Freight Transportation,
The Corporate Information Resource
Executive Summary
Information is the
basis for all decisions. Accurate information improves the chance
for good decisions. Accurate and timely information substantially
increases the probability for successful decisions.
Within every
company there exists an inexhaustible supply of information, but its
sheer size and volume can render it useless; and the cost associated
with its cultivation and harvest could exhaust the corporate
treasury.
Freight
transportation is a rich and robust corporate information resource;
but too often it is viewed as a single function whose sole purpose
is to move raw material in, and finished goods out. Recognizing the
dimensions and dynamics of freight transportation, immediately
presents its capability as a powerful and comprehensive corporate
information resource.
Amongst all of the
corporate functions, operations, processes, and resources, freight
transportation, because of its inherent purpose, is focused and
uniquely capable of penetrating every corporate department,
discipline, activity, and process. Once inside, the “freight
alter ego” travels throughout the entire supply chain
collecting, appending, and processing the freight transportation and
associated data. This data is ubiquitous, and once harvested, has
universal corporate appeal. It is capable of satisfying the
information requirements of every department and discipline,
singularly and collectively.
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This white
paper will discuss freight transportation, its perspective,
its composition, and development. It will examine the traditional
roles as well as enhanced roles of: freight terms and terms of
sale/purchase; Bills of Lading; Delivery Receipts; and applicable
control references, as well as other associated components that
affect and are responsible for the movement of goods throughout the
supply chain. How these instruments and their relationships create
an important corporate information resource, that can improve
operations and performance, will also be addressed.
Freight Transportation
Fundamentally,
“freight transportation” is a compound phrase that is descriptive of
“product conveyance”. “Freight” is defined as, “Goods carried by a
vessel or vehicle,[1] and
“transportation” is defined as, “A means of conveyance[2]”.
In commercial parlance, and notwithstanding these
definitions, freight transportation means many things to many
people. Perhaps this is indicative of its importance and relevance
in our daily lives, both personal and commercial. On the other hand
such prominence may have caused its importance to be taken for
granted thus ignoring the major role it can play in commerce and
industry. Freight transportation is abundantly important and is
recognizable in everything in our possession, and for that matter
everything in our sight. Freight transportation is responsible for
moving everything, from any place to every place and because it
touches every part of every business it is a tremendous corporate
resource. However, because of the lack of understanding and
appreciation, industry’s singular belief in its function and purpose
may have severely limited its benefits to only a few.
Freight Transportation Perspectives
Perspectives are
typically driven by responsibility and influenced by their
environment.
Freight
transportation, like any subject can be understood from many
different perspectives. As an example, the traffic or
transportation manager would primarily see freight transportation as
managing the personnel who perform the operations associated with
the movement of goods. The sales perspective might be limited to
customer delivery satisfaction; accounting would probably view
freight transportation as one of the many cost items that it is
responsible for monitoring; the purchasing perception might
understand it as a component of the delivered cost.
Every department’s
and business discipline’s perception of freight transportation is
seen through the eyes of their respective role and responsibility.
Some may see it in complex terms, and others will see freight
transportation in simple terms. Some may only understand freight
transportation from the task perspective; perhaps their
responsibility only requires the assignment of a code to the Bill of
Lading. Literally, everyone in the world is impacted by freight
transportation. In some cases freight transportation is highly
visible and obvious, and in other cases such as, “the pencil on the
desk” it is simply taken for granted. If every employee were asked
to describe freight transportation, and how their daily activities
were influenced by it, there would be a limitless response and every
response would be correct. Because of the wealth of its data, its
scope, and influence it forms the essence of the corporate
information engine. Therefore, changing its perspective should be a
corporate imperative.
Bills of Lading
Freight
transportation is capable of producing inexhaustible amounts of
data, and neither its cultivation nor its harvest will exhaust the
corporate treasury. The inherent ability of the “freight alter ego”
to travel throughout the supply chain on a chartered course
coincidentally brings it in contact with a preponderance of
corporate relevant data.
