When it comes to selecting a carrier, service is still king with shippers and consignees. "Pick up and deliver my shipments as promised, provide visibility, and don't break or lose anything in the process." Sounds reasonable, but many shippers don't have the tools to measure whether the carriers they hire actually meet the requirements they've set.
In the eight years since we published our report, "Strategic Decision Making in Supply Chain Management," service has remained a top concern for shippers. In that time, supply chains have stretched even longer and visibility has become more important. In 1998, shippers asked if carriers had track-and-trace capability. Today, it's a baseline requirement. Carriers are expected to know where shipments are as long as they are in their system, and they are expected to be able to report details about pick ups and deliveries and to provide advance notice of exceptions. The shipper's focus has shifted from the tools to results (see sidebar, "Looking for value," on p. 40).
Don't make the mistake of focusing on a single measure, says Tom Sanderson, president and COO of Transplace (www.transplace.com). As an intermediary, Transplace deals with thousands of shippers and carriers, and it measures in both directions.
Sanderson explains that in the last two years the supply/demand ratio has shifted in favor of the carriers, and it has been important to be a preferred shipper. As a result, when he comments on carrier measures, Sanderson offers some flip-side measures for shippers.
Use multiple factors to balance the scorecard, says Sanderson. Don't just focus on ontime delivery. That said, he explains, even a metric like on-time delivery has a number of interpretations. For some shippers, on-time is to the minute. For another it might be a 15-, 30- or even 60-minute window on either side of the delivery appointment. Yet another shipper/consignee might set the appointment as the "deliver by" time, with an early delivery tolerated but no late deliveries. And, finally, some shippers may be satisfied with a delivery any time during business hours on the appointed day. Similar criteria and ground rules should be established for on-time pickups.
It is also important to spell out exclusions. Weather or traffic delays and other factors beyond the control of the shipper or carrier could nullify a "late" shipment. Joe O'Brien, director of business development for CargoSmart (www.cargosmart.com), takes that further up the chain of custody. CargoSmart will soon release new tools for shippers that will monitor ocean carriers and capture and report events from container loading and pickup, arrival at the port, onboard the ship, etc., from origin city to destination city. The reports, based on the established routing guide between specific point pairs, measure actual times against expected times for pickup and delivery, transit times, etc. The system will provide proactive reports for exceptions as well as historical reports and tools for analyzing performance by trade lane, origin city, destination city and port. This will extend the shipper's ability to determine which exceptions occur where, O'Brien claims.
The visibility O'Brien talks about can run all the way up the supply chain to an overseas origin. But, domestic or international, the tools should be applied against a routing guide that specifies carrier, lanes, volumes, expected transit times, and other criteria.
Kick out the walls of the warehouse, says Carl Brewer, president of Integrated Warehouse Systems (www.irmswms.com). Visibility is the driving mantra for supply chain management, he continues, and that includes visibility into your supplier's inventory. What do I have in inventory? What's inbound? What do you have? When can you get it to me?
Brewer sees warehouse management systems (WMS) as the backbone of supply chain visibility, and to accomplish that, the WMS needs to facilitate communication. Allow applications to communicate on a message level, not a file level, he says. Respond to the way people ask questions. Transportation management systems (TMS) aren't always picking up the slack, he points out. The TMS will look at when a container was loaded, when the container left the port, where it's going, and when it's going to arrive. But, because many shippers are using brokers, they are dependent on someone sending an e-mail update, says Brewer. The WMS is being asked to pick those up and automate them.
Transplace's Sanderson echoes the concern for accurate and timely status updates. As part of a multi-faceted evaluation, he asks, "Do carriers provide complete, timely and accurate shipment status updates?" Turning the question around, he asks, "Do shippers provide adequate advance notice of shipment requirements?"
This question plays into Brewer's discussion of the overlapping roles of TMS and WMS. Does the shipper have adequate visibility to provide accurate appointments and shipment requirements? Appointments are important to both shipper and carrier to schedule capacity and, for the shipper's dock, adequate manpower and appropriate equipment for loading or unloading. Providing the carrier with accurate shipment requirements is also important to avoid capacity mismatches or other delays.
Measure carrier turn-down percentages, says Sanderson. When a carrier commits capacity in a particular lane to a shipper, it should accept those loads. On the flip side, shippers who fail to meet volume thresholds risk being short-rated. The responsibility runs both ways.
Sanderson also includes trailer pool maintenance as a carrier performance factor. Does the carrier have trailers to spot at the shipper's dock for loading and does it supply those trailers and containers as agreed? The practice of providing drop trailers is beneficial to the shipper and the carrier. Live loading commits a driver, tractor and trailer. Staging a trailer at the shipper's dock allows the driver and tractor to be more productive and can reduce detention charges for shippers if they load the trailer in a timely manner. Shippers can also get better utilization from warehouse equipment and labor if trailer loading can be scheduled during off-peak times for picking and replenishment operations.
It all comes down to money. Carriers want to be paid accurately and on time. Shippers or consignees responsible for the freight costs want accurate invoices. The number one cause of erroneous-invoices from carriers is fuel surcharges, says Sanderson, partly because many carriers don't understand the details of the fuel surcharge.
He offers the example that if the carrier is tracking fuel prices using the Department of Energy index and updating it every Monday, does that mean the update applies to all loads tendered to the carrier on Monday? Or, does it mean a new fuel surcharge is effective every Monday? That could imply the new surcharge level applies to all loads picked up from Monday on, regardless of when they were tendered. It's important for shippers and carriers to clarify how the surcharge is applied to avoid erroneous invoices.
Timely payment is another visibility issue for shippers. If the shipper pays the carrier invoice, the terms are clearly spelled out and it should be a simple matter to check with the accounting department to measure payment performance. But, when a broker or freight payment service is involved, the shipper can lose sight of the transaction.
Sanderson offers two symptoms shippers might see as a result of this problem. First, he says, the carrier may just say "no" when you call, and you will have to go further down the routing guide to find a carrier to handle a load. Or, second, the carriers learn from experience and build their additional costs into their rate structure.
Carriers don't always tell you when they have a problem, confides Sanderson. He assumes the position of a perplexed shipper and asks, "If a carrier had an issue with payment, why didn't they call me? Why did they cut us off? Or, why did they take our price up?" If you are measuring and watching payables, and you have it in a balanced scorecard, he points out, you can talk to the carrier.
Taking an even bigger-picture approach, Brewer notes that the chain of custody is important to determine when you owned inventory and when it transferred. The money's in the inventory, and improving the efficiency at the shippercarrier interaction or the carrier-consignee level can help you reduce inventory.
Having clear visibility on when goods were delivered to your warehouse, when the carrier took possession, or when those goods reached the consignee can also speed up financial transactions. Improvements in either area will have positive bottom-line implications, and, say the experts, to accomplish that, you have to measure and respond to performance.