Browse Tag

freight cost

Landed Cost & Vendor Compliance

Many shippers think that knowing freight cost as a percentage of goods is enough for decision making. While this may be a good jump off point, this measure does not take into account the details associated with a specific vendor or a specific product. This leaves them in the dark about how much money shipments are actually costing them, and whether or not those shipments are actually worth the cost of doing business.

In order to gain a better understanding of the breakdown of your company’s bottom line, it is crucial to know what the unit cost of inbound shipments is from vendor-to-vendor. In our recent webinar, Landed Cost & Vendor Compliance, we posed some prudent questions for companies to review with their operations teams, listed below.

  • What is the true landed cost of freight in terms of inbound shipments?
  • What is the cost of doing business with a vendor?
  • Is the cost worth it?
  • How can you improve efficiency and visibility when controlling costs?

In the following sections, we will break down why it is important to understand true cost and how BlueGrace helps businesses understand their own.

How businesses normally measure cost

Most firms measure performance on a macro or aggregate level by taking the total cost of purchased goods and diving that by transportation spend. “That’s great if you’re just trying to gather some overall business data,” Brian Blalock, Senior Manager of Sourcing at BlueGrace Logistics, says. But somewhat insufficient if “you’re trying to price your products for sale or accurately select vendors.”

“If we don’t understand how the vendor is impacting our cost, then we can’t truly understand what the landed cost of our product is going to be when we deliver it to our customer,” he continues.

On the front end, business intelligence can be formed from data gathered from a transportation management system (TMS), a logistics platform that enables users to manage and optimize the daily operations of their fleets. Many different companies make TMS systems, including BlueGrace. From a back-end perspective, an operations manager can identify industry trends and patterns and use their insight to decide which vendors are the most lucrative business partners and from there, improve inventory management processes.

Once the product is in your hands, you are paying inventory costs.

For example, if you have an agreement with a vendor to move product into one of your warehouses, and the associated cost per product upon delivery is 10 cents per unit, “we don’t want to be at the mercy of their inventory,” Blalock says, meaning that once the product is in your hands, you are paying inventory costs.

Blalock explains that the same reason you may get chargebacks when you deliver your product early to the next member of the supply chain is the same reason you don’t want product arriving early from vendors, “because there is a cost for handling those goods,” he says. At the same time, receiving product late is not an option for obvious reasons. Striking the balance between minimizing the time product is in your storage facilities to avoid extra storage cost and ensuring that it gets to its final destination on time is the plight middle-members of the supply chain is aware of, but achieving that optimal scheduling is easier said than done. Having a firm grasp on your company’s data, or having “business intelligence,” enables you to optimize operations at a higher level than was previously an option, by coming as close to striking that balance as possible.

The key to turning information into profitability is defining goals and measuring performance.

The goal of business rules is to prevent vendors shipping product that will “cost you more money than what you originally allocated,” Blalock explains. “Once you’ve gained an understanding of that landed cost, then you can track your vendor performance and hold them to the established rules.”Knowing exactly what it costs to land the freight on the shelf is essential. So, how do you get there? “You can’t expect to improve in anything you don’t measure,” Blalock says. The key to turning information into profitability is defining goals and measuring performance.

Measuring performance

BlueGrace’s platform allows users to easily calculate the above-described metrics, for instance, cost of carrier per pound and true cost per product SKU. Users can navigate with a map of their network to see the origins of products and their destinations.

Then, you can click on a specific vendor, which allows you to see each shipment to “drill in to find out whether the inventory that belongs to your supplier is affecting the cost of transportation that you’ve agreed to a set cost with them on,” Blalock says. Referring to the earlier described inventory receiving optimization scenario, he reiterated, “We don’t need to fall victim to their inventory issues.”

Having a dashboard that encompasses all of your shipments and their data enables you to make smarter, faster decisions without the headache of calculating these figures on a case-by-case basis.

In the BlueGrace dashboard, users are able to navigate by tabs which include shipment, schedule, and tracking, to view route maps and shipment details in one place. There, users can access data like real-time transport status, port-to-port time, and carrier information. Having a dashboard that encompasses all of your shipments and their data enables you to make smarter, faster decisions without the headache of calculating these figures on a case-by-case basis.

Knowing the true cost means a better ability to set pricing, based on the “right day, right time, right carrier,” Blalock says. From there, the creation and implementation of business rules are what takes your business to the next level. The goal is to make business plans that drive profitability and provide better information to stakeholders.

CLICK HERE to view our webinar and learn more about how BlueGrace can benefit your company. If you would like to speak to one of our freight experts, contact us at 800.MYSHIPPING or fill out the form below.