As the corporate
life bloodline to the market; freight transportation’s functions,
activities, and processes begin with the Bill of Lading. This
instrument is replete with primary and connective data whose
information capabilities are almost limitless. By examining these
data we can begin to understand the depth and breadth of their reach
and, at the very least, our curiosity will drive us to understand
their relationships. It can be effectively argued that the Bill of
Lading can tell the most comprehensive story of every company. Its
data elements can tell us how often, and how much, certain products
are shipped to specific areas. The resulting distribution patterns
can be compared with sales forecasts; this comparison could reveal
product performance and do so at many levels. As an example, if
henna based shampoo sells best in certain ethnic markets, the
distribution pattern may demonstrate that some of those markets are
not being served. Likewise, Bill of Lading data elements when
aligned with Purchase Order data can provide collaborative
information about manufacturing and manufacturing consumption that
would help us better understand inventory. The supply chain
components are connected by freight transportation, and the Bill of
Lading is the initiating instrument. Its proximity with sales and
purchase orders makes the Bill of Lading the primary information
vehicle.
Bills of
Lading, Sales/Purchase Orders and Freight Bills
A Bill of Lading is
a contract for carriage and receipt for merchandise. In this
capacity it has immediate access to: sales orders or invoices,
purchase orders and freight bills. In turn, the associated data
offers direct access to the entire corporate network, which through
the Bill of Lading can penetrate the corporate information and
process web at a myriad number of critical data points. As an
example, the Bill of Lading reference number may be identical to a
sales order or associated with it. Consequently, a salesperson’s
identification would be allied with the Sales Order. Likewise, the
Purchase Order similarly carries its respective information. The
Freight Bill identifies the “shipper’s number” which, coincidentally
is the Bill of Lading Number or can be the Purchase Order number.
The data carried by the Bill of Lading, Sales Order and Purchase
Order are the primary drivers of the corporate information engine.
The relationship between these instruments, with the Bill of Lading
at the center is uniquely capable of driving a continuously
refreshed flow of mission critical, corporate performance
information. The allied data will expose areas of opportunity,
provide corporate insight, suggest sales performance monitoring, and
can improve forecasting as well as presenting a myriad number of
potential opportunities. The information can be presented
historically and interactively. Through ongoing performance
monitoring potential failures can be prevented and modifications can
be implemented for avoidance.
Freight
transportation opens a major information portal into every company.
Through this portal we can examine such things as: individual or
comparative sales performance by product, person, and shipping
location. Pattern recognition allows us to develop an understanding
and appreciation of: the volume and types of shipments, frequency,
distribution market, trade class, freight cost/sale value, as well
as back order information. These discoveries can be viewed
directionally by: customer, salesperson, product, and destination or
through any of the data that is touched during the
freight lifecycle. Inventory levels, by product and class can
be identified. Distribution patterns regarding vendor performance
become obvious by analyzing the data beginning with the Bill of
Lading, if issued as a component of the Purchase Order, or by the
Purchase Order in combination with the Delivery Receipt.
Some business
models rely heavily on promotions and spiffs. In this business case
it is critically important to understand how the promotion or spiff
performs. Which promotions and spiffs work best: at what times; in
what quantities; for which salesperson and why. Clearly, the
instruments associated with freight transportation and driven by the
primary and secondary data will yield the answers to all of these
questions. While this may be of specific interest to some
companies, most consumer goods companies are keenly interested in
the movement of their goods within the sales cycle. This “buy-in
and sell-through” analysis is significantly improved when companies
use freight transportation data and information.
The
“new freight paradigm” developed by TransportGistics,
establishes that “freight” as an identity begins with its first
recognition, simply as an entity and continuing through description,
identification and ultimate consumption. Through TransportGistics’
“Freight Lifecycle Management” (sm)
techniques, and the use of its
TRaIDS product, full and complete information about the product,
at each of the touch points within the supply chain are made
visible. By knowing when the product was shipped, when it was
delivered to the store, the counter and then to the customer, all of
the data necessary for an accurate and timely “buy-in and
sell-through analysis” is readily available. Additionally, any
person, place, or event that affects the velocity of the product
through the supply chain is known. Knowing who, where and when
allows for appropriate and immediate corrective action. Making sure
that goods arrive at the store to meet breaking advertisements, and
that the goods are at the counter in order for the customer to
acquire them and making sure that commissions are paid to the
salesperson on time are critical components of a successful sales
process. The data associated with the “new freight paradigm”
initiates and supports the entire buy-in and sell through
knowledgebase.
