A BUYER’S GUIDE TO - Chainalytics€¦ · This will determine whether FAK pricing structure offsets the potential claims Class Min. Average Density (LB per 3FT ) 50 50 55 35 60

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Minimizing the Impacts of Uncertainty

A BUYER’S GUIDE TO

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Chainalytics Overview

BY THE NUMBERS

135 FTEs Worldwide

Serve 300+ Unique Clients

– 17 of Gartner’s Top 25 Supply Chains

– 80 Fortune 500 Companies

Delivered 500+ Engagements

ACCOLADES

“2013 Cool Vendor in Supply Chain Services” – Gartner

“Great Supply Chain Partner” for 10 Years – SupplyChainBrain

8 “Pros to Know” – Supply & Demand Chain Executive

One of “10 Coolest Supply Chain Boutiques” – ARC Advisory

ATLANTA

MINNEAPOLIS MILAN

STOCKHOLM HELSINKI

BANGALORE

SYDNEY


Years

Quarters

Months

Weeks

Planning

Horizon

Data-Driven Supply Chain Transformations

Transportation

Service Supply Chain

Logistics Operations

Sales & Operations Planning

Packaging Optimization

Supply Chain Design

Are we balancing supply and

demand in the most profitable

way?

How should we transport

product through the supply

chain?

How much and where should inventory be

positioned in the supply chain?

Can we reduce our transport and logistics

costs by improving cube

utilization?

Should our warehousing and material operations

be insourced or outsourced?

What is the best flow path?

How well do our current operations

mitigate repair and warranty

costs?

How can we increase

visibility to stakeholders?


Some of Our Clients

LSP Chemical/Process Automotive & Industrial Packaging Healthcare

HIGH TECH

& TELECOM

FOOD &

BEVERAGE

RETAIL

HOME/OFFICE

DURABLES

HOME/OFFICE

NON-DURABLES

OTHER

INDUSTRIES

SERVED

http://images.google.com/imgres?imgurl=http://www.fashionunited.it/gfx/news2004/fedex_logo.jpg&imgrefurl=http://www.turbohoses.com/Turbo Hose.htm&h=163&w=324&sz=8&hl=en&start=2&tbnid=IYNz5MLzeAPrlM:&tbnh=59&tbnw=118&prev=/images?q=fedex+logo&svnum=10&hl=en

http://www.moduslink.com/index.cfm

http://images.google.com/imgres?imgurl=http://www.corning.com/images/logo.type.gif&imgrefurl=http://www.corning.com/displaytechnologies/discover_lcd/&h=66&w=278&sz=4&hl=en&start=4&um=1&usg=__pYcsQ0Y7vAdlBnYK14ggOoQD6-A=&tbnid=2JjiJRxyvVialM:&tbnh=27&tbnw=114&prev=/images?q=corning+logo&um=1&hl=en&rlz=1T4ADBR_enUS256US256

http://images.google.com/imgres?imgurl=http://www.techgadgets.in/images/apple-logo-dec07.jpg&imgrefurl=http://www.capitolvalley.net/iphone/&h=320&w=320&sz=22&hl=en&start=5&um=1&usg=__WO3JoTh6ep6WKHeeuF1PFhMdwag=&tbnid=i3nM1jJw4oiWVM:&tbnh=118&tbnw=118&prev=/images?q=apple+inc.&um=1&hl=en&rlz=1T4ADBR_enUS256US256&sa=X

http://www.philips.com/global/index.html


Today’s Speakers

Matthew Harding

John Westwood


Uncovering Value in Benchmark Data

Taking Action with Analytical Tools

Freight Market Intelligence Consortium

Procurement Best Practices for Results

Summary + Q&A

Setting the “Negotiation Table”

