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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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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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Below are four areas that require continued focus.
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Key Performance Indicators
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Historical data is interesting but not a compelling
tool because business operations have changed in
recent years. Collecting, analyzing, and understanding
key data points specific to your category is a must.
Develop a baseline around your current operation,
and then set attainable objectives for improvements.
Equally important, though, is to have someone to
hold accountable for reaching the target.
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Some key numbers that should be tracked include:
1) cost/unit shipped; 2) accessories charges plus
total surcharges as a percentage of total freight
expenditure; 3) claims percentage of freight costs;
4) fuel consumption by power unit (dedicated fleet);
5) on-time arrival; 6) average shipment size by
customer; 7) container/trailer utilization; 8)
cost/unit received; 9) empty miles (dedicated fleet);
10) error-free freight bill versus bills paid; and
11) cases delivered/hour.
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Security
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Theft increases during a recession. A recent Chubb
security study indicates that cargo theft usually
occurs on the weekend, with truck stops and rest
areas as common settings for the crime. Your freight
is certainly vulnerable (hijacking accounted for 3%
of theft) but so are your transportation assets, and
even consumables like fuel. A fuel audit program, by
driver, must be in place to monitor consumption trends.
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It's very important to review security procedures
on a regular basis. More importantly, though, work
to establish a culture of security within your
company. Train employees on theft prevention,
pre-screening new hires carefully, conduct semi
annual police checks, and draft a detailed facility
security plan. High-risk travel areas should be
avoided and drivers shouldn't stop within the first
four hours of their start point, in case they're
being followed. You want to select your transportation
partners and brokers very carefully, and conduct
random security audits.
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Customers
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How we ship to customers has a major impact on
the transportation costs. Order size, geography,
transportation mode, and delivery turn-around time
are all key decisions that need to be constantly
reviewed.
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Companies may think shipping collect doesn't cost
them, but a low minimum-orders quantity means higher
costs because of the fixed portion in preparing every
order. Delivering many small orders for the prepaid
shipper has a great impact on the transportation spend.
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Geography serviced is also very important. I know
of one Ontario furniture manufacturer that went
into company creditor arrangement because of an
arrangement to ship into the southern U.S. with
selling terms prepaid. Profitability was lost in
transportation costs, including ancillary and
fuel charges.
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In another case, a transportation manager used
expedited services because the sales department
said order cycle time was a paramount consideration
for the client. But it turned out the customer
simply wanted consistent delivery schedules, and
regular ground transportation was all that was required.
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In all cases, better communication with the customer
could have gone a long way to reducing costs.
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Carriers Selection
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Your selection process needs to be reviewed on a
regular basis. With most companies, the review
process is done when a new set of rates are presented.
A more effective way is through a Request for Proposal
process. Develop a clear strategy, and communicate it
to the carrier community.
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Some companies still fragment the carrier selection
process across departments and business units.
Centralizing the process under one group is much
more effective. Of course you'll have to decide
whether all transportation services - both inbound
and outbound - are available for quotation. The
more volume you have, the better the quotes you'll
get. I know of two non-competing beverage companies
that put out a joint Request for Proposal, combining
their volumes as an opportunity to reduce costs.
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These approaches to leaning your logistics operations
are important any time, but even more so during an
economic slowdown. If we have truly entered a recovery
period, they'll make your organization that much stronger
moving forward.
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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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