Chilled Supply Chains

While most supply chains operate on the assumption that if the freight is frozen, something has gone terribly awry. However, some goods need to be kept on ice in order to maintain freshness and comply with food safety regulations.  

Much the same as any other supply chain, however, cold and frozen supply chains are also subject to the laws of demand. For example, there are roughly 2.5 billion pounds of beef stockpiled in U.S. cold storage facilities as a result of trade regulations and tariffs set forth by the Trump administration.  

Here are some interesting cold storage stats provided by Quartz 

49 million: Pounds of butter in US cold storage in July 1918 

310 million: Pounds of butter in cold storage in July 2018 

3.6 billion: Cubic feet of cold storage space in the United States 

36 million: Temperature-controlled square feet at 2800 Polar Way in Richmond, Washington, the largest cold storage warehouse in North America 

$28 billion: The projected value of China’s cold chain market in 2025 

25%: The growth rate of India’s cold chain industry 

$24 million: The cost of two refrigerators for Air Force One, which must carry 3000 meals in case of an emergency. 

A Brief History of Cold Supply Chains 

Refrigeration was brought about in the United States in the late 1800s. Originally it was thought that warehouse owners were using cold storage to scam consumers by stockpiling fruits in order to control pricing. However, that notion was quickly set to the side and by the mid-20th century, refrigerated transportation had changed the nature of the supply chain and access to proteins and rarer produce to the average consumer.

As the middle class continues to grow in developing countries, the demand for reefer transport is rising.

Refrigerated shipping containers, “reefer units” were originally invented in the 1950’s and are still used to haul approximately 90 percent of the world’s food trade. As the middle class continues to grow in developing countries, the demand for reefer transport is rising. Anything from food to pharmaceuticals relies on reefer units as these goods make their way around the world.   

How a Cold Chain Works 

There are a number of different goods that utilize chilled transport: meats, produce, flowers, pharmaceuticals, even transplant organs. While the exact practice varies from product to product the general practice remains the same. Quartz details the step by step for produce.    

  • The first step is pre-cooling: Getting the harvest from the field to on-site cold storage. A one-hour delay in hot weather means one day less of shelf life at the store. There are a lot of methods, from the simple (shade, spraying water) to the sophisticated (vacuum cooling). 
  • Then it’s into the reefer. An automated system can fill a truck in 10–15 minutes. 
  • Next, it moves to a cold storage facility, which is just a giant warehouse with lots of metal shelves. Here’s what an automated one looks like. 
  • After that, it’s back to the reefer and to the store, where fresh fruit and vegetables are taking up an increasing amount of space. 
  • Finally, it’s moved out to the display case, where fresh-cut produce has to be maintained between 32℉ and 41℉, a tricky physics problem. 

Of course, with more stringent requirements from the FDA, containers have to get smarter as well as the supply chain. One such adaptation is reefer containers that can monitor temperature data in real time. This allows suppliers to monitor and prove that their produce or other temperature sensitive goods have been within acceptable thresholds for the duration of the trip.   

Blockchain is expected to play a big role in the future for preventing expired or mishandled food from reaching customers.

Another advancement links that container to data systems, specifically blockchain data, which provides a more or less permanent snapshot into the entire life cycle of the product. There are a number of major players in the food industry including Walmart and Nestle that have had a bad rap for bad food. Blockchain is expected to play a big role in the future for preventing expired or mishandled food from reaching customers. “You’re capturing real-time data at every point, on every single food product,” says Frank Yiannas, vice president of food safety at Walmart, which leads the effort. “It’s the equivalent of FedEx tracking for food.” 

One of the biggest advantages to using blockchain for food item supply chains is that the data can’t be faked, changed, or altered. Once the data is in, it’s in for good since blockchain databases work peer to peer instead of being housed on a single server. Additionally, because of the shared nature of the data, it can actually help to cut down on operation costs, by eliminating the need for data silos and processing.  Should a food issue arise, the process of tracking down not only the spoiled goods, but the location and other goods that might have been contaminated from the same source can be tracked down in minutes, rather than weeks, which helps protect not only the consumers but the retailer selling the products.  

How Can I Simplify My Freight Needs? 

This is just one example of the diverse nature of the supply chain and highlights the need for agility, visibility, and flexibility to make it all work. At BlueGrace, we help our customers navigate through the constant changes the industry brings. No matter the situation, we can help simplify your freight needs. If you have any questions about how a 3PL like BlueGrace can assist, contact us at 800.MYSHIPPING or fill out the form below to speak with a representative today! 

