The supply chain functions with the biggest financial impact are inventory and transportation management. Logistics managers tend to focus on transportation decisions as one of their major responsibilities. It is important, however, that all managers in the supply chain have a good understanding of inventory policy. The attached is a brief synopsis of Inventory Management from the textbook Supply Chain Logistics Management .
I am working with Northern Essex Community College on revisions to their Supply Chain Certificate program for 2014. Planned modules include: Introduction to Supply Chain, Operations, Materials Management/Purchasing, Inventory/Warehousing, Transportation and Logistics, and International Trade. Details will be provided in the Spring/Summer catalog on the NECC website.
The motor carrier and air freight industries are extremely competitive, giving shippers an advantage in carrier selection and negotiations. A common mistake made by shippers is failing to prepare before meeting with carrier representatives. Another mistake is focusing on price. A better strategy is to emphasize value in your discussions with carriers. If you determine that they have the capabilities to provide quality services, then you can move the discussion to price. Consider: if simply asking for lower rates can result in transportation savings, how much better would the result be with a little preparation? Here are some suggestions from someone who has spent many years on the carrier side of the table.
Determine your specific transportation needs and goals ….for example
Analysis Prior to Negotiation
There is not much advantage to withholding your shipping profile from carriers. Because the industry is so competitive you will get a better deal if transportation providers know what volume they are bidding on and any specific service requirements. If this information is not available to them they will hedge their bets and be less aggressive in their offers. Gather some data and present it. This will give you professional status in the eyes of your carriers. Here is some minimum information needed. Most of it can be found in bill of lading or invoice files.
Request for Proposal/Request for Quotation
A formal RFP or RFQ is an effective way to both reduce transportation costs and gain the value that you need from your carriers. Ad Hoc Logistics can prepare your RFP/ RFQ, get it to the appropriate transportation providers, and even negotiate on your behalf. Get started by contacting Ad Hoc Logistics.
A recently completed project involved comparing Spirit Airlines with competitors Southwest and Jet Blue. I looked at a number of features and characteristics: # of Destinations, Hubs, Fleet Size, Aircraft Types, Fares/Fees/Surcharges, Frequent Flyer Programs, Domestic Market Share, and Skytrax Rank. In the low cost airline market, Spirit has only one advantage and that is ultra low fares. In all other areas Spirit ranks below both Southwest and Jet Blue. The flying public is becoming accustomed to unbundled services and new fees seem to pop up on every flight. Spirit charges for all “extras” and cites their ultra low fares as justification. Ultra low fares means that Spirit must be aggressive in controlling costs. This can lead to service issues and customer complaints reflected in Skytrax ratings. Southwest and Jet Blue are low cost airlines which project perceived value for relatively low fares. This is crucial in attracting business flyers. If Spirit wishes to expand beyond their current vacation traveler clientele they may need to adjust their business model.
As part of any Export Management Program, exporters need to make sure they are using correct commodity classifications and license exceptions. While freight forwarders can provide expertise in these areas the exporter bears primary responsibility for compliance. If you are automatically using NLR and EAR 99 you may be at risk. According to EAR part 732 “For items subject to EAR but not listed in CCL the proper classification is EAR 99. EAR 99 is a basket for items not specified under CCL and appears at the end of each Category on the CCL.”
BIS has some easy to use tools on their website. A good place to start checking is the BIS Website Decision Tree.
Contact Ad Hoc Logistics if you need help.
According to CBP Customs and Border Protection passing rates for the customs brokers exam average only 3-11% nationwide. The test is given twice per year in April and October. It consists of 80 multiple choice questions and a passing grade is 75%. The exam is open book which makes it seem easy. However, the books consist of the HTUS Harmonized Tariff of the United States and CFR 19 Code of Federal Regulations, totaling hundreds of pages. The difficulty is in being able to quickly access the right section for each question. It is a four hour exam so three minutes per question is not much time.
I took a prep course in Boston taught by Atty. Mary Wright. The class met two nights per week for 6 weeks prior to the exam. Mary explained the material very thoroughly from her background as a customs attorney and prior experience as an import specialist for CBP. We also reviewed previous exams in class. As good as this class was, I would not have been able to pass the exam without additional study. I estimate that I spent about 40-50 hours on weekends leading up to the exam. I used 6 previous exams and a 3 step process. In step 1 I took each test for accuracy, ignoring the clock. In step 2 I took the tests again in the same order, while timing myself to make sure I could finish within 4 hours. I believe that step 3 was the key to my success. For this phase I circled all the questions I had missed in steps 1 and 2 and created a separate mini exam which I took several times until I answered all the questions correctly. I had many years of transportation experience but no customs brokerage background before taking Mary’s course. This actually proved to be an advantage for me. Most of the others in the class were working for brokers and may have felt overconfident.
