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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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In win-lose bargaining, both parties are in direct
competition and there can be only one winner.
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Understandably, many people look at win-lose as a
kind of game. Indeed, it can be compared to poker
in that it is adversarial in nature, with both side
trying to win the pot through keen observance of an
opponent's weaknesses, and a strategic use of
bargaining chips. The big difference, of course,
is that win-lose negotiations are not a game. And
the stakes are very real.
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Poker players like to play their cards "close to
the vest," careful not to share information or
reveal too much to their opponent. The same is
true in win-lose negotiations, where there is
minimal disclosures to the other party. Furthermore,
buyers avoid giving any clues (or "tells") that would
reveal their true position. In fact, good negotiators
are known for their poker faces. They 'hold' and
'raise' as necessary with pressure tactics and they
pressure their opponents through delays, walkouts,
and threats.
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How effective is this approach to negotiations? Not
very. In fact, it is often counterproductive and does
not have any long-term sustainability.
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Even when you win in this confrontational style of
business, you still lose because the relationship
with your counterpart is irreparably damaged. If
you win enough your opponent will eventually stop
playing the game. No one likes to lose, and they
certainly don't appreciate being bullied. As the
relationship deteriorates, the winner can expect
the tables to turn when their opponent gets even
by providing substandard service at lower cost in
an effort to recoup losses.
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In win-lose negotiations, logistic professionals
are taking a short-term view, potentially locking
their companies into a narrow range of positive
outcomes. Win-lose does not serve the long-term
interests of the winner, even in if short-term
objectives are achieved.
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"Win-win" negotiations, on the other hand, involve
integrative bargaining or interest-based bargaining,
where the parties collaborate to find a mutually
beneficial solution.
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In the win-win approach to freight negotiations, both
the shipper and carrier are engaged in finding the best
solutions to move freight economically. It yields a
freight agreement that each party is willing to fulfill.
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Successful logistics buyers looking to achieve best
outcomes use win-win techniques where both parties in
the negotiation walk away with the sense they have
accomplished their objectives. Relationships are
developed that have a foundation of trust because they
are mutually beneficial. At the heart of the negotiation
is true cooperative problem solving, cost cutting,
customer service, and mutual profit.
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This kind of collaborative takes additional work
on the part of the logistics buyer.
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1. Preparation
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This is the most important element in achieving an
agreement. and it starts long before you sit down
at the table. It involves a lot of data gathering.
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First, understand the shipment. What is the size?
The weight? The average cube per shipment? What kind
of commodity is it? Is it dangerous? Does it have
special requirements? Will it need temperature controls?
Additional security? Dunnage?
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Next, you have to know your customer's requirements.
How much will be shipped? How often? What are the
delivery locations? What about the dock-side requirements?
Unloading equipment at consignee? Dock? Tailgate? Pallet?
Hand bomb?
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Now, what kind of equipment will be required? Dry
van? Reefer? Heated service? Flat bed? Tridem? Tandem?
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And finally, what is the service cycle time?
What is the best mode of transportation?
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Proper preparation will help you understand the
implicit costs. Use benchmarking, historical data,
industry associations, and the Internet to map out
what you need. Based on this information, the shipper
can set flexible objectives. They'll consider what
would be the ideal situation, the very best that can
be achieved. They'll also get a sense of the biggest
challenges they'll face.
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Preparation also involves finding the right transportation
suppliers to negotiate with. Research and qualify the
carriers that can provide the services you required.
Find out as much about the companies as you can, the
lanes they service, their service objectives, their
response to damages, their reputation in the market
place, the corporate culture they have fostered. anything
that will help with the discussion.
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2. Exchanging Information
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At preliminary meetings with potential partners, a
frank and open discussion is the best way to meet
objectives. Shipment data is shared and service
requirements are discussed. Where the sides differ,
their expertise will be needed to improve the cost
and service.
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3. Making a Deal
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When you're close to an agreement, have the carrier
provide the full cost and service proposal electronically
in advance of the meeting. This allows you to prepare
for the meeting. Analyze the quote against current
shipping data to understand the value proposition.
The meeting agenda should consist of a discussion to
understand services, rates, fuel surcharges and ancillary
charges, and process improvements.
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There is no room now for misconceptions. Don't be
afraid to ask the carrier representative how rates
can be lowered. Talk about what needs to be done.
Never assume the amount quoted is the final price.
Most carriers' rates have some "wiggle" room.
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The steps you take to improve the transportation deal
are important blocks to building a solid relationship.
Some concessions may have to be provided, to get lower
costs, but it is worth it. Problem solving must be done
jointly.
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Focus on the issues at hand, don't take positions,
and be flexible, using fair business practices. Most
important, use reason not control, pressure, or power.
Listen to what is being said. Find ways to make your
freight attractive to the carrier.
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This is true win-win negotiating, and it ensures that
in the long run, everyone wins.
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Fuelling Your Supply Chain
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Inbound Freight Programs
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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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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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