Bricks and Mortar: 5 Real Applications of AI To Improve Bottom Line

Many applications of Artificial Intelligence (AI) for brick and mortar retail seem far off, or too futuristic. We picked 5 of the more accessible applications of AI that could help improve your bottom line this year.

1. User accounts

Brick and mortar stores have often felt disadvantaged when it comes to AI compared to e-commerce retailers. Stores simply do not have the same depth of customer behavior tracking data that Amazon does, for example. However, many AI applications for e-commerce could transfer to physical stores.

With store user accounts, retail brands better synchronize offline and online retail.

The mingling of brick and mortar with online shopping occurs in many ways – such as relying upon location-based services or the use of a universal cart that can be used whether you are shopping on a mobile, desktop or voice-powered device. Omnichannel commerce covers many forms of customer experience – the many touch points a customer has with a retailer. Brick and mortar retail can rely on online data when shoppers set up a user account at the store, or from using click and collect or delivery services. With store user accounts, retail brands better synchronize offline and online retail. This reduces the “separateness between these channels [that] poses a threat to operational efficiencies and adds friction to customers hoping to shop in a seamless and consistent fashion.”

2.Recurring billing

A shift towards recurring orders and subscription shopping services is taking place. Retailers can immediately think of ways to encourage clients to consider their habitual, recurring purchases (laundry soap for instance) and plan for them. In that way, habitual orders can be delivered “on repeat.”

Smaller companies might consider subscription programs to expand customer reach and deepen relationships.

Smaller companies might consider subscription programs to expand customer reach and deepen relationships. With subscriptions, member incentives increase visitors to physical locations (Special offers). An example of a “masterful combination of a subscription program and a sophisticated store network”, is Sephora. Cosmetics are especially suitable as sampling products. Those interested want to try out new products – plus they are small and easy to ship. “Sephora’s PLAY! program offers subscribers access to new products through home deliveries while also encouraging them to shop at their local stores to build up points they can redeem for exclusive prizes and experiences.”

3. Style assistants

AI Style assistants in stores are not too far off, as well as other forms of augmented reality, like voice-activated assistants. Expect changes in the store environment, such as is already happening at Zara. “At Zara’s new flagship store in London, shoppers can swipe garments along a floor-to-ceiling mirror to see a hologram-style image of what they’d look like as part of a full outfit. Robot arms get garments into shoppers’ hands at online-order collection points. iPad-wielding assistants also help customers in the store order their sizes online, so they can pick them up later.”

4. What’s Old is New Again

What is AI really anyway? Retail AI is simply mimicking the original experience of a country store (when an associate would help you, care about you, and talk with you) (personalization), with empathy (care for the customer) and manners.

The bulk of retail revenue continues to be derived from brick and mortar stores. The tactile nature of shoppers’ needs is one of the most important factors of this and why physical retail remains. AI can improve empathy, or sensitivity and understanding of a customers’ point of view – and needs – to scale. As observed by many, “It’s no longer about segmenting customers based on general characteristics such as gender or age. Knowing a consumer’s attitudes and sentiments towards things, favorite day of the week they like to shop, the associate they like to deal with, the price points that they buy at, etc., will help retailers better target their consumers and deliver a great experience.”

Using AI options can begin today, even in the way we remember the original needs of the customer.

5. Logistics & Inventory Management

AI addresses out of stock product head on. With AI solutions, a notification that an item is out of stock, running low or out of place in the store is sent out right away to an in-store associate. Currently, Home Depot’s website offers “a vast array of local store data, such as stock levels down to the number of SKUs carried in a store. If you need 10 items of a specific SKU, you want to know a store has that many before you go. It’s no good if we only have two,’” explains Dave Abbott, the retailer’s vice president of integrated media.

Also, data-driven insights on the logistics end, such as offered by BlueGrace, increase operational efficiency

Also, data-driven insights on the logistics end, such as offered by BlueGrace, increase operational efficiency. Using BlueGrace proprietary technology connects retailers with AI possibilities. After companies undergo a review with a BlueGrace specialist, they are presented with new opportunities for cost savings, such as opportunities to implement predictive analytic technology with certain partners that will factor in weather and inventory levels. This will help direct trucks to different stores as part of an overall supply chain improvement. BlueGrace’s enhanced shipment visibility and business intelligence pave the way for AI initiatives.

For more information on how BlueGrace can help you create visibility and operational efficiency, feel free to fill out the form below or contact us at 800-MY-SHIPPING.

