Global Supply Chain Management Consulting - Boxes and Globe

The Checklist Every Shipper Needs (Part 3)

Today we continue to highlight and expand upon the key elements of the “Checklist for Transportation Spend Management” created by Transwide and Supply Chain Media.  In today’s post we highlight checklist items three, four and five.

Checklist Item #3 – “Carrier Bid and Selection is an Automated Process and Rates are Automatically Updated.” 

This point is an interesting and extremely important one because in many company’s bid processes, the final carrier selection is based solely on the lowest cost respondent.  That single selection criteria process is not always the best choice, and in fact often times is the worst choice for the shipper.  In any carrier bid process, the key element is making sure that all carriers who are invited to bid are in fact “all created equal.”  If not, then selecting the least cost carrier may, and often does backfire because the lowest bidder may provide the lowest level of service.

To work with a bid process that is automated and where the carrier rates are updated automatically, is a very powerful tool for any shipper to utilize.  Automating processes in conjunction with the carriers’ processes only strengthens the working relationship between both parties, creating true and hopefully long lasting relationships.

Checklist Item #4 – “Almost all of our Carriers are Meeting their Service Level and Routing Compliance Requirements, as a Percentage of the Shipments They Handle.”

The key words in the above checklist point is “almost” and “as a percentage of the shipments they handle.”  First and foremost, we all understand that no transportation service provider will provide 100% on-time, damage free deliveries, 100% of the time.  Having said that, every company must establish their own metrics for what they feel is a reasonable “fail rate”, because that is exactly what it is, a failure of the carrier to meet its service obligations as outlined by the shipper.  If a carrier continually falls below that failure rate, the shipper must have a defined plan to replace that carrier immediately and perhaps even more important, is the need to get that change order message out to its suppliers, customers and other company employees involved in the process without any interruption in service.

Checklist Item #5 – “We Collaborate and Synchronize data with Carriers, Suppliers and Trading Partners, and we Only Need to Concern Ourselves with Invoice Exception handling.”

Collaboration is such a critical part of any business relationship, especially between shippers and carriers.  But we are continually amazed at how often these relationships are thought of as vendor/customer relationships and not business partnerships.  This is a fatal mistake and is usually made by the shippers who feel that they own the freight and they pay the bills so they are the ones that are in control…NOT!

The old adage “it takes two to Tango” is still true today. Yes, the carrier needs the shipper’s freight but equally as important is the fact that the shipper needs the carrier to get its goods delivered.  Sounds simple enough and it is, but putting the proper tone on these relationships at the outset is critical for long term business success FOR BOTH PARTIES!

The issue of invoice accuracy is another critical aspect of any carrier/shipper relationship.  If the rates and charges are agreed to by both parties, the rates and charges would be loaded into the freight carriers billing system and therefore each and every invoice it issues SHOULD be 100% accurate.  That’s in a perfect world which none of us live in.  Again, metrics are critical here as well.  What percentage of invoice inaccuracies is acceptable?  What happens if the carrier exceeds that percentage?  There is a cost associated with the shipper’s need to audit and properly pay all of the carriers invoices in a timely fashion.  So the more invoicing errors there are, the more cost the shipper bears.  That is another recipe for failure that is often overlooked in the bidding process.

One final point that both shippers and carriers should always strive for.  If the carrier and shipper agree to the rates and there is a total collaborative process in place between the shipper and the carrier, the shipper could “Pre-Rate” every shipment it makes based on the agreed upon rates and charges.  That would allow the shipper to send payment to the carrier without ever having to receive an invoice from the carrier – How’s that for a collaborative and synchronized business operations process.

 

  

Business People Sitting in an Office Building Chatting

Is Blockchain The New Supply Chain?

Blockchain!  The new hip and technical term everyone is hearing more about; what is it exactly and how will it affect your Supply Chain in the very near future?

Throughout modern history, the majority of anything involving the sale/transfer of goods and services between two or more parties was recorded on some form of a physical ledger. With the development of the computer and the internet over the last several decades, technology has proven that the use of a physical ledger is no longer efficient and can be highly risky for business.

