Institute Management Accounts Presentation Apr/10

LPS Logistics & Procurement Services, LLC

LogproTM

“Freight Management”4-22-10

Presented By: Steven C. Hogan, President

Logistics & Procurement Services, LLC (d/b/a “LPS”)

INSTITUTE OF MANAGEMENTACCOUNTS

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“Your Transportation & Logistics Experts” LPS2010SM


Objective

“Your Transportation & Logistics Experts”LPS2010SM 2

IMA Mission Statement:“To empower accountants and financial professionals to become “trusted business advisors” “playing a driving role” in their organizations’ business success and advancing their careers.”(http://www.imanet.org/about_mission.asp (© 1997-2008)

LPS Session Goals:Honor IMA Mission Statement By Providing Information On Freight Cost Management, Challenges, and Approaches Through An Interactive Presentation Approach.

http://www.imanet.org/about_mission.asp�


Agenda:


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Brief Overview LPS

How Do You Measure Freight Cost?

Who Has Responsibility For Freight Costs?

Basic – Challenges To Freight Costs Management

Options To Manage Freight Costs

Key Considerations

Case Studies

Q & A


Logistics & Procurement Services “LPS”

“Your Transportation & Logistics Experts”LPS2010SM 4

Who we are:

We are a management service company that provides procurement

expertise, consulting, and solutions to help our customers establish

and manage supplier contracts that deliver better pricing, value and

services.

What we are not:

A carrier, broker, intermediary, or transportation capacity

provider…


LPS Service Mission

“Your Transportation & Logistics Experts” LPS2010SM 5

“To be our customers independent, transparent, staff experts

at securing the best costs and services for their supply chain

operations.”

“Provide 10-30%+ operating cash savings for our Customers

through our expertise in operations & procurement of

transportation, supply chain, and 3PL provider services.”


Our Service & Approach


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We fully oversee and manage the process of selecting, negotiating,

contracting, and monitoring of these services to strength our

customers existing functions or implement new solutions.


Our Expertise:


“Service-Providers”Less Than TruckloadTruckloadParcelRailIntermodalForwarder / US CustomsOcean Air / ExpediteRail

“Service-Providers”IntermodalUSPS/Mail / ConsolidationPrivate Fleet & DedicatedCourierExpediteWarehousingDistribution3PLOutsourcing

Methods & Administration-TechnologiesTransportation MgtSupply Chain Visibility

-Freight Audit / Payment-Freight Terms-Shipping & Handling

Revenue-Consolidation; Pooling; X-

Dock-Vendor Compliance-Routing Guides-Claims-Packaging


LPS Customers Include:


• Fortune 100 – 1000

• Manufacturing

• Retail

• Services


How Do You Manage Freight Costs? (COB)

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C – Level Visibility Management Information Purchase “% $’s; Unit; Weight; Sale; Factors”

Sales /Period “ Customer / Market “

O – Operational Level- “Responsible/Authority”

Responsible/Stake Holder C Level + Services

Authority “COB”

Provider Base Rate; Accessorial; Fuel; Service (s); Distance; Volume;

Balance Sheet Purchase & Sale Terms

F.O.B.-Covington, KY – “Freight Collect”

– “Freight Prepaid”

– “PPD & Add” etc


Who Is “Responsible” & WhoHas “Authority” For Freight?


What Drives Your Company? Sales / Marketing / Customer Service Procurement / Supply ChainManufacturing / Distribution Customer Service

Who Is Your Internal “Authority” On Freight? Shipping / Receiving Fleet / Transportation Manager Transportation Operations / Procurement ?


Basics – Freight Management Challenges


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What Information Do You Have?Metric (s) – Aligned To Primary Business Driver?

Where Can You Get Them

How Can You Improve Them

Discrete Transaction Detail / Profiles To Support Metric EvaluationService Level

Requirements

Volume

Stable / Standard Freight Cost Basis Formalized Rates & Contract

Internal / External Technology Capture

Defined Service Levels


Options To Manage Freight Costs


Resources – Reward – Balance Paradigm

InternalExpertiseAbilityTime

ExternalCapabilitiesCostStrategy

External Resource Cost

& Expertise

Internal Resource

Expertise & Availability

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Customer Case Study Discussion:


Status Quo” Customer—- Legacy services and costs with primary focus on daily operations and execution, limited internal expertise in transportation and logistics and poor internal information to recognize and implement improvements. Costs are generally rising and unknowingly absorbed or passed on.

“Routine” Customer—-Services and costs are updated to a schedule more reactively based on service changes, price increases, or internal events effecting operations, locations, and customers. Internal expertise exists without work tools, planning, or depth of knowledge and leadership visibility to achieve more than cost containment.