Accelerating Business Growth And Lowering Cost With Data Analytics

Too many companies are experiencing transportation and freight expenses as one of their top three costs. Smaller companies feel the pinch the most. They typically incur greater logistics costs than medium and large sized companies, as do companies that sell lower product value goods. In a recent survey, 32% of online retailers expected logistics and delivery to be their biggest cost this year. The expense of moving products or assets to different destinations should not be the leading cost in any business, if possible. (See How Does Freight and Transportation Fit into your Budget? 

What’s behind the dramatic rise in transportation costs in nearly every sector? There are simply not enough drivers on the road to keep up with demand.  

Truck Capacity Crunch 

The first explanation for the rise in transportation costs is the truck capacity crunch.

The first explanation for the rise in transportation costs is the truck capacity crunch. See “Rising Costs and Lower Capacity in the Domestic Truckload Market.” There are simply not enough drivers on the road to keep up with demand. “Surging transportation demand is spurring trucking companies to charge as much as 30 percent more for long-distance routes compared with prices a year ago, and they’re hard pressed to add capacity because of a long-standing shortage of drivers,” explains Thomas Black, in Bloomberg’s “There Aren’t Enough Truckers, and That’s Pinching U.S. Profits.” Tyson Foods Inc anticipates paying $200 million more for freight in 2018 from the previous year. Kellogg Co’s logistics costs are expected to rise by nearly 10 percent. 

Chief Executive Jim Snee of Hormel Foods, the maker of Skippy peanut butter and SPAM, says, “We don’t believe we’re going to recoup all of our freight cost increases for the balance of the year.” He informed Reuters that the company’s operating margin sank to 13.2 percent, from 15.6 percent due to rising costs – freight among them – in the most recent quarter. 

Stringent Demands of the ELD Mandate 

The second reason is the new ELD (Electronic Logging Devices) Mandate which entered into force on December 18, 2017.  Drivers are now driving less, in keeping with the new regulations. Fewer drivers on the road at any given time due to the ELD Mandate is equivalent to taking 200 to 300,000 or so trucks off the market, according to a podcast episode by Freight Savings Tips.

Truck Driver Wage Increase

With fewer people getting licensed to become truck drivers, and older drivers retiring (see “Attracting the Next Generation of Truckers”), it will be inevitable that wages will need to go up to attract much-needed drivers. To cover the cost of truck driver wage increases, truckload rates will inevitably rise. 

Fuel Price Hikes 

The rise in fuel prices is especially hard-hitting for companies as fuel represents a significant portion of freight spends – often appearing as a surcharge on carrier invoices or embedded in line-haul rates. Fuel, according to the Harvard Business Review, is often the “largest inadequately monitored part of a company’s cost structure.” 

Tom Kloza, global head of energy analysis for Oil Price Information Service calls this season “the most expensive driving season since 2014.”  

Congestion In Cities 

With increased traffic volumes and customer expectations on delivery times, the pressure to perform – quickly, and in congested parts of the city (i.e., tricky navigation) is very real. Consumer changes and complicated last-mile delivery obligations require money which must then be offset elsewhere. 

The main solution – and greatest hope for companies engaged in shipping activity –  is data analytics.

What To Do: It’s All about Data Analytics 

The main solution – and greatest hope for companies engaged in shipping activity–  is data analytics. Data analytics lessen the cost of bringing products to retailers or customers by uncovering new possibilities.  

Transportation spending covers many dimensions. Therefore, there are many opportunities to control the spend. These solutions come in the form of reconsidering warehouse processes, leveraging IT systems, revising package and product designs to alleviate excess weight and increase shipment density, or “nearshoring” (reducing the number of miles shipments travel). 

Bringing in the Experts

Companies who have relied on BlueGrace’s tried-and-true data analytics have recouped losses from mistakes they have made in the past. Consider the consumer packaged good company that underwent BlueGrace data analysis to determine what the “true cost” of its orders were (using information from historical orders) when freight cost was allocated.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level. Since freight cost was not passed through to the client, this would either show a net margin loss on certain orders or opportunities to reduce the freight cost allocation on others to become more competitive. The result highlighted regions that were more costly to ship to, products that did not have enough margin potential to consider shipping unless they met a specific minimum requirement and insight into regions of the country that would benefit from an additional warehouse location.” 

With BlueGrace’ specialized business intelligence, processes become clearer. Transportation costs are curbed relative to sales and overall budget. Ready to find your own clarity today? Feel savings relief by taking the first step. Watch the video on our proprietary game-changing data service here and talk to an expert today. Fill out the form below or call 800.MY.SHIPPING (697-4477) to be connected to a Transportation Management Expert.