Agenda

1

6

5

4

3

2


FMIC Demographics $655MM in Annual Freight Spend, 24 Members

LTL Transportation Spend by Industry

LTL Company Count by Spend Category

Origins

Destinations


FMIC LTL Benchmarking Process

Lane Report Carrier Report Trend Report

Create Econometric

Models

Create Reports

& Research

LTL Survey Rate Estimator

Industry Report

Leverage Content

Populate Portal & Visualization Tools

Shipper Chainalytics

Confirm or Revise

Validate Geography

Rates, Fields

Send Validation

Report

Populate Raw Data

Template

Submit Data

Provide Raw Data

Template



Create Econometric

Models

Create Reports

& Research


Confirm or Revise

Validate Geography

Rates, Fields

Send Validation

Report

Populate Raw Data

Template

Submit Data

Provide Raw Data

Template


Industry Report

Leverage Content




Econometric Modeling & LTL

Econometric modeling coverts shipments into cost drivers

Extensible across geographies, freight classes, dimensions

Model output represents discounted market tariff benchmark

Econometric Model Output

Variables Model Output

Run 68

DepVar AI380

Data USA & CAN

R^2 87%

Regions x

(Constant) 33.440000000$

distance 0.055000000$

dist_sqr (0.000013800)$

weight 0.029000000$

wgt_sqr (0.000001680)$

freight_class_actual 0.310000000$

actclass_sqr (0.000554000)$

dist_wgt 0.000005400$

wgt_actclass 0.000174000$

dist_actclass (0.000032100)$

dist_wgt_actclass 0.000000714$

Scale_weight_OB_5DZ_vol 0.010000000$

Scale_weight_IB_5DZ_vol 0.010000000$

Scale_weight_annbuy 0.070000000$

Manchester, NH to Atlanta, GA

Class 250 LBS 500 LBS 1000 LBS 2000 LBS 5000 LBS 10000 LBS

50 $78.13 $96.28 $132.02 $201.34 $391.90 $651.54

55 $80.12 $99.34 $137.23 $210.83 $414.26 $695.35

60 $82.09 $102.38 $142.41 $220.31 $436.60 $739.14

65 $84.04 $105.40 $147.57 $229.76 $458.92 $782.90

70 $85.96 $108.39 $152.71 $239.18 $481.21 $826.64

78 $88.79 $112.83 $160.37 $253.28 $514.61 $892.21

85 $91.57 $117.22 $167.98 $267.32 $547.95 $957.72

93 $94.30 $121.56 $175.53 $281.31 $581.24 $1,023.18

100 $96.98 $125.84 $183.03 $295.24 $614.48 $1,088.58

250 $139.18 $200.22 $321.75 $562.63 $1,267.90 $2,385.39

500 $161.77 $276.42 $505.18 $960.53 $2,309.19 $4,498.99

Discounted Market Tariff



Create Econometric

Models

Create Reports

& Research

Maximizing Insight for Internal Communication

Confirm or Revise

Validate Geography

Rates, Fields

Send Validation

Report

Populate Raw Data

Template

Submit Data

Provide Raw Data

Template


Industry Report

Leverage Content




Industry Report



Maximizing Insights for Internal Communication

1 Address tangential concerns using research and

surveys

2 Share consortium procurement strategies

3 Share consortium contractual policies

(fuel, accessorials, etc.)

4 Enable community interactions that drive greater

understanding

5 Support point of view with independent

third-party perspectives






Summary + Q&A


Agenda

1

6

5

4

3

2



Create Econometric

Models

Create Reports

& Research



Confirm or Revise

Validate Geography

Rates, Fields

Send Validation

Report

Populate Raw Data

Template

Submit Data

Provide Raw Data

Template


Industry Report

Leverage Content



LTL Market: PPI LTL and DOE #2 Diesel Trends


Aligning Benchmarks to Change Management

Validate & Invest

Control & Validate

Alignment

Control & Validate

Alignment

Change Strategy

HIGH

Market-Based Cost Benchmarks LOW

Serv

ice a

nd O

ther

Subje

ctive K

PIs

HIGH


Above Market Below Market

How to Utilize Benchmark Data

1 Recognize “natural” cost

variability

2 Compare to service and

other intangibles

3 Assign to business

“levers”

4 Determine appropriate

action


Demonstrating the Process Carrier Plot

Two carriers, same buyer


Demonstrating the Process Carrier Plot

Carrier G

Carrier H






Summary + Q&A


Agenda

1

6

5

4

3

2


Efficiency in Analytics is Critical

Rapid evolution in efficient cloud-based visualization tools is occurring

Efficient front-end for large quantities of data

Designed to answer questions, not static reporting

Transforming the way logisticians approach data and

decisions

Does not require significant IT costs or resources


Analytical Efficiency: Outliers


Analytical Efficiency: Geography


Punch List for Maximizing Benchmark Value

1 Aggregate market results by carrier and geography

2 Balance results against subjective aspects and service

3 Use latest visualization tools for analytical efficiency

4 Ensure benchmarking insights support

communication

5 Focus on differences in your portfolio






Summary + Q&A


Agenda

1

6

5

4

3

2


Managing Cost: Set the Table

Tariffs: Move away from carrier tariffs to independent 3rd party tariffs

Difficult and timely to compare bids across multiple tariffs

Reduces administrative cost and the number billing errors

Best Practice: Tariff should be less than 10 years old

Fuel Surcharge: Carrier tables have great deal of variance, so create a shipper-owned fuel table

Carrier tables have a range of starting pegs and escalation thresholds

Best Practice: Escalation of 0.1% for every $0.02 on the scale

Negotiate how often FSC is updated (i.e., weekly or monthly)

