This white
paper
will identify and discuss the most important, perhaps simplest of
steps necessary to improve Inbound Transportation Management as well
as the opportunities that this improvement will yield.
Changing
Business Attitudes
Yesterday’s
business relationship recognized the individual importance of the
buyer and seller. Individual advantage was the objective and this
attitude was portrayed with customers and competitors alike. This
business relationship was supported on many levels, but most
supportive was the belief that this was a zero-sum game,
there could be only one winner.
At many organizations, inbound
shipments just appear on the dock. Companies have little
control over when and how the products are shipped and see little
opportunity to streamline. Many companies do not have their arms
around their inbound spend; there are too many other areas that have
a higher priority because of the lack of inbound control and
visibility. But by improving control comes a wealth of new
benefits that can help companies better decide where and how to
route and consolidate inbound shipments for real savings.
After all, the
ultimate goal of any inbound process is to receive materials as
quickly as possible, without exception, so that they can either be
moved to production for manufacture or assembly or moved into stock
for sale, all at the lowest possible costs.
Begin Control:
10 Tips to Create a Routing Guide
The routing guide
defines the rules of engagement between vendors
and customers. As logistics processes have come
under more scrutiny, the routing guide must be
more detailed, providing a solution for every
shipping situation. Yet, it also must be easy
to read, simple to use and flexible. Your
trading partners will be more apt to comply with
a guide if nothing is left to their imagination
and the carrier’s, cost savings and route
parameters are clearly spelled out.
The rules of
engagement are essentially a compilation of
business rules that particularly address the
operating conditions under which the trading
partners perform. Developed from an
understanding of the corporate philosophy and
empowered by the Terms of Sale/Purchase and
Freight Terms, the rules of engagement truly
establish the way in which the trading partners
conduct themselves. The rules of engagement also
function as the platform through which
compliance is defined and enforced and should
serve to speed up the flow of information and
materials.
Organize your
current and future shipments by origin and
destination.
Turn to your company’s vendor and customer
files and identify origin and destination
points in your entire distribution network.
You can create something as simple as a
state-to-state matrix or even as complex as
a nine-digit zip-to-zip matrix.
Identify and chart the price
/ service capabilities and limitations of
each transportation vendor, consistent with
your desired level of service and cost.
Know your carrier’s strengths and
weaknesses. Some carriers are good at
transporting perishables; others may provide
the best service, but only to certain
locations. Some carriers may provide great
inbound service but less than optimal
outbound service. Others may excel with
overnight service; others may have strength
in 3 – 5 day service. There are as many
capability variables as there are carriers.
Communicate the possibilities and where to
access the best value for every
transportation dollar you spend.
Identify
shipment size (volume and weight),
frequency, modal requirements, special needs
and time in transit.
Know the general make up of your shipments
and the variables for time in transit.
Identify weight groupings and service /
modal requirements that apply to each
group. Typical weight groups are 1 to 70 or
150lbs, 71 or 150lbs to 5000 lbs, 5001lbs to
12000 lbs and over 12000 lbs. Service /
mode requirements can vary from overnight,
two day, 3 day or 3- 5 day or Air, LTL,
Truckload, Rail and Ocean. You may not want
to provide a standard routing for overnight
shipments weighing over 5000 lbs, nor would
you provide a routing for ocean shipments
weighing less than 70 lbs. Additionally,
for shipments under 5000 lbs, you may want
an opportunity to consolidate the shipment
with others before it is shipped. Pay
careful attention to your commodity mix and
identify susceptibility to damage,
contamination, heat and cold, etc. If some
commodities cannot be shipped with others or
require unique handling requirements due to
their special nature, you need to provision
for this.
Identify
consolidation opportunities and weight
breaks that support your price / performance
needs.
All too
often, shipments are arranged as they come
in from sales or order processing. A basic
rule in transportation is that volume
enables volume discounts from carriers. If
your shipments can be consolidated, you will
receive better service and rates. Take a
look at your carrier rates. In many cases
you will find that one carrier offers better
pricing for shipments of varying weights,
one carrier may offer lower pricing for
smaller shipments while another carrier may
offer lower pricing for larger shipments.
Create
a cross functional matrix that considers all
possible variables in Tips 1-4 but keep it
simple.