Freight Terms
and Expediting Receivables
All businesses are
keenly interested in expediting their receivables. Freight
transportation data and proper terms of sale will result in
accelerating corporate receivables.
In its capacity as
both a contract for carriage and receipt for merchandise, the Bill
of Lading establishes the time and place that the freight is
receipted for by the carrier. When the terms of sale are FOB
origin, title passes at the time and place of pick-up and when the
terms of sale are FOB destination, title will pass at the time and
place of delivery. As soon as the carrier issues the Bill of
Lading, or when the freight is tendered to the consignee, invoice
dating should begin. Utilizing the freight transportation data to
drive the invoicing process will provide the necessary information
to expedite the receivables and offer every company the opportunity
to support its timely invoice demands and information needs to
improve their cash management.
The terms of
sale/purchase dictate the passage of title and therefore
significantly influence payment dating. Knowing exactly when title
passes is tantamount to anticipating the date of payment. The Bill
of Lading is the device that provides access to carrier delivery
information. It should be used to support the enforcement of
invoice payment dates as well as used for analytical purposes to
create a baseline for improvement or modification.
In addition to
expediting receivables, the size of most freight budgets allows that
amount of capital to be used in more advantageous ways than simply
being committed to the payment of freight. As a negotiating tool
this expense has enormous potential. Effective use of the freight
expense in a time sensitive reimbursement program can properly
secure improved transportation services and eliminate the need to
borrow or purchase money for other capital requirements.
TransportGistics has developed an entire program called, “freight
cash asset management” (sm). Its
primary understanding recognizes that the freight expense can be
converted to an asset. From this perspective, an immediate benefit
can be found in cash flow and improved capital utilization.
Freight terms and
routing data also play an important role in corporate performance
because their data elements, in conjunction with freight
transportation data will supply the necessary information to improve
customer service. Questions regarding service level and delivery
performance are just two examples of the importance of the data
utilization. Incurring premium transportation expense is only
appropriate if needed, and if needed there must be a means to
determine if the deliveries are being performed in accordance with
the expense. An example of this can found in a consulting
assignment with an insurance company that distributed more than
2,000 overnight shipments every night to their various offices and
agents. Understanding the field needs and comparing them with
delivery performance, two important discoveries were immediately
identified: Agent expectation and usage were dissimilar and the
deliveries were inconsistent with home office expectation. The data
clearly demonstrated cost and service level alternatives that
reduced the freight expense by more than 22%. These findings have
been replicated in consumer products companies as well. In addition
to cost reduction, customer service was dramatically improved
because customer expectations were placed in sync with the company’s
order cycle, routing and shipping practices. Customers no longer
had to estimate the order cycle time, they simply identified their
inventory need and based upon the freight transportation data,
alternative and meaningful service levels were offered. Unnecessary
premium freight expense was eliminated.
In-Store
Modeling and Freight Transportation
An interesting
example of TransportGistics (TGs) innovative use of freight
transportation data occurred during another consulting assignment
for a client in the cosmetic and fragrance industry. TGs
Consulting and Convergence Practice Groups were asked to study
“in-store modeling” and present their findings. In-store modeling
is a sales process whereby models walk in and around the retail
store, approach customers randomly asking them if they would like to
“experience” a fragrance. The client’s primary interest was in
determining if in-store modeling was effective. While traditional
consulting methods and processes would have delivered answers to the
client, the TGs teams approach enabled a substantive
report along with important recommendations that also provided the
client with a unique method to monitor performance interactively.
Using historic freight transportation data, specific shipments
comprised the database. Because the client had already been using
the
TRaIDS product, this data combined with the shipment data
connected the, “whom, when and where” of each shipment. Drilling
down, the “buy-in and sell-through” together with the respective
commission reports identified individual product performance. Next,
the consultants used the model database to connect modeling days to
the product sales. Data analysis supported the premise that sales
appreciably increased when in-store modeling was employed. However,
the combined databases were able to provide the client with
significantly more information, duly supported with the appropriate
decision criteria that allowed them to more effectively use in-store
modeling. The client learned which products sold best on days with
certain characteristics and the most productive times of the day.
