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Who Says You Need to Own the Freight to Control it?

By Chris Jones | 04/07/2013 | 10:44 AM

The common convention is that to better manage inbound deliveries you need to take control (ownership) of the transportation. While that may work for higher volume shippers that can consolidate LTL or small package shipments, it is often not practical for companies with large numbers of suppliers or distribution centers. Instead they should focus on better coordination of their suppliers and the suppliers’ carriers to improve delivery visibility and reliability, and even control the flow of goods into the distribution center.

Unfortunately, LTL and small package delivery can be a visibility “black hole” with highly variable delivery reliability and unnecessary days in the PO-to-dock door delivery process. Everyone knows that late deliveries are bad, but early deliveries can cause problems too as the consignee may reject the entire delivery. There are several reasons for these problems:

  1. Supplier consolidation is more focused on lowering their delivery costs and generating revenue. Simply put, suppliers will hold or accelerate POs to their bottom and top line benefit at the point that the product is shipped, creating unnecessary delivery variability.
  2. LTL and small package carriers also look to drive down their costs and make consolidation and delivery decisions outside of the suppliers’ or consignees’ original delivery intentions. Carriers make money on the aggregation and disaggregation of freight and work across multiple suppliers. They have little if any knowledge of the impact on PO due dates if they hold or try to push the freight to increase their margins, and the supplier doesn’t know it until they are dinged by the consignee for due date noncompliance.
  3. The supplier/carrier/consignee delivery process is serial, adding days to the PO-to-dock door delivery process. For instance, carriers won’t attempt to schedule deliveries until they have the freight in hand, even though they know that a supplier shipment pickup request is imminent.

Getting better visibility and control of the PO-to-dock door delivery process involves providing PO and shipment level consolidation visibility to the supplier, carrier and consignee and a multi-party shipment consolidation and dock appointment scheduling solution.

This is exactly what CVS Caremark, a leading retailer did. By providing a portal that allowed suppliers and their carriers to see their relevant POs, they and CVS Caremark could see what would happen to agreed-upon PO delivery dates if either the supplier or the carrier decided to hold or push shipments. Now everyone knows when POs will or won’t make their agreed-upon delivery dates. The total PO-to-dock door delivery lead time has been significantly reduced because dock appointments are made when the supplier consolidates the POs into a single shipment. Carriers can now see and must honor those appointment windows. While this may seem like the carriers have less flexibility, it is more than offset by the carrier having greater visibility to planned shipments and delivery commitments.

As with many new processes there can be unanticipated benefits. For CVS Caremark, this happened when they faced a hurricane in the North East in 2011. For many retailers in these types of situations, there was a scramble to make sure that they had an abundance of the goods their customers need the most – flashlights, batteries and water, for example. Because CVS had visibility to the shipments that were planned or underway, they were able to stop the delivery of nonessential goods and accelerate the delivery of the flashlights, batteries and water into their DCs and to their stores. In this case CVS Caremark was able to answer the imponderable logistics question “How do you control what you don’t control?” through multi-party logistics collaboration.

How successful is your company at managing supplier controlled freight? Have you heard of or seen any best practices to get better control of it? Let me know.

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The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Chris Jones

Chris Jones

Chris Jones is Executive Vice President of Marketing and Services at Descartes Systems. Jones has spent more than 30 years working with manufacturers, retailers, distributors, and logistics providers to improve their supply chain operations. One of his primary missions is to identify and leverage new and counter intuitive activities that make a difference in the business. Jones has held senior positions at Kraft Foods, Descartes, and Gartner. He has a B.S. degree in Electrical Engineering from Lehigh University.



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