This is a basic
“What If” matrix that leaves the
decision-making responsibility with you,
where it belongs. If your vendors are given
the flexibility to choose carriers for you,
they will almost always choose a carrier
that they prefer, and not necessarily the
one with which you negotiated the best rate
or service. Most freight rate exceptions,
most errors in documentation, and most
causes for non-compliance can be associated
with a lack of control. It is a difficult
task to identify all possible combinations
of circumstance and requirements, what’s
more is that you want to keep your routing
guide simple so that your vendors or other
users can easily obtain the information that
they are looking for.
Create a mechanism for
exceptions handling that fit within your
current business processes.
While you
strive to provide as much necessary
information to your vendors as possible,
there are circumstances for which you cannot
account. So you need a mechanism to provide
routing assignments and rules for those
unique shipments that will occur. Create a
contact form or shipment authorization form
that can be easily executed by your vendors
so that they can provide you with all of the
information that you will need in order to
obtain a carrier that will satisfy your
requirements.
Create rules
Your rules
will identify the general and specific rules
of engagement for conducting business with
your company and should identify anything
that is necessary to maintain or improve the
efficiency of your receiving, put away,
inventory and accounts payable and
receivable processes. Identify requirements
for marking, labeling, tagging, bar coding,
Bill of Lading preparation, Garment on
Hanger Shipments, direct to floor
merchandise, pallet specifications,
contacts, purchase order guidelines, hazmat
and back order processing.
Distribute your guide.
Print only the
number of copies you require so that each of
the recipients can have access to the
information appropriate for their need to
know. Make sure each Routing Guide has a
clearly stated security requirement clause
and a clearly stated ramification for
violations that compromise your company’s
competitive privacy. Copies in the wrong
hands are a potential security problem so
you should know where every copy is at all
times. When a vendor informs you that your
Routing Guide has been misplaced, or even
that parts are missing, be very concerned.
The details in your Routing Guide can be
highly competitive information that should
be easily accessed by the ones who should
have access, but not available to
competitors or to those who do not have a
need to know. All too often, a vendor
misplaces a Routing Guide or has it open or
available when a competitor to you is in the
office. Security can be a very difficult
concept to manage.
Create
communications around your guide.
Mail each guide
with a signed delivery confirmation and a
return receipt or fax acknowledgement form.
Follow this up with a telephone call to
review aspects of the Routing Guide where
there might be confusion. Share comments
about your Routing Guide with users,
particularly where they pertain to
exceptions that can improve your supply
chain. Keep notes of these exceptions for
addendums and future updates. A signed
confirmation is not just a security
function. You need to confirm that every
vendor has the most recent edition of your
Routing Guide available for reference when
it is time to make a transportation delivery
decision. The excuse that your Routing
Guide was not available should not be
tolerated.
Plan to repeat
this process in four months or consider
simplifying the process by taking it
on-line.
Things
change and your Routing Guide is not a
static process. You negotiate a lower
rate. You find a better transportation
alternative. A carrier goes on strike. A
usual route or highway is closed or is prone
to congestion or accidents. There are many
reasons to continually revisit your Routing
Guide. If you are working with old
fashioned paper Routing Guides, you know
that this is also an expensive on-going
compilation and printing expense. If you
have changed over to an electronic Routing
Guide you can make changes as they occur so
your Routing Guide is always current, always
secure, and always ready for full
compliance.
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Improve
Control: Improve Communications
Managing the costs
of moving goods through the supply chain is a huge challenge for
shippers and consignees. A single shipment involves inter-company
and intra-company transactions and communications. In the life cycle
of every transaction, data is required by a variety of people
including vendors, customers, carriers, customer service,
accounting, purchasing, product coordination, inventory management,
warehouse management, and fulfillment.
A routing guide
should be looked upon as a collaborative resource that
improves trading partner relations, management decisions and
reduces costs for all parties. |
Companies procure transportation services with specific carrier
partners that both meet their requirements for price & service and
have a solid understanding of the nuances of their business needs.
Additionally, these companies establish business processes and rules
of engagement to facilitate the efficient flow of information and
material into and throughout their organizations.
To convey information internally and externally, companies have
historically implemented the use of paper routing guides. These
guides are prepared, printed and distributed several times a year
and often require vendors to acknowledge receipt of the new guide,
fax an acknowledgement and immediately comply with the new
directives. Printing and distributing the guide to vendors is a
nightmare, if anything has to change, it would involve the same
process all over again. Once a company mails its guides, there is no
ready method to insure that vendors had the correct information,
until they started to see vendors were using carriers that were not
approved. Because the process of distributing a routing guide
and monitoring compliance is so costly, companies are reluctant to
update their routing guide too often. This precludes companies from
taking advantage of better freight rates and immediately reacting to
changing market conditions.