The TG consultants also recognized retail customer
buying patterns from the database and understood the importance of
external influences, such as weather. By overlaying weather
databases, the buying patterns were further refined; rainy days
demonstrated increased sales of certain fragrances. Likewise, cold
days demonstrated that other fragrances sold best. The
opportunities that flowed from these discoveries allowed the client
to significantly improve product distribution. Ongoing performance
was supported by collecting the freight transportation data from the
transaction stream. Significant cost reductions were realized in
freight transportation, inventory and models were paid in a more
timely fashion. While there were many additional benefits that the
client realized, Spiffs and promotions could now be targeted and
focused thereby used far more effectively.
The Supply Chain
Adding to its scope
of influence and increasing its level of complexity, and therefore
its capability, freight transportation should also be viewed as the
“master link” in the supply chain. This perspective allows you to
see an increase in the amount and type of data that will reside in
the corporate data/information repository. Freight transportation
is also the “moving” vehicle and mission critical component of the
supply chain, that is, absent freight transportation there is no
supply chain. Further, freight transportation connects all of the
trading partners. As freight moves up and down the supply chain,
the “freight alter ego” is collecting, appending, and processing the
data. Throughout the supply chain, there are virtual and actual
stops or “touch points” at which identifiable activity occurs.
These touch points are responsible for multiple events, one of which
causes the identity of the trading partners to change. Consider the
manufacturer; when they initiate a shipment they are the consignor
or shipper; when they receive a shipment they are the consignee or
receiver. When the manufacturer purchases raw material, they could
be the buyer and the consignee. When they ship the finished product
they are the seller and the consignor. On the other hand the
manufacturer may not be visible during all or at certain segments of
the freight lifecycle. As an example, a manufacturer may simply
purchase goods and arrange for them to be shipped from the source to
a converter and the converter may ship to a finisher; at no time is
the manufacturer the shipper or the consignee. Understanding the
importance of transient trading partner identification along with
the data and information opportunities that are available at every
touch point in the supply chain will provide the creative and
imaginative visionary with an unlimited supply of opportunity.
Conclusion
If you agree with
the
“law of commerce and logistics”, that is, “increasing the speed
of electronic commerce results in the consequential demand to
accelerate the supply chain”, the inability of yesterday’s practices
and tools to keep pace with the speed of the supply chain will cause
their failures to surface at an unmanageable rate. Freight
transportation’s primary and connective data offers every company a
rich and robust harvest of timely and accurate information that will
substantially increase the probability for successful and profitable
decisions
Freight
transportation is responsible for moving everything, from any place
to every place and its freight alter ego roams throughout the entire
supply chain. Consequently, it
should be viewed as a highly influential corporate resource and
knowledgebase that can be readily used for inquiry, analysis, and
performance monitoring. Freight transportation is pervasive and
because of its ability to join the trading partners, it is highly
capable of providing superior management information.
About TransportGistics, Inc.
TransportGistics is a global,
multi-product and services company that provides market leading,
simple, incremental solutions for transportation management and
logistics functions within the supply chain.
TransportGistics commitment to
education is portrayed through its advancement of professional
logistics and transportation programs. Its
white paper site presents important and timely
transportation and logistics subjects each month, and is regularly
visited by more than 30,000 companies in the private and public
sectors, universities and governments, worldwide. It is
an active
partner at the Center of Excellence in Wireless Internet and
Information Technology at the
State
University of New York-Stony
Brook.
Continuation
Please consider
this white paper as a continuum in this subject area, succeeding
white papers will address common issues and address them with common
solutions. We encourage our readers to direct any specific
questions or comments to
papers@transportgistics.com.
Disclaimer
The information
presented herein represents the opinion of the author, but not
necessarily the opinion of TransportGistics, Inc. This white paper
is not presented as a legal position or as a recommendation.
“Freight
Lifecycle Management” and “Freight Cash
Asset Management” are sales marks of TransportGistics,
Inc.
TransportGistics,
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