1. Effective Sourcing Processes for Logistics Service Providers
Executive Seminar
September, 2005

2. Transportation Sourcing
Foundation questions for the transportation sourcing discussion …
Is this a bad time to be sourcing truck or ocean transportation? Is it a sellers market?
What is your goal for reducing transportation costs as a percent of revenue or cost of goods sold over the next 2 to 3 years?
When sourcing transportation, what is your most important issue other than cost? Capacity availability? On time performance? Transit times?

3. Truckload Satisfaction Ratings
Are the current sourcing programs yielding good results?

4. LTL Satisfaction Ratings
The results for LTL carriers are different, but the overall score is still not great.

5. All Mode Comparison
Ratings do not always correlate to performance. The key factor seems to be in setting and meeting expectations.

6. Truck – Finding Capacity
Peak Shipping Months
Retailers have a pronounced peak season which places a premium on capacity availability.
Despite a large number of available carriers, retailers tend to focus their demand on a relatively small number.

7. Truck – Building Bid Packages
Freight segregation in bid packages can miss potential efficiencies.

8. Additional Bid Parameter Categories
Truck - Bid Parameters
Additional Bid Parameter Categories
Capacity Parameters
Schedule and Routing Parameters - Pickup
Schedule and Routing Parameters - Transit
Schedule and Routing Parameters - Delivery
Schedule and Routing Parameters - Mode Shift
Equipment Parameters
Historical Performance Parameters (Incumbent Carriers)
General Parameters

9. Truck - Techniques
Optimal bid results depend in part on allowing carriers to take an active part in matching their network to your requirements.

10. Truck – Sourcing Tools
32% of participants indicated they use an automated tool in the sourcing process. After eliminating the Excel and Access solutions, the remaining tools (truckload only) include:
Optibid
Combinet
Verticalnet
Manugistics i2
Ariba based eRFX
One Network
FreeMarkets (in combination with Optibid)
Bid Pro
In reality, few shippers are using sophisticated tools for RFP requests, bid collection and optimized solution analysis.

11. Enabling Tools
Many companies have under invested in tools that offer significant potential savings.

12. Ocean Carrier Contracts
The majority of ocean contracts start in April or May. Is there an advantage to negotiating off peak (sooner)?

13. Ocean Capacity – Carrier Commitments
What commitments or assurances do carriers make to shippers that adequate capacity will be provided?

14. Ocean Capacity – Shipper Commitments
What commitments or assurances do shippers make to carriers in return for capacity commitments?

15. Ocean – Building Bid Packages
Is there an optimal grouping of freight for bid packages? Does the grouping of freight exclude some opportunities?

16. Ocean – Bid Invitations
How many carrier participants in a bid event is enough? Too many?

17. Ocean – Services
When “ocean” freight is being bid, what services are likely to be in the package?

18. Ocean – Bid Parameters
Do you always know the cost of the services being required? Can you balance the value of a requirement with its cost?

19. Ocean – Interactive Bidding
The best outcomes result from allowing carriers some flexibility in responding to requirements.

20. Ocean – Trend
The forecast is for rates to go up with the biggest changes on trans-Pacific routes.

21. Ocean -- Perceptions
The perception is that the current sourcing process is producing better than average rates which likely discourages significant process change. The reality is likely different.
Only two shippers are using an automated sourcing tool for ocean transport other than Excel. For small ocean shippers this approach is likely best practice, but for large shippers more sophisticated tools would seem appropriate.

22. Transportation Sourcing – Learning’s
Capacity as well as cost can be an issue, particularly with the impact of new hours-of-service rules – best practice considerations include contract terms, load acceptance policies, freight brokers, dedicated fleets, core carrier programs, auctions, and alternate modes and routings.
Bid package development – the grouping of available freight into bid packages and the data requested can pre-determine your potential for success.
Service requirements – set requirements that are important to you. Be prepared to assess the cost of discretionary requirements.
Bid evaluation – use methodologies that allow carriers to offer solutions that best fit their capabilities (e.g. lane bundles, partial lane volumes, multiple bid iterations, discounting, tailored service, etc.)
Process and tools – an investment in the right skills, process and tools is always worthwhile.

23. Questions?