“Challenged” Customer—-Services and costs are updated with specific internal expertise however the resources are used in a more formalized project mentality causing trade-off and completion challenges. Leadership visibility is good, cross-functional strength is poor or specific expertise to address larger scale improvements in process, policies, organization, technologies, network, and services leaving significant cost and service improvements unrealized.

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LPS Customer Case Studies

CUSTOMER: Vertically Integrated Manufacturer Windows, Doors,

Columns, And Extrusions

• 6 Business Units

• 11 Locations (12 U.S. Plants, 1 Plant In China)

• 120 Tractors; 290 Trailers

• Sales > $650M MARKET: Building Materials SITUATION: “ROUTINE”

• Rapidly Rising Fleet Transportation Costs

• Legacy Driver Routes, Processes, & Use of One

Way Transportation

• Decentralized Transportation Spend and Man-

agement “Within” SBU

• Limited Senior Management Visibility To Costs

& Service Options Across SBU’s

LPS Multi Mode Transportation Improvements Save $2.9M In Pur-

chased Transportation Costs

Building Materials Holding Com-pany “CFO” Seeks Fleet Cost &

Transportation Savings

Logistics & Procurement Services, LLC


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CRITICAL SUCCESS FACTORS:

• Establish Transportation Council Approach

Across SBU’s To Manage Changes & Improve

Team Approach

• Reduce Fleet & Transportation Costs Through

Leverage of SBU spend and services.

• Establish Go Forward Senior Leadership Con-

trols & Management Scorecards

KEY BENEFITS:

• Reduced Total Supply Chain Costs $6.5M, Elimi-

nated 25% Of Fleet Assets

• Decreased Purchased Truckload, LTL, & Ocean

Transportation Costs 22%

• Rationalized Plant To Customer Market Service

Area, Reduced Total Miles 8%

• Decreased Empty Fleet Miles 18%

• Established Strategic 3 Year SC Plan Consoli-

dating 2 Plant Locations

SOLUTION: • LPS LogproTM

• Truckload Bid-Contract

• LTL Bid-Contract

• Ocean Bid-Contract

• Network Analysis

• Route Utilization

SERVICE DESCRIPTION:

• Contracted To Source Fleet

Tractor & Trailer Equipment &

Services

• Contracted Source Truckload

Transportation

• Contracted To Source Import

Ocean Transportation

• Contracted To Provide Network

Analysis, Route Rationalization,

& Transportation Technology

Solution

LPS Multi Mode Transportation Improvements Save $2.9M In Pur-

chased Transportation Costs

Building Materials Holding Com-pany “CFO” Seeks Fleet Cost &

Transportation Savings







LPS Consolidates International Ocean And Air Spend Across Diverse SBU

Requirements

Automotive Supplier & Industrial Power Systems “COO” Cost Reduction

Initiative—International Freight


CUSTOMER:

Multi National Automotive and Industrial Power Sys-

tems Manufacturing Holding Company

• 12 SBU

• 28 Locations (North America, Asia, Europe)

• Sales > $1B

MARKET:

Automotive

Industrial Power Systems

SITUATION: “ROUTINE”

• Decentralized Import/Export Transportation

Spend And Contracting Across SBUs

• Limited Resources, No Specific International

Ocean & Brokerage Expertise

• Poor Executive Visibility of Spend And Service

Data Between SBUs

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SOLUTION: • LPS Managed Services

• Project Management

• LogproTM - Ocean/Brokerage

• LogproTM- Import Intelligence

SERVICE DESCRIPTION: • Contracted to source Import

Ocean, Air Freight, And U.S. Cus-toms Brokerage Services

• Contracted Provide Logprotm –

“Import Intelligence Services”

LPS Consolidates International Ocean And Air Spend Across Diverse SBU

Requirements

Automotive Supplier & Industrial Power Systems “COO” Cost Reduc-

tion Initiative—International Freight


CRITICAL SUCCESS FACTORS:

• Implement Inter Division and Suppler Routings

• Establish Over 20% Cost Reduction And SBU

Participation Solution

RESULTS:

♦ Over 24% Reduction Of Ocean Transportation

And U.S. Customs Brokerage Costs

♦ 31% Reduction Air & Charter Service Costs

♦ Established Visibility Solution Linked To Master

Planning And Inbound/Outbound ERP Line Item

Status

♦ Established Vendor Compliance Routing & Re-

lease Controls



Key Freight Management Considerations


“COB” – Can You Measure & Report Sufficiently: C-Level; Operational?

Who has “Responsibility” and “Authority” For Freight Management?

Do You Have The Right Resources?

Can You Identify Your Reward to Resource Balance?


Thank You !


Contact Us:Steven C. HoganPresidentLogistics & Procurement Services, LLCP.O. Box 271Verona, KY 41092E-mail: [email protected]: 859.630.6944Office: 859.485.6994

Questions & Answers

mailto:[email protected]�

Documents

Institute Management Accounts Presentation Apr/10