Archive for September, 2009

Have freight rates bottomed out yet?

Monday, September 28th, 2009

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Have transportation freight rates bottomed out yet? This has been one of the two most frequently asked client questions this summer – along with “is it too late to bid my freight out to take advantage of recent market conditions”.

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Although no one has a crystal ball to definitively answer the first question, ChemLogix’s market data since May 09 implies the market has probably bottomed out by late summer.  The second question can be answered with a simple answer – yes.  The time is still ripe to bid freight rates today but…don’t wait too long or you will miss this year’s golden opportunity to generate freight rate savings.

ChemLogix has conducted numerous freight benchmark Cyclops hd studies and bids this summer. Our studies have shown an average freight savings opportunity of between 10-25% of combined line haul and fuel surcharge costs.  Clients with very well managed freight costs have achieve freight savings opportunities of less than 6%.  Savings opportunities for these clients tend to be surgical, lane-level adjustments to only a few lanes.  The majority of our rate studies this year have found savings opportunities in excess of 10% which justified modal specific freight bids.

With that stated, I will also say the results of several bids conducted by ChemLogix in the latter portions of this summer have shown a transition in rates offered by carriers today.  Although significant savings were achieved through these bids, we saw either a slowdown in rate decreases or a stabilization of rates on similar lanes between bids. This trend, combined with other market indicators, such as, improving client load counts, increasing restrictions in getting carrier capacity in many markets, and hearing weekly that carrier business has started to boom over the over the last few months, all indicate conditions appear to be reversing themselves by summer’s end.

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If you think your company’s rates are high today then consider bidding your freight immediately.  If you are not sure how your freight rates fair against market conditions today, then have your rates benchmarked first and tie any bid activity to some savings trigger.  As a rule, ChemLogix feels savings opportunities of 5% or more should trigger a bid activity.  Companies with estimated savings of less than 5% should secure existing rates with existing core carriers for at least one year and go after identified savings opportunities using surgical, rate adjustments on a lane-by- lane basis only.  Few if any carriers will agree to more than a one-year rate contract today.

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Tuesday, September 15th, 2009

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Addressing the Inventory Challenges Posed by Global Supply Chains

Tuesday, September 15th, 2009

Good news! World trade may be rebounding.  According to the World Bank, 18 countries reported their trade data for the month of June exhibited an increase in imports and exports. This is the first identified trade increase after five months of severely depressed world trade.

As trade collapsed earlier this year, companies accelerated the depletion of excessive inventories adjusting their outlook to one of  a sustained business downturn. Once inventories were stabilized at new lower levels, market analysts predicted that some trade recovery would likely follow.  So lies the question:  “Is this recent positive trend just a spike or does it reflect a real turning point, with continued growth to follow?”

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This is not the first time (it”s just received more attention because of the magnitude of this economic crisis) that chemical manufacturers and supply chain managers have been confronted with the inventory issues: when to replenish and to what level. It is a question not easily answered.

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Impact of the Global Supply Chain on Inventory

The global supply chain is inherently a process of many handoffs to a variety of service providers who must expertly and timely execute their functional responsibilities to ensure the successful coordination of an international shipment. Assuming no major bottlenecks occur during the management of these handoffs, the timeline from order shipment to customer delivery of chemical products could take weeks, unlike a road or rail delivery that can be fulfilled in a matter of hours or days. The longer delivery time span for an international shipment naturally results in an increase of  inventory in transit and greater working capital exposure.

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While logistic managers may not be able to accurately predict the ebbs and flow of their global trade to determine future inventory levels, specific transportation management strategies can help minimize and/or control inventory build as global supply chains get longer and more complex.

 

Web-based transportation management systems, for example, offer a degree of control over supply chain operations that can result in more accurately predicting restocking points and managing inventory levels.  By providing real-time visibility of supply chain activities involving customs brokers, freight forwarders, ocean carriers and logistics service providers, On-Demand Global Transportation Management Systems (GTMS) help logistic managers to monitor unscheduled delays that inevitably occur in the long chain of events. Through optimized event management, key logistics personnel are automatically alerted to shipment delays along the extended supply chain, enabling corrective actions to occur sooner to reduce the length of delays and to keep the chain of events on schedule.

Using the tools offered by an On-Demand Global TMS, international managers can proactively optimize operations to:

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  • Reduce cycle times
  • Eliminate excess inventory build
  • Reduce supply variability and safety stock
  • Minimize expedited shipments
  • Reduce stock-outs

As On-Demand Global TMS capabilities expand to support international (import/export) operations, chemical companies have now begun to automate their often manual international supply chain processes to include: freight tendering, compliance, and other logistic processes.  Through better event management and online visibility into logistic operations, businesses can more consistently balance inventories, whether the world economy is trending up, contracting or remaining stable.

 

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