Accessorial: Determine the applicable accessorials and possible fees

Carriers can update their rules tariff anytime without notification, and rates are subject to the tariff

Best Practice: Committee review of excluded accessorials with the carrier at least semi-annually



Contract: Shipper contract is especially important for liabilities, so decide whether the contract supersedes the carrier’s rules tariff

Freight Classification: Review NMFC freight class on your products prior to the RFP

Include product changes or mixes coming out of factor classes

Freight All Kinds (FAK): Simplify the pricing and administrative cost with individual classification billing

Carriers often agree to an overall lower class in order to secure the business of the customer

Depending on product mix, multiple FAKs or a ceiling may be necessary to get the best overall value

Carriers may impose liability limitations with FAKs

Thus, analyze the value of the commodities being shipped and the frequency of claims

This will determine whether FAK pricing structure offsets the potential claims

Class

Min. Average Density

(LB per FT3)

50 50

55 35

60 30

65 22.5

70 15

77.5 13.5

85 12

92.5 10.5

100 9

110 8

125 7

150 6

175 5

200 4

250 3

300 2

400 1

500 Less than 1



Carrier Profiles: Determine the carriers based on actual service capabilities

Save time, effort, and increase credibility

Terminal Locations: Identify which terminal locations are nearby

Direct relationship between terminal approximation and shipper awards and cost

Collaboration: Check out what your neighbors are up to

What carriers do they use?

How they address freight challenges, especially within certain geographical areas?

Can you work together? (e.g., consolidate and direct delivery to LTL carrier’s terminal)

Carrier Terminal Locations






Q&A


Agenda

1

6

5

4

3

2


Managing Cost: Visibility to Carriers

Network Visibility: Provide line item data with the actual class, preferably for the prior 12 months, including:

Accessorial count summary, both paid and waived

Site profile

Facility information

Inbound and outbound shipping information (e.g., lumpers, pallet sizes, hazardous, double stack, actual class summary, etc.)

Pricing structures should be tiered (multi-leveled pricing)

National ► State to State ► 3DZ to 3DZ

Qualitative Questions: Understand the areas of imbalance for the carrier

Carrier financial risk

Technology

Metrics and reporting


Managing Cost: Getting to the Results

Optimization Tools: Validate different strategies (e.g., carrier type, number of carriers, etc.) and apply qualitative results (i.e., penalties)

Transit Time: Understanding the impact outside of price

Cost of carrying goods and of service time will be factored in overall cost model and decision

On average, 15%+ of carrier networks can see improved transit time at same or lesser cost

Interlining: Does your shipment stay within the carrier’s network?

Discount is based on direct points of pick-up and delivery; interlined is often ½ or lesser the direct discount

Determine if the shipment stays within the carrier’s network, and identify additional carrier(s) if needed

Best Practice: Remove interline carriers from the award scenarios and negotiate to remove any interlining discount language


Managing Cost: The Rundown

Small Parcel Revenue-Based Incentives: Leveraging Across Modes

Full tariff cost goes towards UPS and FedEx revenue-based incentives

May add complexity to the discount if LTL spend is seasonal

Payment Terms: Trade Finance

Freight payment companies give credit line to a shipper; no call for funds up (i.e., “float” model providers)

Carrier can choose to receive an accelerated payment model, taking a 1% invoice discount, or to get paid on normal client terms for no fee

Bump Clause: Add language to your shipper contract to ensure the clause upon carrier’s “weight and inspection”

Shippers can artificially increase the weight of the shipment to increase its density, so it will be re-rated at the next lower class, resulting in a lower charge

Best Practice: Most effective on higher class shipments (150+)

Kansas City >

Chicago (40%)

Rated

Class

Rated

Weight Final Cost

Original 250 426# $457

Bump (Add 23#) 150 459# $295

Savings $162 (35%)


Key Takeaways for Communicating and Mitigating

the Impacts of Uncertainty

1 Standardize

2 Use latest visualization tools for analytical

efficiency

3 Challenge existing policies






Q&A


Agenda

1

6

5

4

3

2


Q&A: Submit your questions now.

June 4 3PM EDT

UPCOMING WEBINAR

All aboard June 4 @ 3:00PM EDT.

http://bit.ly/OceanFreight


Thank you for attending A Buyer’s Guide to LTL Managing the Impacts of Uncertainty

John Westwood Manager, Transportation

Office: +1 (678) 384-3616

[email protected]

Matthew Harding Principal, FMIC

Office: +1 (603) 347-1250

[email protected]

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Documents

A BUYER’S GUIDE TO - Chainalytics€¦ · This will determine whether FAK pricing structure offsets the potential claims Class Min. Average Density (LB per 3FT ) 50 50 55 35 60