Archive for the ‘General’ Category

Shorter Cash-To Cash-Cycles Will Ensure Chemical Shippers Have Money On Hand as Economy Improves

Monday, April 25th, 2011

As the economy rebounds and business normalizes, companies with healthy cash flows will be in a good position to address corporate expenditures and investments put on hold due to the recession. Those with long cash to cash cycles, however, may find themselves short on cash to fund future operations.

Even with strong sales marked on the books, companies may be cash poor due to long cycles associated with converting resources into cash flow. Inventory management, accounts receivable cycles and accounts payable times are all factors effecting cash to cash cycle times. Today, managing these components has become complex as business goes more global.

For example, when purchasing products from international sources, a chemical company may face a variety of new overseas procurement situations such as expensive letter of credits, logistics problems, and reliability. And when shipping overseas, long payment cycles, often just starting at product receipt, can extend cash payments to more than six months.

Strain on cash can adversely affect companies without adequate supply chain management processes. Chemical companies may need the support of a third-party logistics outsource that has the international experience and technology in implementing supply chain management strategies that may include developing free trade zones, consignment warehouses, customs automated clearinghouses and freight on board destinations.

A 3PL can also offer web-based transportation management system (TMS) technology that automates financial processes and provides visibility into the financial flow, reducing accounts payable times, ensuring greater accuracy and maintaining established accounts receivable time frames. Through better management of the supply chain – from inventory management through to accounts payable – chemical companies can improve cash cycles.

By Francis Ezeuzoh — Chief Financial Officer, ChemLogix, LLC

Did you know the Fuel Surcharge you pay on every load doesn’t cover the out-of -pocket costs of higher fuel cost to your carriers?

Thursday, March 24th, 2011

Why? Fuel surcharge formulas are based on a loaded mile formula. All empty miles run between the terminal and your loading site, such as miles from the carrier’s last delivery to you or miles to the terminal for equipment repairs or tank cleaning, are not included in the fuel surcharge calculation.  As a result, the carrier has added fuel costs for those empty miles. Sure, when you contracted with the carriers, they built in some fuel recovery number for empty miles.  However, recent fuel cost increases (the time from when you negotiated your contracts until now) are not included in those calculations.

What does this mean to you? Let’s review a few examples. Say, during the time of your last contract negotiation, fuel costs increased by $1.50/gallon.  What added cost does that represent?   The average truckload carrier – either dry van or bulk – wants a minimum per-truck revenue of $200K to $225K.   Assuming a modest 10% empty mile to loaded mile ratio for TL van freight and 20% for bulk freight, unrecovered fuel costs is $2,769 for dry van carriers and $5,538 for bulk truck carriers. (Click View Graph below for more)

How do you effectively negotiate during any price increase discussion? Know your carriers empty mile ratio and average truck miles per gallon before you meet. Also, look back at your current contract effective date. Knowing what the fuel price was during your last contract renewal, along with your carrier’s empty mile ratio and average MPG/truck, will enable you to calculate your fuel cost impact on your carriers. You can also be a good partner to your carriers by putting actions in place to minimize empty miles and fuel waste.   As example, initiate a no idle rule at your plant during wait time to load.


TMS Mobile Applications Get Us Closer to Meeting the Rubber on the Road

Sunday, May 23rd, 2010


Welcome to Chemlogix Chemical and Transportation Logistics Blog

Wednesday, March 4th, 2009