While basic practices see the
routing guide as a static body
of operating rules that speak to sales and purchase driven freight
transportation matters such as carrier selection, routing, packaging
and labeling, claims and credit, their primary form of
communication was the “printed routing guide”. A weighty document
that resembled War and Peace, it was published either semi-annually
or annually. Because of its unwieldy size, lengthy preparation and
printing time it was not unusual that at the time of its
distribution, it was already outdated and required the collateral
issuance of supplemental instructions. In an attempt to keep
current, some companies issued supplements and revised pages,
similar to tariff updates, throughout the life of the guide. As
cumbersome and impractical as this process was for the issuers, it
was at least as painful for the recipient. Neither buyer nor seller
could timely deploy changes or even place the changes into a
workable process. If getting the information out on time was
impossible, it was equally impossible to take advantage of
significant transportation opportunities that were literally
available throughout the entire life of a shipment.
A routing guide should be looked upon as a collaborative resource
that improves trading partner relations, management decisions and
reduces costs for all parties
as non-compliance
with routing guides costs both vendors and their customers millions
of dollars annually.
To adjust to the
conditions that exist today, manufacturers, distributors, and
retailers have implemented
web based routing guides
either. A web based routing guide should enable companies to ensure
that trading partners use the carriers, rates, services, business
rules, and communications that are required to effectively manage
their supply chain. It should empower users with real-time
information and utilities to immediately execute decisions based
upon current information. It should make this information visible,
thereby providing a solid basis for decision-making. It should
eliminate voids between the decision and the implementation of the
decision and improve communications and relations between trading
partners. It should share information in a real time
environment given the ongoing challenge to drive down transportation
and handling costs.
People in general
and management in particular, do not deliberately make mistakes.
Non Compliance implies that a mistake has been made somewhere along
the supply-chain. The most common causes of errors are inadequate
and inaccurate data. A web based routing guide should be designed
to address these issues. It should capitalize on what computers and
people do best. Computers are excellent at handling data, but not
so good at decision making. People are nowhere near as good at
handling data but, excellent at making decisions if given the right
information. A Web based routing guide gives decision makers the
right data at the right time to allow them to make the right
decisions. The right decisions made at the right time, increases
service, improves performance, and eliminates non compliance.
When creating a
web based routing guide, consider the following:
In short
order and with little effort, you should be able to make changes
to your carrier assignments and rules of engagement (routing
guide) and instantly, automatically inform all vendors /
customers / employees of the change.
It should provide constant
contact with vendor and customer requirements and the ability to
adapt these changing requirements by making and affecting
instant changes while simultaneously notifying all users.
It should enable companies
to maintain a manageable number of delivering carriers to
maximize efficiencies of the freight receiving process.
It should enable users to
simplify the distribution process and concurrently leverage all
shipment volumes to improve compliance and drive down
transportation costs.
It should empower users with
real time information and the ability to make and execute
decisions without delay.
It should provide greater
flexibility in defining transportation instructions and take
advantage of short term opportunities offered by its carriers.
It should be easier for
shippers to comply with routing instructions by eliminating
paperwork,
It should
improve communications
as it should serve as the mechanism to convey all of your
logistics requirements to your vendors, customers and DC's.
Conclusion
The most valuable use of a routing
guide is to allow you to gain control over inbound shipments by
getting vendors to comply
with routing instructions while web based routing guides promise
timely information, easy distribution, and widespread access.
In either instance, these can serve as a simple, cost effective way
to gain control, improve the management and drive down direct and
indirect costs associated with inbound transportation.
To gain a
better understanding of the rules of engagement and to learn how
many of the world’s leading corporations have improved control and
management of inbound transportaton, simply
click on the following link:
RoutingGuides.com.
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. Most recently,
TransportGistics has been named a Top 100 Supply Chain Partner by
the readers of "Global Logistics and Supply Chain Strategies"
Magazine as well as a Top 100 Logistics IT provider by Inbound
Logistics Magazine.
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.
“Idea Logistics", "Freight Lifecycle Management”, “Convergence”
and “Today’s Freight Paradigm” are sales marks of
TransportGistics, Inc.
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