Technology dictates how we buy and sell and keeping records of that has become increasingly more complex and leaves too much room for inaccurate data and in some cases, even fraud.

Take for example, a widget manufacturer; the company’s supply chain can be vast.  Sourcing materials from multiple vendors, assembling products lines and having third party logistics providers transport product direct to customers. Without Blockchain technology, a company is forced to rely on transactional data from multiple intermediaries who own and control their data.  This is inefficient as parts of the data can be changed by various owners and therefore, visibility for the manufacturer and other parties in the supply chain is highly limited.

And here’s where Blockchain technology can be a game-changer– as every transaction or data input occurs, it would be placed into its own “Block.”  When another Block of data is created it is then linked to the previous Block.  All parties have permission to see the data Blocks and once they are created, they cannot be changed, moved or deleted unless all parties involved review and agree to the changes. This is HUGE for transparency. Who doesn’t love transparency? Especially with your own business – honesty is the best policy, I always say.

As technology continues to develop there will be more and more room for error and fraud.  Blockchain is a simple and efficient solution to provide value and security for companies, consumers and logistics providers to ensure that the data they operate off of is correct and tamper proof.

UPS-Logo

UPS Enhances Technologies through Supply Chain Division

UPS has a Valentine’s Day present for its UPS Supply Chain customers.  The company has enhanced a number of technologies it offers Supply Chain customers through its Supply Chain Division.  When the UPS Supply Chain customers log onto Flex Global View, they will now see enhanced tracking and reporting capabilities in the following areas:

1.  New Ocean Container Dashboard –a visibility dashboard specifically for ocean containers. Information about containers can be sorted by carrier, port of loading and unloading, shipper, receiver, etc.
2.  UPS Transportation Invoices – customers billed in the U.S. and Canada can now view an image of the UPS invoice associated with their air and ocean freight shipments
3.  Improved Dashboards and Reports – enhanced and better organized for easier search and reporting requirements

UPS is on a mission to assure its customers that the company is committed to continually upgrading its technology to better serve its customers.  That’s what partnerships should be all about.

Read the original story that appeared in Global News Wire here

WSJ

No longer your father’s supply chain!

It’s obviously no longer your father’s supply chain!  We have all been witnesses of what we consider significant changes to traditional supply chains.  The Wall Street Journal is now reporting that Kellogg Company will remove the leg of actual store deliveries from its traditional supply chain to retail grocery stores and just deliver their sought after goods directly to the grocery store warehouses.  This means the grocery chains will now have the responsibility to handle the actual store deliveries.

So what’s the impact here, well for Kellogg, they intend to close 39 distribution centers and will eliminate approximately 1000 jobs.  So for Kellogg workers this is certainly a major blow.  For the grocery chains, this means more goods moving through their distribution centers for actual store delivery; obviously at additional costs.  We also wonder if the reduced costs Kellogg will benefit from by making these changes will be passed onto their customers in terms of reduced prices for the “delivered” goods.  Somehow we don’t think that will be the case however.

Here is a link to the full article.

port

Will An Oversupply of Vessel Capacity Affect Trans-Pacific Contract Negotiations?

According to an article on joc(dot)com, “beneficial cargo owners are reassessing their supply chain strategies for the coming shipping season.” BCOs may be keeping more cargo on the West Coast, where freight rates are expected to remain low.

BCOs that had approached their trans-Pacific contract negotiations with an eye toward shifting more cargo to the East Coast may be looking again at keeping more on the West Coast where vessel overcapacity will continue to keep freight rates low.

In fact, the article reveals that a global oversupply vessel capacity is expected to last “at least two more years.” More smaller vessels are expected in the trans-Pacific, which could contribute to “depressed rate levels.” Ocean freight and bunker surcharges are also expected to go down.

How will actual shipping schedules be impacted? Read the original article to learn more: http://bit.ly/1PLOQb9

 

Note: The above is a summary of an original article posted on joc.com and is meant for informational purposes only.

How Secure Is Your Supply Chain?

