impartial. and growing.
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Generally speaking, logisticians at small- to mid-size
logistics firms make too little use of standard Requests
for Proposals (RFPs) and Requests for Quotations (RFQs).
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Both are important parts of the logistics buying process,
allowing potential suppliers to join the competition to
provide a business with goods or services. The issuer
makes available the specifications and requirements to
several candidates, and then waits for the competitive
responses to be submitted.
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Affordable Supply Chain Technology
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Transportion Management Systems
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Transportation Management Systems (TMS) over the
internet allows any company, regardless of size,
to obtain the benefits of a good transportation
management system.
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Not long ago the high cost of Transportation
Management Systems meant they were used almost
exclusively by large shippers and carriers.
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Well, things have certainly changed - especially
with the advent of "software as a service" or
SaaS as it is commonly called.
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