Day to day logistics is a function of supply chain management. Logistics consists of planning, organizing, executing, controlling, and problem solving. While supply chain is strategic in nature, logistics is more tactical. The goal is to solve problems so that they stay solved leaving more time for planning, organizing, executing, and controlling. Here is a simple model that managers and front line supervisors can use in solving basic logistics problems:
Problem Solving (Tactical)
This model is for small to medium sized tactical problem solving. To use this model you must “own” the problem and have the power to solve it. Your goal is simplified planning and immediate implementation. More complex problems will require a more detailed solution.
Step #1 Problem Statement/Impact
Write one or two sentences which clearly describe the problem and the pain points. If you can’t be definite about this you have very little chance of solving the problem.
Step #2 Cause/Effect
Managers often jump from problem identification to solutions. This is especially true in logistics, which is action oriented. However by taking the time to analyze cause and effect you are more likely to solve the problem. What are the root causes of the problem? What are the impacts on costs, productivity, sales, etc? What else happens as a result of this problem? This step helps you make sure that you are solving the right problem.
Step #3 What Info Is Needed?
Determine the data, reports, or evidence you need to analyze the problem. This will help you prove to yourself and others that the problem needs to be solved.
Step #4 Where Will I get It?
Identifying where the info can be located speeds up the process.
Step #5 List Solutions Steps/Implement
If you have completed Steps 1 thru 4 the solutions should be obvious. If still unsure about solutions re visit Steps 1 and 2. Prioritize the tasks and give yourself deadlines. You may opt for a trial solution as long as you are not devoting big resources during the test period. Implement, don’t agonize.
Step #6 How Will I Measure and Manage in the Future?
To avoid a recurrence of your problem decide how you will monitor and manage the issue going forward. Communicate the changes and why you are making them. Create a checklist or dashboard.
Supply chain strategy is often designed to eliminate or reduce warehousing. While this trend will no doubt continue as a means to lower total costs and improve efficiency, warehousing can still play an important role and add value. Here are some key areas for managers to consider in improving warehouse operations:
SUPPLY CHAIN STRATEGY:
A major factor in supply chain strategy is inventory turnover. Warehouses enable effective positioning of inventory to support supply chain strategy. This includes raw materials, components for manufacturing, and finished goods inventory. Sound location theory is needed to determine the best warehouse site.
BRIDGE BETWEEN 20TH AND 21ST CENTURY MODELS:
Old model characterized by use of intermediaries (middlemen) and staging of inventory throughout the supply chain. Newer model eliminates some nodes and reduces inventory. Faster cycle times put more pressure on logistics systems. This means that positioning of inventory is more important in the newer model.
VALUE ADD:
Old logistics models focused only on efficiency and cost control. The challenge for whse mgrs is to achieve efficiency, control costs, and add value. This is done through improving cycle time and managing fulfillment operations.
CONTRIBUTION TO PROFIT +/- :
Bulky commodities tend to occupy the most space in a warehouse and require labor to handle. These commodities usually carry lower value per pound and therefore lower profit margins. They may also be in the mature or declining product life cycles. Warehousing of these products must be efficient to avoid profit drain.
FINANCIAL CONSIDERATIONS:
Big factor in warehouse decision making is price of real estate. High tech distribution centers with automated handling systems are capital intensive. Labor markets are important to the location decisions. These are examples of strategic decisions made at higher levels of management.
PROFESSIONALISM:
While training does exist, there are very few college courses in warehousing. Some literature exists but few text books. Therefore opportunities exist to professionalize the field.
MANAGEMENT:
Most warehouses are labor intensive and variable costs are critical. The whse can be used to provide good front line management experience for new managers. Mid level managers may also be assigned to the whse because of reorganizations and downsizing and their experience can be valuable. The whse should not be used as a dumping ground for problem employees. This will result in lower professionalism.
LOGISTICS IMPROVEMENTS:
Logistics improvements can be high level supply chain integrations, mid level coordination between manufacturing, marketing, and other intra company functions, or basic improvements in functions. In most companies the warehouse can benefit from some basic improvements. Small changes can have a big impact and can be implemented easily.
According to Logistics Management magazine many over the road trucking companies are considering or in process of converting operations to intermodal. There is no question that more traditional truckload and LTL traffic, especially longer haul, is moving on the rails. While these changes can result in significant cost savings and efficiencies, the barriers to conversion are formidable.
Elements of Intermodal
KPI’s for both OTR and Intermodal
OTR Issues
OTR Advantages
Trends in OTR
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Here is a basic outline for negotiating/evaluating 3PL contracts. It should be noted that this outline is a starting point and tactical in nature. It does not address higher level 3PL performance such as full integration with client business strategies and C level involvement.
Common shipper client complaints:
– Not getting 3PL A team
– Surprise costs
– Lack of ideas and innovation from 3PL
– Lagging in technology
While 3PL’s want to be more strategic they are often seen by clients as tactical operators and cost reducers.