Posts Tagged ‘procurement’

YouTube Video Discusses Advantages of ISO Tanks to Transport Chemicals

Thursday, January 12th, 2012

Check out our first in a series of videos on important logistics topics of interest to chemical shippers.

Stephen Hamilton, Managing Director of ChemLogix Global, discusses how BulkTainer ISO tanks offer enhanced safety and security for shipping chemicals by taking chemicals off roadways and reducing the incidence of accidents. Click Here.

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.


Logistics Outsourcing: Does it make sense for everyone?

Wednesday, June 2nd, 2010

Each company must look to its strengths to answer this question for itself. But the answer is likely to be yes ….to some extent.

Two questions help to begin to frame the answer are: 1) what expertise and capabilities should we have in-house based on our size and the criticality for each logistics function? And 2) what really are our strengths today for each function and each mode and are any gaps best filled by Outsourcing?

Smaller companies with less than 5-10,000 shipments per year will often Outsource the full logistics function to a 3rd party provider (3PL). It simply is not cost efficient to have experts across all functions like procurement, execution, payment, regulatory compliance, etc.  and across all modes from truck to rail to ocean. For medium size, and even large shippers the answer often comes down to looking at its operation mode-by-mode. Some very large domestic shippers who only do several thousand international shipments per year recognize that the complexities of those shipments require an understanding of markets, processes, regulations, etc. that is better handled by experts who do that for many shippers. Companies that may have large packaged truck operations but smaller bulk truck needs, or vice versa, will often carve out that mode for Outsource experts to manage. The same is true across all truck, rail, and intermodal operations.

An especially useful area of Outsourcing for companies of all sizes can be Freight Procurement.  Outsource providers bring: 1) purchasing power, 2) market expertise, and 3) systems and tools that a single shipper cannot hope to match. 3PLs have staff that is constantly in the market both for themselves and for their Freight Procurement customers. This allows them to see changing trends in price and capacity across regions. This valuable knowledge is coupled with the use of automated tools that create competition for the shipper and often allow carriers to see how their Bids are stacking up. This ensures the best matching of carrier capacities/strategies with the needs/strategies of the shippers.  These Outsource Procurement engagements often start with a Benchmarking exercise that highlights the potential of having an automated bid done in conjunction with the Outsource partner.

The logistics process with the most hassles, Freight Audit & Payment, is also often Outsourced to save internal staff resources. Especially coupled with a Transportation Management System the process can be automated and exceptions, the bane of the process, significantly reduced.

For processes/functions/expertise that makes sense to keep in-house for medium and especially large shippers there is still an Outsource decision to make…..where do we get the support systems needed by our staff for procurement, for shipment execution (Transportation Management Systems – TMS), for global trade management, etc.   Some 3PLs, such as CLX, use these systems as well as sell and implement them with larger shippers. The very good news here is that the seller/implementer is fully vested in ensuring a good product that is well maintained.

As with many questions in Logistics, the answer to “Should we Outsource?”  comes down to “it depends”.  But I think you will find that in most cases the decision will not be to Outsource or not, but rather, what functions, processes, and modes does it make sense to Outsource.

Does the BLS Trucking PPI Indicate That a Bottom has been Reached?

Tuesday, May 26th, 2009

Ghost Ship full After performing a steep dive since Q3 2008, the current Bureau of Labor Statistics Trucking PPI  looks like it”s beginning to run out of negative steam. Anybody who has been watching this in the marketplace knows that the timing is pretty good to dust off those carrier contracts and secure the requisite capacity at today”s rates … rates that are destined to go north once manufacturers begin to feel the pinch of inventory depletion. Reinforcing the change in momentum is the Census Bureau’s latest report on the ratio of manufacturer”s inventories to sales, always a good leading indicator. A American Hauntingn download

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So what can shippers do today to ensure they remain competitive during these volatile & evolving conditions? The first question they have to answer is how their freight costs measure up in the marketplace. There are a couple of ways to benchmark rates:

    • A quick metric is to compare actual freight rate change trends to the BLS PPI indices for TL, LTL, & rail freight classes; other rate index sources are available from the ATA, AAR, and STB.
    • Or a more detailed benchmark analysis can be performed on the shipper”s freight database by an outside provider that has a comprehensive, best-in-class, and current freight rate database in the modes used by the shipper.

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Catch a Fire hd Once it”s been established that the opportunity exists for rate improvements, a procurement initiative needs to be launched to close the gap. Here too there are a couple of options:

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  • Using either manual, electronic, and/or web based processes shippers can execute their own in-house RFQ methodologies to secure requisite capacity at the most competitive rates available in today”s market.
  • Or an outside provider can be engaged to perform the RFQ process often times in conjunction with other shippers” volumes to leverage maximum lane densities using highly efficient, state-of-the-art RFQ technology.

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So whatever option a shipper elects to use, my advice is Carpe Diem – seize the day.

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