A recent survey by Smart Manufacturing Technologies found that forty percent (40%) of the manufacturers they surveyed had zero visibility into their manufacturing processes; in other words they are working in the dark.

The survey went on to say that nearly 10% of the respondents spent half of their day looking for equipment and products. These results certainly indicate that there is a tremendous need for improvement in tracking manufacturing processes.

If you can’t find or track the products today, how can manufacturers prepare to make changes in demand or production schedules in the future? The reality is they cannot unless there is a marked improvement in their processes. Here are some additional statistics from that same survey.

30% of the manufacturers surveyed stated that they did have access to instant, real-time status of every product. That leaves 70% unable to find all of the goods or some of the goods. Not great odds!

56% of the manufacturers surveyed are using what they termed “limited visibility data” to identify problems as they occur. Therefore more than half of the respondents only know about a “crisis” after it occurs. (Do you see a trend here?)

Remember, these results are for manufactured products before they even enter the supply chain. What can happen once they enter the supply chain….plenty! Improvement initiatives will require that company’s create, follow and continually monitor Supply Chain Risk Management Strategies. Wikipedia defines Supply Chain Risk Management as “the implementation of strategies to manage both every day and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity.” We would add the words “eliminating vulnerability and ensuring continuity” to the Wikipedia Wikipedia goes on to describe Supply Chain Security as “efforts to enhance the security of the supply chain, the transport and logistics system for the worlds cargo. It combines traditional practices of supply chain management with the security requirements driven by threats such as terrorism, piracy and theft.” So what are some typical supply chain security activities?

 

• Screening and Credentialing of all participants in the supply chain

• Screening and validating the contents of cargo being shipped throughout the transportation journey

• Advance notification of the contents of the cargo at the destination country

• Ensuring the security of cargo while in transit via the use of security devices

• Complete inspection of the cargo upon entry into the destination country

 

As you can see, these are very broad recommendations; every company should have a comprehensive plan built around these broad security measures. Without such measures there is a real concern that shippers may not be able to insure their goods while in transit. This brings us to another issue of concern and that is terms and conditions of the various contracts affecting supply chain activities.

Even the best plans of action are sometimes foiled by circumstances beyond the control of the parties in any business transaction. What options do companies have to protect themselves when “stuff” happens?

Companies must have comprehensive contracts with all suppliers in the business transaction and those contracts must have a Force Majeure clause to protect all parties. What’s a Force Majeure clause? The BusinessDictionary.com describes it as “a standard clause found in contracts, it exempts the contracting parties from fulfilling their contractual obligations for causes that could not be anticipated and/or are beyond their control. These causes usually include Acts of God and other impersonal events or occurrences.” While this definition describes the clause, the following is an actual Force Majeure clause provided by the Maurer School of Law at Indiana University which thoroughly spells out the Force Majeure provisions to protect all parties in a business transaction.

“Any delay or failure in the performance by either party hereunder shall be excused if and to the extent caused by the occurrence of a Force Majeure. For purposes of this Agreement, Force Majeure shall mean a cause or event that is not reasonably foreseeable or otherwise caused by or under the control of the Party claiming Force Majeure, including Acts of God, Fires, Floods, Explosions, Riots, Wars, Hurricanes, Sabotage Terrorism, Vandalism, Accident, Restraint of Government, Governmental Acts, Injunctions, Labor Strikes, other than those of Seller or its Suppliers, that prevent Seller from furnishing the materials or equipment, and other like events that are beyond the reasonable anticipation and control of the Party affected thereby, despite such Party’s reasonable efforts to prevent, avoid, delay, or mitigate the effects of such acts, events, or occurrences, and which events or the effects thereof are not attributable to a Party’s failure to perform its obligations under this Agreement.”

So here’s our question, or shall we say questions!

 

1. Are all of your business transactions covered by comprehensive contractual agreements?

2. Do your contracts have a comprehensive Force Majeure clause in it?

 

With all of the strife going on in the world today, businesses cannot afford to be unprotected. It’s time for a comprehensive assessment of all business processes and contract agreements.

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