Best Practices Consortium Supply Chain Best Practices Consortium Ocean Carrier Selection and Performance Executive Seminar Track 3, Session G September, 2006

Scope This session covers ocean carrier selection, top carrier performance, and ocean carrier performance standards. Ocean Carriers: Rate structure, top carriers, and evaluation criteria. Ocean Carrier Selection: Bid Process, selection criteria, and carrier relationship management. Ocean Carrier Performance: Administrative and operational metrics.

Ocean Rate Type What type of ocean carrier rates do you utilize most often? Consortium shippers prefer origin port to destination door rates.

Ocean Carriers Which ocean carriers do you utilize most often? On average, 6 to 7 ocean carriers are used, and responses show that 56% of all ocean freight is transported by the largest incumbent ocean carrier.

Incumbent Carrier Satisfaction Ratings Ocean carriers in this selected list were graded on the following criteria. The top three carriers average to a “somewhat satisfied” rating. Scales used to grade carriers: very satisfied = 3, satisfied = 2, somewhat satisfied = 1, not satisfied = 0.

Selection Criteria Ocean carrier selection criteria as weighted by consortium participants. 83%, when compared to other shippers with similar volume and service requirements, believe their rates to be lower by up to 20%. However, 81% of these shippers do not benchmark rates.

Carrier Contracts/Relationships Ocean carrier contracts typically begin in June. Also note account management frequency by designated company contacts.

Carrier Performance What are my administrative and operational metrics, and what is my current state of performance versus company goals? A large majority (70%) reported that they reduce ocean freight volume for carriers that do not perform.

Your Expectations What would you like to learn and discuss from this session? Important issues? What’s working? What’s not working? What’s changing? Shared good and bad experiences? Reasonable performance expectations?

Potential Discussion Points Is a formal bid process necessary to award ocean freight to carriers? Does your bid process utilize lane bundles? How do you determine what freight to include in a bid package? Are ocean carriers expected to provide discounts for higher volumes? What are the top criteria in achieving a successful ocean carrier selection outcome? How important should incumbency be in awarding business? Should carrier turnover be limited? Who/how many should you invite to bid?

Potential Discussion Points (continued) How do you measure the success of an ocean carrier selection event? Low rates? Increased capacity? How do you measure the performance of your ocean carriers? Do you use a performance scorecard? How often does the designated company contact communicate with these carriers? When should you seek outside help in carrier sourcing? What skills are important? It is interesting to note that when asked, only 26% of shippers reported using technology-based carrier selection tools. How often should freight be re-bid?

Important Takeaways While there are many important Benchmarking & Best Practices takeaways in ocean carrier selection and performance, listed below are just a few: Formal bid process – Defining business requirements and expectations while using a formal bid process allows for calculated decisions on which ocean carriers to select. Ocean carrier selection – A wide range of evaluation criteria can be used. Deciding which criteria carry the most weight for your company’s selection process will help achieve optimal selection results.

Important Takeaways (continued) Ocean carrier performance – Operation and administrative metrics such as proactive alerts on late shipments, shipment integrity, claims, capacity utilization, containers rolled, on-time availability, bookings declined, on-time arrival, on-time sailings, proof of delivery, billing error rate, status updates, and claims response times can assist your company in managing ocean carriers. To communicate these metrics, 49% of the consortium shippers utilize performance scorecards. Relationship management – Establish relationships with ocean carriers through defined expectations, dedicated account management, and shipper/carrier accountability. Invited carriers – Expand the invitation list to include strong niche players, incumbent carriers, and highly rated carriers.

Questions?

Benchmarking & Best Practices References Information on strategies for ocean carrier selection and performance can be found in the following references: