The supply chain has become one of the most critical functions in an organization. Its dynamic nature and the high impact it has on the business makes it challenging to manage. Thus it is necessary for the success of the business to have a strong and well-informed leader at the helm.
However, good leadership skills and information savviness alone are not enough to handle the supply chain function and manage the team. There are other necessary capabilities apart from business know-how and general leadership skills that a supply chain leader needs to lead the function efficiently and effectively.
What are the most important skills that every supply chain leader should have?
While there are many skills a supply chain leader should have, tome impact the business more than the others. These skills are non-negotiable and a must-have. They are:
Strong Analytical Skills: Supply chain is all numbers and analysis. To lead the function effectively, it is extremely essential for the leader to be comfortable with numbers, handling large amounts of data, analytics, and the various analytical models that are used for decision making. A lack of these skills or discomfort with analytics can be fatal for not only the function but the organization as well.
Technology Know-How: Since the past couple of years, supply chains have been adopting new technologies, digitalizing, and automating processes. In such a scenario, it becomes crucial for the leaders to understand and be open to adopting new and advanced technologies to manage the function. In fact, they not only need to understand, but they also need to lead the adoption of technology for their organizations.
A report by Gartner titled “Gartner Top 8 Supply Chain Technology Trends for 2020” says, “It is important for supply chain technology leaders to adopt a mindset that accepts and embraces long-term perpetual change”. Supply chain leaders should be able to identify what technology will work best for their organizations and be the champions for change. If supply chain leaders possess such a mindset, it becomes easier for them to convince the management to adopt new technologies as and when an upgrade is required and to lead the team through the change.
Strategic Thinking and Operational Mindset: Supply chain is a function that involves both strategy-making and operations. To be able to make good strategies, the people leading this function need to have an understanding of business and the environment the business operates in. And, to make sure the supply chain functions smoothly, they should have knowledge of how things work on the ground.
In short, a supply chain leader should be able to think strategically and execute the plans operationally with equal efficiency. If either of the skills is missing, it becomes difficult for the supply chain to function smoothly and create value.
Negotiation Skills: Leading a supply chain function means endless negotiations with internal stakeholders and external business partners. They need to know how to put forth their viewpoints and get a buy-in from the other parties involved. To be able to do this efficiently, they need to have a good grasp of the market dynamics, rates and pricing of services, and the latest industry trends.
Quick Decision Making: Supply chain is a fast-paced function. In the supply chain, it is common to come across situations that require quick and on the spot decisions. At such times, the supply chain leader should be able to use the data and information on hand to make quick but informed decisions and follow through with them. He should also be able to train his core team to do so. A lack of this skill can lead to further disruption of operations and delays in completing the task. If this happens often, it can make the supply chain inefficient.
People and Relationship Management: Today’s supply chain is usually not limited to one geography or location. They are spread across the globe. A global supply chain has many participants in the form of internal teams spread across regions, vendors, business partners, and business associates from different parts of the globe. Each team or partner has its own way of working, cultural mindset, and knowledge.
They should also know how to bridge the gap in knowledge of the function and technical understanding to make sure none of the team members feel left behind and are able to cope with the dynamic function. To do so, they need to have an understanding of different cultures, regional peculiarities, emphatic attitude, soft skills, and people management skills.
Statutory and Legal Knowledge: Supply chains have to comply with a lot of taxes, duties, labor-management laws, and export-import formalities. Even a little slip up in any complying with a statutory or legal requirement can result in large fines. This is why, along with functional expertise, supply chain leaders need to have at least a basic understanding of laws and regulations of the regions they operate in. This also ensures that they can get the best solutions for such matters from their local teams.
Along with these skills, supply chain leaders also need trusted partners to make sure their supply chains are running smoothly. That’s where we – BlueGrace Logistics come in. Our team has expertise in analyzing supply chains and helping our business clients find the right solutions to improve their supply, make it more effective, and create value.
To know more about how we can work with your supply chain leaders and teams to take your supply chain to the next level, get in touch with us today!
There are some common causes for tender rejection, but the following list certainly doesn’t account for every reason a load might be rejected.
Long distance to potential backhauls creating a lot of deadhead miles
Short lead times
An exceptionally competitive truck market
Tight capacity in specific trucking segments
Minimizing Tender Rejections
You can’t eliminate the possibility of tender rejections altogether, but there are some ways that you can reduce the number of shipments rejected by carriers.
Occasionally, tender rejection may occur if a request for proposal isn’t clear enough. Ensure your internal processes give carriers all the information they need to understand the scope of your haul.
Choose Your Carriers Wisely
If the rate a carrier offers seems too good to be true, it probably is. A carrier may quote in order to gain business, but if their quote comes out below what the service costs to perform, they may reject the load.
A carrier audit is a great way to check in on tender rejection rates and determine if these rejections are making doing business with certain carriers in your repertoire too costly.
Increase Your Lead Time
If at all possible, try to stretch out lead times to at least a couple days. Give carriers time to fit you into their schedule ahead of time so that they can be assured business.
Consider forming relationships with carriers of all sizes and specs operating in your lanes. When you’ve got a long list of potential carriers for a load, you don’t have to hire a carrier who says they can probably fit you in. Spreading your business around helps small carriers thrive, and you may find a great new partnership.
Opt for Multi-Lane Carriers
Carriers may reject a load that comes with too high a connection cost. Any load that’s going to require a driver to schlep a lot of extra miles is one that’s not very appealing.
When you choose a carrier who operates in multiple lanes, especially lanes that connect to your load’s destination, the carrier can keep their costs down by turning another load in short order and therefore are less likely to reject a load.
Build Great Carrier Relationships
While you can’t mitigate every reason for tender rejection by building relationships with carriers, it can certainly go a long way towards getting your load out on the first try.
This is one of the big benefits of working with a 3PL to broker your loads. Freight brokers have already developed great connections with the carriers they engage. When faced with two similar loads at similar rates, a carrier is likely to opt for the load commissioned by the party with whom they have the best relationship.
One way to mitigate the impact of tender rejections is to use a 3PL. It’s a lot less trouble for you if a freight broker acts as intermediary when a load is rejected, and they have extra incentive to keep costs low while seeking an alternate carrier in order to keep your business. Need help assessing your carriers or adjusting processes to avoid tender rejection? Call us at 800.MYSHIPPING or fill out the form below.
With the global pandemic still in effect, freight capacity is fluctuating even more than usual. Over the past few months, we’ve seen a tightening of capacity for numerous reasons, not the least of all being several smaller carrier companies going bankrupt. Whenever there is a change in the overall availability of capacity, changes to both spot and contract rates are right behind it.
Understanding those rates can help your company make better decisions about how to move your freight
Understanding those rates can help your company make better decisions about how to move your freight, saving you both time and money, while keeping your operations flowing smoothly. But what is the difference between the two different rates, and which one should you be more focused on?
Understanding the Relationship between Spot Rates and Contract Rates
Freight rates are broken down into two different categories, contractual rates and spot rates. Contractual rates make up about 70 to 80 percent of overall market rates and are governed by the average spot rate at the time of bidding. Contract rates offer peace of mind for both parties. For carriers, there is guaranteed volume, while shippers have the peace of mind knowing that trucks will show up, on time, to move their freight, even when capacity gets tight.
However, there are situations in which shippers will opt for a spot rate instead.
However, there are situations in which shippers will opt for a spot rate instead. For inconsistent freight volumes, seasonal or one-off shipments, shippers might not benefit from a contracted carrier. However, spot rates are incredibly volatile and change with demand. While demand is low, shippers can often get a better rate, but run the risk of going over their shipping budget when the overall available capacity swings the other way.
Shippers Should Start Considering Contracts
When the Covid-19 outbreak first started, overall consumer spending dropped drastically. This led to a significant drop off in freight demand which, in turn, dropped spot rates and opened up capacity. While this was incredibly beneficial for shippers, carrier profitability comes under pressure. Couple this with the Trump administration’s trade war with China, and many smaller carriers couldn’t afford to keep their doors open. With fewer carriers, and continued pressure on underperformers, the available capacity will continue to drop. As the U.S. begins to open back up, and consumer spending picks up, this means that demand will see a sharp uptick.
“After six consecutive quarters of deflation, the market is rebounding, heading back towards an inflationary environment, the spot market will reach an inflationary environment by Q1 of 2021,” William B. Cassidy, of JOC.com
This means that spot rates will climb, rather quickly. So what does that mean for contract rates?
Like we mentioned above, spot rates affect contract rates, which means an increase in both. However, for shippers, bidding out a freight contract for a carrier might prove to be more beneficial in the long run due to the following:
Spot rates will continue to climb as reopening continues across the country and demand increases.
Shipers have likely already seen the floor for spot rates, meaning we’ve seen it at its lowest point so it has nowhere to go but up.
Shippers will begin to experience capacity issues. This perhaps the most important issue. Whenever there is a capacity crunch, carriers can cherry pick freight for the best rates which means you’re either paying a premium, or your freight ends up sitting on the loading dock.
The secret to maintaining operations is to find the balance between contract rates and spot rates. As carrier operations begin to capitalize on the effects of continued increases of the spot market rates, it will be time for shippers to start looking for more carriers and fulfillment options to fill the void.
Want to Learn More?
Want to learn how to better manage your contract and spot rates? Curious about what the second half of 2020 holds for freight rates? You can watch this webinar, as well as all of our past sessions, as part of our free resource library, to learn more. Every month, we here at Bluegrace will have a new webinar on the topics that matter to you! Stop in for next months webinar and receive a free supply chain analysis for your business.
As much as we’d like to believe that our supply chains are both quick enough to react to major disruption and flexible enough to maneuver around major obstacles, the global pandemic has taught us that often isn’t the case. It is the single major weakness of most supply chains, an inability to react to a sudden and massive large-scale disruption, which can include pandemics (such as Covid-19) massive weather events, and a myriad of other setbacks. This lack of resiliency is most notable in supply chains for life sciences, health care, and food industries in particular.
The Chinese market is massive, for one thing, and most companies can’t afford to withdraw completely, otherwise, they might lose any competitive edge they might have had.
After COVID broke loose around the world, the current administration issued a call for companies that have offshored their production to Asia, (China, in particular) to bring it back stateside. However, for many companies, this proves to be challenging and counterproductive. The Chinese market is massive, for one thing, and most companies can’t afford to withdraw completely, otherwise, they might lose any competitive edge they might have had. Additionally, because the Chinese market is now either the dominant, if not sole source, for thousands of different items, reducing the dependence on those goods will take a significant amount of both time and money.
Reshoring wouldn’t necessarily mean resiliency either. The meat shortage in the United States is a perfect example of this. The industry’s supply chain is entirely domestic. In an attempt to reduce costs, many companies focused on consolidating manufacturing activities, which means a smaller number of slaughter and processing plants are now producing much of the beef and pork products consumed in the United States. This created a vulnerability as shutting down one plant, even for a few weeks, creates a major impact throughout the country. Farmers, who get paid to raise the feedstock, are now stuck with taking a potentially devastating loss on their products while the rest of the country faces months of meat shortages.
Remap instead of Retreat
Instead of retreating outright from the forign market, the best approach to building resilience into the supply chain is by conducting an internal audit. More specifically it’s the process of mapping out the layers of suppliers, manufacturing plants, distributors, and the other various elements of the logistics network and then implementing a stress test to evaluate the ability to recover from the disruption of any of the various links. Understanding where various bottlenecks will occur means being able to create mitigation strategies which can include increasing manufacturing capabilities, adding more suppliers to the roster, or building up buffer stock.
The added advantage to mapping and stress testing the supply chain is that companies using this method can find unexpected weaknesses or high risks throughout the organization. The more complex the produced good is, the higher the risk of utter disruption.
“Work that one of us (David) did with the Ford Motor Company found unexpected high risk associated with small suppliers, including many local suppliers. One part it identified that fell into this category was a low-cost sensor widely used in its vehicles: If the supply of it were disrupted, the carmaker would need to shut down its manufacturing operations. Because the total amount spent on this item was low, Ford’s procurement group had not paid much attention to it,” reads a recent article from HBR.
Stress Testing on a Policy Level
Essential industries, such as pharmaceuticals and health care, need to have a level of government involvement to ensure that supply chains are resilient enough to continue operating, even during the worst-case scenario. Consider the mask and hospital supply shortage when the pandemic first started to hit the United States. While panic buying created part of the problem, the supply chain itself faltered and eventually failed under the crushing demand.
If such a test can be conducted for banks, it can similarly be conducted for all life-critical supply chains.
There is a precedent for such involvement, however. Back in 2008, during the recession, the U.S. government and the European Union conducted a stress test for banks to guarantee that the major financial institutions that prop up the entire financial system, could survive a major crisis. If such a test can be conducted for banks, it can similarly be conducted for all life-critical supply chains.
The Long Road to Resiliency
Creating supply chain resilience for essential products and services here in the United States could very well require domestic manufacturing. But that’s neither an easy nor cheap fix. Take the pharmaceutical industry, for example. Of the drugs sold in Europe, more than 80% of the required chemical components are manufactured in China and India. Because chemical production is a significant environmental hazard, it would require the development of clean technology and manufacturing processes to create a domestic supply chain. This process could take upwards of 10 years and would require a hefty financial investment. Could it be done? Absolutely. But not easy, and not cheap.
However, until companies have a full comprehension of the vulnerabilities throughout their supply chain, these kinds of decisions can’t be made. The pandemic has created an excellent opportunity and, perhaps more importantly, a motive to put in the necessary time, energy, and resources. Only then can they protect their supply chain from a potential devastating disruption that may be lurking on the horizon.
Do you have supply chain questions that you need answered? Do you need help bolstering your current supply chain to handle these new and disruptive global situations? Feel free to contact one of our logistics experts today and lets talk more about it today.
Prolonged dwell times have been an age-old inefficiency that the trucking industry has been trying to curb. Longer dwell times affect the drivers, carriers and shippers alike. An estimated detention time or dwell time can cost trucking companies $3 billion per year as per the Federal Motor Carrier Safety Administration.
The total time spent at a facility by a driver is called dwell time while detention is the gap between the allocated time to start loading/unloading and the actual time of loading/unloading. Longer detention at customers’ premises has largely impacted drivers’ available hours-of-service. Ideally, shippers and receivers are allowed a 2-hour window to load or unload a truck. Any time spent outside the allotted time calls for detention charges. Detention is thus used to offset the cost of a truck being detained at a shipper or receiver’s premises.
Dwell time in unprecedented times – A challenge
The month of March saw an unprecedented rise in panic-buying, which resulted in a tremendous spike in demand. The truckers continued to ply on the highways, making essentials available throughout regions. With increased demand, came the perils of heightened dwell times and detention times. The added safety protocols, social distancing, precautionary SOPs to be followed at the shipper and consignee facilities and the shortage of manpower had considerably impacted the driver detention times. On the other hand, transit times may have improved, owing to less traffic congestion during the lockdown period.
Improvement in the check-in process, ensuring social distancing, enhancing driver safety and the use of technology to manage appointments and improve collaboration between all parties have been the key drivers of change.
Improvement in the check-in process, ensuring social distancing, enhancing driver safety and the use of technology to manage appointments and improve collaboration between all parties have been the key drivers of change. While the world adapts to the new normal in supply chains, it is of utmost importance that more sustainable solutions are innovated and implemented.
Detention: Causes and Impact
Inefficiencies at the facility such as the lack of manpower to load and unload consignments, the unwillingness of the shippers or consignors to invest in manpower to accommodate increased freight movement and the inability at the individual level are the main reasons for increased detention durations. Additionally, mismanagement of appointment times such as goods not being ready for dispatch while the vehicle arrives at the premises lead to unwanted delays. Another common reason is the overbooking of appointments – when more trucks are booked than what the loading location can handle. All of the above contribute to increased detention times, which in turn amounts to losses for truck drivers. On average, truck drivers spend two and a half hours waiting at the shipper or receiver premises to load or unload goods. These hours are not considered as working hours, thus, leaving them unpaid.
We need to understand that most of the drivers are paid on a per-mile basis, therefore, every moment lost in delays is a direct loss of income for drivers.
We need to understand that most of the drivers are paid on a per-mile basis, therefore, every moment lost in delays is a direct loss of income for drivers. On the other hand, for LTL carriers, waiting at a certain facility for longer durations can mean skipping the delivery altogether.
As per a 2018 report published by the Department of Transportation Officer of the Inspector General (OIG) that sought to understand the correlation between driver detention times, crash risks and costs incurred, it was found that detention time may impact annual earnings for truck drivers by $1,281 to $1,534 per year in the negative. Shippers of essential goods have experienced longer detention times at facilities lately. For example, the recent crisis of toilet paper around the nation had trucks lining up at facilities for hours before being loaded with goods. Detention fees paid by shippers to carriers can only offset the loss up to an extent but that money fails to cover the driver wages lost by not driving. Primarily, the carrier efficiency and a driver’s payable hours-of-service are at stake, but the effects of longer detention times invariably trickle down to every stakeholder across the supply chain.
Is there a long term solution – that can increase efficiency, while ensuring optimum asset utilization and prioritizing driver safety in times of crisis?
Longer dwell times and increased detention times are not a byproduct of the current economic crisis alone. They have lingered in the industry for quite some time now and only technology can help provide long term solutions to enhance supply chain visibility. In a recent statement by Collins White, the president of Alabama Motor Express, he stated, “It has become progressively worse since 2018. We have bought software that automatically tracks when the truck goes over the allotted two hours of dwell time and automatically bills the customer.” Better technology that tracks the movement of trucks with a precise estimation of time spent at shipper or receiver facilities will help us give a clearer picture of the spots where the detention is taking place. Identifying these spots will further enable a better understanding of bottlenecks, allow correct allocation of resources and change practices to streamline the flow wherever necessary.
On the other hand, the tried and tested drop-trailer business model may have worked for some quite well. In the drop trailer method, a driver leaves a trailer at the facility for a stipulated time period until another vehicle picks it up. This doesn’t time-bound the shippers and they can load trailers at their convenience. Given the current situation of restricted labor availability, this method comes as an interim respite but cannot be considered as an all-round solution to the problem.
Investing in data-enabled technology is necessary to be able to make any supply chain more robust and induce complete visibility.
Investing in data-enabled technology is necessary to be able to make any supply chain more robust and induce complete visibility. Location Intelligence (LI) is set to make location data more accessible to participants in a supply chain. The use of LI is a promising trend as it uses geographical relationships to decipher complex data that can provide fleets with critical insights of accurate detention time calculations. It can provide accurate information such as time of arrival and departure of a truck at a site. They can also monitor a driver’s fuel stop time or break times which can further help enhance asset utilization. Insights into trends pertaining to a particular time of a day or week can translate to better prediction of transit times and estimated time of deliveries. All of these are elemental in aiding data-enabled business decisions through optimized route planning with reduced dwell times that boost overall productivity and enhance supply chain performance.
As the nation grapples with the ongoing economic crisis, a sudden surge in demand followed by flattening of the curve, the unpredictable rise of freight volumes and its correlation with increasing or decreasing dwell and detention times remain a cause of concern. What must not be forgotten is that these problems of detention and dwell times pose the opportunity for a permanent change towards creating a symbiotic relationship between carriers and shippers. There is an immense potential for cost savings and enhanced operational efficiency that will invariably impact the driver community’s way of life on the road.
The recent federal decision to authorize the import of certain citrus fruits from China has garnered significant attention since its announcement in April. More so in an ongoing pandemic situation across the world, this came as a major shock to the indigenous farmers and authorities in Florida. While there have been neutral remarks by California industry representatives who do not foresee any formidable impact on the fresh produce markets owing to the smaller volumes of import, Florida seems to differ on the opinion.
What’s the USDA decision regarding citrus imports?
Towards mid-April, the U.S. Department of Agriculture authorized the import of five commercial citrus fruits from China. Chinese pomelos, Nanfeng tangerines, Ponkan tangerines, sweet oranges, and Wenzhou tangerines are the five varieties of citrus fruits that can now be imported into the U.S following systematic plant pest screening. The decision comes after the federal scientists reinstate that these five varieties can be safely imported given the farmers, packers, and shippers use a systematic approach to minimize pest risks.
Following the announcement US Senators Marco Rubio and Rick Scott penned a letter to Sonny Perdue, the USDA Secretary to reconsider his decision of importing these varieties that may be detrimental to the current scenario of Citrus trade in Florida. The impacts could be manifold pertaining to the safety of these produces in the aftermath of a pandemic.
Why are these five fruits such a cause of concern?
The four main things to know here are:
The dwindling Citrus Industry of Florida.
Firstly, the sorry state of Florida’s Citrus industry over the past decade has been a major concern for the agricultural community as well as industry experts. The reasons for such a downward spiral are hurricanes, unfair pricing of imports, and citrus greening. Mike Sparks, executive vice president and CEO of Florida Citrus Mutual, stated,
We need to take another look at this decision. Add to the fact it will hurt growers by flooding domestic markets with Chinese citrus and it really is a double whammy.
At a time when the indigenous growers are facing a steep challenge with the ongoing economic crisis, this move seems to come as a severe blow to the agricultural community in Florida.
Citrus Greening or Huanglongbing, HLB, a disease that originated in China and entered the U.S. through imported citrus is a serious cause of concern. The disease primarily affects the growth of the plants and produces asymmetrical and stunted fruits with thick yellowing peel and a bitter taste. Citrus Greening has been majorly responsible for the dwindling citrus fruit production in the US and many other countries around the world.
Potential invasive pest and disease threats.
Especially in the aftermath of the pandemic engrossing the world, there is a potential invasive threat of pests and diseases. While Florida industry representative Dan Richey finds the agreement of the country to import Chines citrus fruits close to lunacy, he emphasized the likely threats new imports could introduce to the nation. He stated
I am much more concerned with the invasive pest and disease risk, not only with the fruit but with pallets the fruit is shipped on. We are required to use heat-treated pallets to ensure no wood-boring insects are hitchhiking in the pallets. Again, the Chinese cannot be trusted to adhere to this rule and who knows what may arrive in these pallets and on our shores?
Adherence to the Systematic Approach of Imports
Lastly, the USDA supported the decision based on the prerogative that if a systematic approach is adhered to in importing these fruits, then there is absolutely no cause of concern. But the question is who is to guarantee that such a systematic approach is being strictly followed?
This systematic approach demands that the growers, packers and shippers implement a methodical approach that minimizes the risk of pests. Limiting imports to commercial shipments alone, registering production sites & packaging plants, certifying the safety of the imports and that they are devoid of any pests or infections, regular inspection and sanitization of the production sites and proper disposal of waste. While these seem the best practices that must be followed to ensure safe consumption, Richey remarked, “If we think for one minute that China will hold their grower/packers to the standards required of a systems approach, we are fools.”
While the apparent impact of the imports on the market is believed to be small, the threat of introducing invasive varieties to the region is real and the subsequent adverse impact on the agricultural community cannot be overlooked. The decision seems to be ill-timed and irresponsible given what the industry has faced in the last decade as well as on account of the ongoing economic crisis.
As the global supply chain settles into the COVID19 technology driven and customer-centric decade, there’s no time to pause and reflect on what has happened. Now, more than ever is a time for action. You need to pick up the pace and ensure that your processes are leaner, faster, and you are equipped to meet your customer’s expectations. Understanding the nuances of your supply chain and how to improve upon it is the best way to achieve maximum savings, optimize efficiency, and manage customer expectations.
We’ve come up with a concept called the Three M’s, three key areas that you can explore and break down in order to realize the full potential of your company that can help you to get the biggest, fastest savings in your supply chain, today.
They are: Measure; Manage; and Maximize.
The first of the three M’s is the measure, and it’s all about understanding your supply chain and how it functions. To measure your supply chain is to create an overview of your operations and within that, to develop an understanding of your key processes and where your company’s strengths and weaknesses lie.
Understanding how to create an overview of your supply chain is the very first step in measuring what your company is doing right now and what your current process looks like.
“Understanding how to create an overview of your supply chain is the very first step in measuring what your company is doing right now and what your current process looks like. Either creating an overview or even having an external analysis done by a third party will help you gain visibility and understanding why you’re doing things the way that you do and then taking that information and turning it into actionable information that your company can then use to make better business decisions,” suggests Amanda Staffon, our Senior Business Development representative.
Measuring can help you to:
Analyze the need for process improvements.
Understand where cargo can be consolidated to increase cost savings.
Measure carrier cost structures to maximize efficiencies and lower costs.
Better financial efficiency of your end to end supply chain network.
Enhanced control over shipment scheduling.
Manage is all about the internal conversation within your organization. It’s about understanding why key stakeholders which should include, vendors, purchasing, customer service, sales, are making the decisions that they do and how those decisions affect your supply chain. Manage is also about understanding the flow of goods, money, and information throughout your organization.
The data and analytics gathered during the measure phase is instrumental to a proper understanding of your operations
The data and analytics gathered during the measure phase is instrumental to a proper understanding of your operations and can create the insight necessary to understand why these decisions are being made and how you can improve upon them.
There are four key advantages to the management phase:
Visibility across the entire supply chain from sourcing raw materials to the delivery of finished goods
Modeling future supply chain scenarios as your company grows/changes to ensure speed to market while maximizing cost structures.
Complete insight into the production, partner, and supplier performance to ensure responsiveness to customer needs.
A Global perspective to keep updated on the latest developments and optimize processes across North America.
The last of the three M’s is Maximize, and all about making the most possible good from every factor and decision within your organization. For example, technology helps to maximize efficiency and, in turn, increase profitability.
A well-managed supply chain provides companies with the ability to execute best practices
The other two steps are crucial to maximize as they help you to understand the layout of the organization and what steps you need to take in order to see the most benefits, whether that be further developing strengths, optimizing a specific aspect of your operation, or outsourcing aspects that your company isn’t particularly strong in.
A well-managed supply chain provides companies with the ability to execute best practices in the following areas:
Risk Management and Contingency Plans
Putting it into Action
Of course, the first step in this process is often the most daunting. During the uncertainty, dedicating resources (time, energy, money) to anything that doesn’t have an immediately apparent return can be terrifying. However, taking that first step is most important as it lays the path towards improvement and growth in the future.
We encourage you to listen to our free Webinar about the Three M’s to get a more in-depth understanding of the process as well as to take advantage of our free supply chain analysis to see how BlueGrace can help you to improve and optimize your operations.
While all facets of the modern business are important, arguably the most important to any retail, manufacturing, or goods based service is their supply chain. The supply chain serves as the backbone of these companies and has a significant impact on the company’s business strategy which directly affects its operation and operational costs. Additionally, the performance of the supply chain has a direct impact on a company’s ability to provide services to their customers and create additional value via services offered or simply through reliability. With the multitude of changes that have been occurring within the logistics, trade, and freight industries now, more than ever, is an opportune time to conduct or review the process of internal audit of your supply chain.
An internal supply chain audit is one of the most powerful methods of evaluating and possibly improving your supply chain, reduce operations costs, and increase competitive advantages.
An internal supply chain audit is one of the most powerful methods of evaluating and possibly improving your supply chain, reduce operations costs, and increase competitive advantages. The goal of the internal audit is to help you find weaknesses within your supply chain and correct pain points, bottlenecks to increase supply chain flexibility, agility, and overall efficiency.
To make the most out of your audit and its results, it’s important to understand that the supply chain isn’t a stand-alone, isolated feature of your business. In all actuality, the supply chain is suffused in every aspect of your business. As such the supply chain needs to be viewed between all participating companies and suppliers throughout the supply chain, with solutions applied from a holistic approach.
Why an Internal Audit is Necessary for Your Supply Chain
For most companies, audits are typically part of the normal routine, either for financial records or for physical inventory. The entire purpose behind an audit is to make sure things are where they should be and that everyone is playing by the same rules.
“Internal auditing is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes,” as defined by The Institute of Internal Auditors (IIA).
This is especially important when trying to maintain retail compliance, for example, with increasing customer demands like On Time; In Full (OTIF) or Must Arrive By Date (MABD).
Simply put, an internal audit is a multi-step process that is a means of determining whether your current systems and operations are in compliance with your company’s predetermined operating procedures and regulations. This is especially important when trying to maintain retail compliance, for example, with increasing customer demands like On Time; In Full (OTIF) or Must Arrive By Date (MABD). Conducting an internal audit does more than just evaluates the supply chain, it also takes a necessary look at the interaction between other aspects of the organization such as the accounting and financial systems, practices, and procedures. For example, are your planners and purchasers communicating properly, not only with each other but with the production floor and shipping department? Are parts coming in with enough lead time that items can be manufactured and shipped according to customer requirements?
An internal audit is important because it allows the company executives and logistics decision makers to examine the effectiveness of their business operations and controls and applications of new policies. Over time, establishing those best practices means a more competitive and more profitable company in the future.
Things to Consider Before you Start the Audit
Performing an audit is one thing, but knowing what areas you need to be focusing on is something else entirely. While every audit should be more or less tailored to the specific needs of an individual organization, here is the basic framework for initiating an audit that needs to be included:
Audit Planning: Internal auditors should have a plan in place well before the actual auditing begins.
Examining and Evaluating Information: Internal auditors should have a standardized criterion to compare findings against.
Communicating Results: Audit should have a clear and concise method of reporting their findings.
Follow Up: Internal auditors should follow up in a timely manner to ensure that appropriate actions have been taken to correct audit findings.
This framework also serves as a support system for corporate managers and allows managers of larger production systems to delegate the oversight of the audit to the internal audit department. This is important for a few reasons:
Operating Complexity: Automated data processing has increased the levels of complexity when analyzing data, a task better suited for those who know what to look for.
Decentralization: Given that supply chains are prone to be decentralized in terms of a physical location due to globalization.
Lack of Expertise: As the adage goes, stick to what you know. Leave those auditors in charge of the audit for the best quality audit.
With the right framework in place for the audit to commence, let’s take a look at the tasks involved for the actual audit.
Supply Chain Structure and Internal Audit Tasks
Like we mentioned above, every company is different and, as a result, the needs for every individual supply chain will vary. So while there is no hard and fast or “Use audit ‘A’ for Supply chain system ‘1’ ” convenient method of doing things, there are some common focal points that are applicable for just about every organization and style of the supply chain.
The supply chain management processes identified by The Global Supply Chain Forum are:
Customer Relationship Management
Supplier Relationship Management
Customer Service Management
Manufacturing Flow Management
Product Development and Commercialization
All of these processes are hallmarks of a healthy supply chain and also indicative of the successful supply chain management. Here again, we can see all of the links that connect the supply chain to every other facet of the business. Another benefit to performing an internal audit is that offers to perfect opportunity to increase the synergy between these various departments. For CFO’s and supply chain leaders, this means that supply chain management deals with total business excellence and represents a new way of managing the business and relationships with vendors, suppliers, and partners.
An internal audit can help a company in finding answers to crucial questions about managing success factors of supply chain excellence, of which these can be divided into five main sections:
Strategy – To determine if the enterprise has a clear strategy tuned to business expectations and focused on profitably servicing customer requirements
Organization – To determine if an effective organization structure exists enabling the enterprise to work with its partners to achieve its supply chain goals
Process – To determine if the enterprise has excellent processes for implementing its strategy, embracing all plan-source-make-deliver operations
Information – To determine if the enterprise has reliable information and enabling technology to support effective supply chain planning, execution, and decision-making
Performance – To determine if the enterprise is managing supply chain performance in ways that will increase the bottom line, cash flows and shareholder returns
Supply Chain Risk Management
As much as we wish we could, the ability to see and accurately predict the future still eludes us to this day. In the end, it all comes down we can optimistically refer to as an “educated guess”. With that being said, even the most educated guesses can’t predict the weather or a broken down truck. This means that within every supply chain, there will always be an element of risk. That risk represents any number of things that can go wrong within your supply chain and halt or delay your shipments. For this very reason, risk management is incredibly important when evaluating your supply chain.
An internal audit can provide business leaders with the necessary framework to develop an appropriate supply chain risk management program.
Risk management is a huge proponent of supply chain health, especially given the instabilities in the global marketplace created by political uncertainty, trade tariffs, etc. An internal audit can provide business leaders with the necessary framework to develop an appropriate supply chain risk management program. This is how your supply chain audit can also help with risk reduction and increased security:
Reviewing and understanding supply chains, including their strengths and weaknesses, in developing markets, to validate monitoring programs
Working with the company’s supply chain specialists to help develop a monitoring process that can be repeated
Helping to identify which suppliers are critical
Assessing which suppliers may be vulnerable to threats and helping draw up a residual mitigation profile
Identifying strong risk control procedures
Helping to develop key analytic tools and techniques
Aiding with compliance monitoring
Ideally, the risk mitigation will also allow companies to increase supply chain efficiency to the point where on hand stock can be reduced. While having excessive stock might create a buffer in time where shipments are running late or capacity is tight, that excess can also eat into company profit margins. Additionally, having a well-running supply chain vastly lowers the chance for disruptions, operating costs, and other unexpected costs such as chargebacks, detention fees.
Despite the cause, however, the results are often the same, a drastic slow down of operations and a huge impact on customer satisfaction and profitability.
Supply chain management is a very complex structure of activities with cross-functional processes, and it presents one of the most important functions in the company since it is directly linked to all functions of the company. Supply chain problems can result from any number of things including natural disasters, labor disputes, supplier bankruptcy, an act of war or terrorism, systems breakdowns, procurement failures, and other causes. Despite the cause, however, the results are often the same, a drastic slow down of operations and a huge impact on customer satisfaction and profitability.
The supply chain internal audit aims to support managers in process optimization and above all in cost reduction which result from an uncertain environment by evaluating and directing management towards approaches which will prevent or reduce negative effects.
After analyzing definitions and some of the standards of internal audit, it can be concluded that this process can improve effectiveness and efficiency, and by that, the performances of many functions within the organization. High-impact supply chains are more competitive and are capable of winning market share and customer loyalty, creating shareholder value, extending the strategic capability and reach of the business. Independent research shows that excellent supply chain management can yield:
25-50% reduction in total supply chain costs
25-60% reduction in inventory holding
25-80% increase in forecast accuracy
30-50% improvement in order-fulfillment cycle time
20% increase in after-tax free cash flows
To increase supply chain strength, agility, and overall integrity, companies should develop a framework for a structured approach to ongoing risk identification and management. This will enable businesses to proactively address organizational supply chain risks on a periodic basis – a practice that affords stronger company and brand protection against supply chain risk gaps.
The more we know the more we can simplify.
The more we know the more we can simplify. When we know what your current transportation situation involves and what your pain points are, we can really help you simplify. The journey with our customers begins with the Needs Assessment process and the goal to determine transportation management solutions that increase productivity and decrease overall costs. To speak to one of our freight experts, call us at 800.MY.SHIPPING or fill out the form below to receive a FREE Supply Chain Analysis.
Throughout 2020, truckload carriers felt the burn of the China-U.S. trade war, declining capacity, and low spot rates. In general, markets with lower spot rates are more beneficial to shippers, keeping carrier profitability in check. The opposite applies when contract rates are lower, allowing carriers to retake control and reap greater profits. In addition, the risk for a resurgence of higher spot rates and renewing interest in truckload freight contracts is an area, shippers should understand and keep their eye on in 2020. According to William B. Cassidy of JOC.com, he describes this chance:
“After six consecutive quarters of deflation, the market is rebounding, heading back towards an inflationary environment, the spot market will reach an inflationary environment by Q1 2020.”
To combat that prediction and also consider the influence of the coronavirus, shippers need to understand the driving forces of change in the truckload market, what is already happening with the coronavirus, and a few tips to better underscore and improve use of both truckload freight contracts and spot rate shipping.
Driving Forces of Change in Contract and Spot Rate Markets
The biggest driving force of change in the market involves available capacity and its influence on capacity. As explained by Cassidy:
“DAT noted that freight demand, in terms of total spot and contract volumes, has been increasing, with spot volumes rising 7 percent in 2019 year over year and contract volumes 4 percent. The American Trucking Associations (ATA) predicts a 1 percent increase in contract truckload volumes for 2019, down from annualized growth of 3.2 percent in 2018 and 3 percent in 2017.”
How much capacity must exit the market before supply and demand move back to a closer alignment? Some experts believe truckload capacity and freight demand already are closer to equilibrium than they’ve been since 2017 and that a surge in demand could tip the balance. Others think trucking’s supply-demand gap will take more time to close.”
Unfortunately, that prediction and driving force now hangs in the balance with a likely swing away from the prediction. That’s right. Capacity is rapidly increasing overseas, and it will likely lead to changes in the U.S. truckload freight contracts’ market.
The State of Truckload Freight Contracts Will Retract Due to the Coronavirus
Capacity is dependent on the demand in the volume of imported raw materials, finished products, and other supplies from around the world. Many electronics, automotive, and medications and medical equipment arrive in the U.S. from China. In addition, the flow of exports from the U.S. to the APAC region, including the iPhone and agricultural products, are at risk. There is a near-stop to the flow of freight in the region due to the coronavirus. So, what happens in other areas abroad and in the U.S.?
The freight that would have filled trailers and help carriers push spot rates upward vanishes. Now, carriers have too much capacity, too many drivers, and too few lanes to travel that make a profit. As a result, the spot rate market is on the verge of bottoming out, and shippers will benefit to an extent. The real problems for shippers will not become evident until their favored carriers start to close lanes and begin to exhibit signs carriers are looking to gain profitability when more reweighs and reclasses occur or accessorial fees tick up. At this point, shippers will face the uncertainty of limited carrier availability, if any, and an inability to move freight to their customers as cost-effectively.
The only way to maintain operations lies in creating a balance between the use of contract and spot rates to get the best deal to benefit everyone.
The only way to maintain operations lies in creating a balance between the use of contract and spot rates to get the best deal to benefit everyone. As carrier operations begin to suffer the effects of continued drops in the spot rate market, it will be time for shippers to start looking for more carriers and fulfillment options to fill the void.
How to Better Understand Contract and Spot Rates
Shippers that wish to create a successful balance between the use of spot rate and truckload freight contracts need to follow these steps:
Connect your supply chain assets to a centralized supply chain control tower.
Leverage the full scale and scope of the BlueGrace TMS.
Take advantage of managed services, including invoice auditing and accounting services.
Rate shipments across all modes and potential trade lanes to determine the best-case, not the cheapest, shipping option.
Always consider the “other” factors in tendering freight, including claims’ insurance and management needs.
Diversify your carrier network to include the small and local carriers that have expertise in both truckload and last-mile delivery.
Extend your TMS and order fulfillment systems across your whole supply chain, including brick-and-mortar stores.
Remember to integrate new systems with existing platforms to enable omnichannel capabilities and take advantage of all available inventory.
Gain Better OTR Rating With an Advanced, Customizable TMS at BlueGrace
The freight rate market is continuously changing to reflect the risks and opportunities in the market. As the year rolls on, shippers need to take the steps necessary to shore up their operations against the industry’s top risks, including market volatility and the coronavirus. Moreover, applying the functions and wide-ranging benefits of a dedicated TMS and 3PL’s lineup of managed services will provide a protective barrier against risk and help your organization succeed. Find out how more information and visibility can improve your use of spot rates and truckload freight contracts by calling BlueGrace at 1.800.MY.SHIPPING or filling out the contact form below.
Supply chains are evolving fast. To keep up with the fast pace of supply chain evolution it is important for supply chain planners to upgrade their skills and step up their business planning and forecasting techniques. If the planners lag behind, it will have an adverse impact on not only the supply chain but also on the organization as a whole.
The Gartner Supply Chain Planning Summit held in Denver, USA, in November 2019, emphasized this very aspect. According to Marko Pukkila, Vice President and Team Manager, Gartner, who shared his views during the summit:
“The job description of SCP leaders today looks totally different than 10 years ago. It’s no longer enough to provide copious amounts of data — planners must use the data to draw conclusions about future risks and opportunities. It’s all about supporting business objectives. Gartner calls this an outside-in mindset.”
What is the Outside-in Mindset?
As Gartner defines it, the outside-in mindset is about being
“aware of what is happening around you — be it a business objective or an upcoming recession — and use the capabilities of the planning function proactively to set up internal processes that are optimized for whatever will happen in the future.”
In simple terms, the outside-in mindset is about understanding external factors and the impact they will have on the business objectives. It is about creating a system that can not only take into consideration the impact of these outside forces but can also respond quickly to the ever-changing global economic-social-political environment. It is about creating a planning process that is agile and flexible enough to integrate future events.
What are some situations where the outside-in approach would help?
Let’s take the US-China trade war situation. This scenario has been in existence since 2018. It has impacted the trade relations between the two nations. Needless to say, it has had an impact on the supply chains of the organizations of the two countries. For example, Chinese organizations that were exporting to the US may have seen a decline in the orders due to tariffs or the US organizations would have had to reduce quantities of goods imported from their Chinese counterparts. In this situation, the US companies would have to find another source (country) to fulfill their requirements and the Chinese would have to find alternative buyers for their finished goods.
While the trade war is an anomaly, as a concept is not unheard of. In this situation, organizations that may have researched and identified alternative buyers or sellers ready to do business with them in case of a change in the trade relationship between their countries would have suffered less of a set back as compared to those who may have neglected to take this factor into consideration.
A current situation that is creating havoc on supply chains is the Coronavirus virus outbreak. An article published on February 14, 2020, in The Wall Street Journal which quotes Lars Jensen, head of Denmark-based maritime research group Sea-Intelligence, saying:
“Substantially less cargo is being moved between China and the rest of the world. Last week we had an additional 30 sailings canceled, with 23 across the Pacific and the rest to Europe.” The article further states that “Mr. Jensen said the canceled trips, which have topped 50 since late January, will delay or reduce shipments into the U.S., where retailers may see a slowdown in their traditional restocking of inventories for the spring.”
According to the article, “Analysts reckon that the virus could lead to Apple shipping 5-10% fewer iPhones this quarter and could scupper its plans to ramp up production of its popular AirPods.”
These are just two instances that are coincidently related to one of the major economies of Asia and will have an impact on US businesses. But there are many other situations that may not have a far-reaching, global effect but can disrupt the supply chain at a local level. For example, labor strikes can impact day-to-day operations and create a backlog in the supply chain. Supply chain planners need to factor in local incidents as well while making supply chain plans.
The Gartner outside-in approach suggests that it is important for supply chain planners to be able to read the data and information available to them and identify possible outliers – roadblocks, challenges, and opportunities, in the future. They should then incorporate solutions or plans to be able to navigate their supply chain should those outliers become a reality in the future.
How to incorporate the outside-in approach in supply chain planning?
To incorporate the outside-in approach in supply chain planning, Gartner advises a 3-step process:
1. Realize that the time to transform is now: Citing the 2008 – 2010 economic recession, Gartner says that organizations that were ready with planning processes in place that provided forward-looking insights fared better during and post the recession than those who tried to streamline their supply chain after the recession hit. To put it simply, there’s no time like the present to streamline the supply chain with the evolving global business, economic, political and social scenario. While the change may seem to be in the distant future, it is wiser to prepare the supply chain for it today.
2. Refocus the planning team to business outcomes: Organizations need to understand that supply chain planning and business planning are not independent of each other. Explaining this point, Gartner says: “It’s no longer enough to just provide a forecast — planners must use the forecast to find pathways that guide the business to where it wants to go. Think of an advanced navigation system that doesn’t only plot the best route, but also foresees roadblocks and traffic jams and navigates around them.” Further adding, that the planners need to be able to convince the other stakeholders why this plan is good for the business and how it will help them succeed.
3. Become the orchestrator of success: The supply chain planners need to take the lead on creating cohesion between the different departments of the organization and their business plans. Explaining the point, Marko Pukkila, Vice President and Team Manager, Gartner, says: “The whole is more than the sum of its parts when all parts of the business go into the same direction. This is what planning should accomplish”.
Today supply chain planners have data available to them from every touchpoint of their business. This data, if used effectively can form a strong foundation for supply chain plans. But data is just the starting point. As the Gartner three-step process suggests, supply chain planners should use this data in a constructive manner to create actionable insights, solutions, and bring all the stakeholders on board to follow through the plan.
We know implementing an outside-in approach in supply chain planning is easier said than done. That is why our team of experts not only helps you analyze your supply chain with the help of advanced technology but also guides you in finding effective and efficient solutions to address the issues in your supply chain. Get in touch with our team to know more!
Crises such as the COVID-19 outbreak and the subsequent disruption to our economy and supply chains have truly brought to light the importance of effective risk management. In a world where normally reliable trade partners are shutdown for weeks or ports are closed or workers are furloughed, companies that were one minute functional are now scrambling for solutions to move goods from manufacturing to warehouse to distribution center to retail outlets. What once seemed like a well-oiled machine is now full of chaos or emptiness.
Hiring a 3PL can help companies work their way through tough times.
Hiring a 3PL can help companies work their way through tough times. A lack of resources to maintain and improve growth, lack of experience coping with crises, a deficient organizational structure or insufficiently trained or available staff are all hurdles that can be overcome by outsourcing logistics operations.
Handing off some or all logistics operations to a Third Party Logistics (3PL) provider allows companies to focus on the product or service(s) they provide without dealing with the, well, logistics of it all. Whether a company is looking for help managing their entire logistics operations or simply needs help putting together a tech stack that serves their needs and goals, 3PLs can tackle the operations that are out of their wheelhouse.
It Can Cut Costs
Because of their industry knowledge, access to top tech, highly developed networks, and the potential for bulk discounts, 3PLs may be able to help companies cut logistics costs and manage their budgets more effectively. Outsourcing can lead to the development of smarter, more efficient processes tailored to a specific business’ needs.
Reducing logistics spend through better deals with carriers and/or improved operational efficiency opens up opportunities for growth.
Reducing logistics spend through better deals with carriers and/or improved operational efficiency opens up opportunities for growth. It leaves room in the budget for improvement, whether that be through expansion, R&D, or hiring on top talent.
3PLs Provide Scalability
When you hire a 3PL to handle logistics, you’re gaining a modicum of scalability that you simply can’t get with an internal department or positions dedicated to logistics. A 3PL can provide the staffing you need during every season. A 3PL may also allow for scalability in a new location without the upfront expense associated with opening a physical location, providing expertise and connections in new shipping lanes without a dedicated staff.
Outsourcing Isn’t Without Risk
As with just about any business endeavor, outsourcing to a 3PL isn’t risk free. When a company is spending money, it’s inevitable that things could go sideways and they won’t receive the return on investment they’d hoped for. Risks involved in outsourcing to a 3PL include unexpected costs, trouble during the transition of operations from your company to the 3PL, and reduced customer service.
Mitigating the Risks
Discussions on expectations, service requirements, budget, and other pertinent details should occur before hiring a 3PL.
There are certainly ways to reduce the risks listed above. Choosing a 3PL with extensive knowledge and experience in your industry and in the type of operation you’re hiring them to carry out is critical. Look at references and reviews of the company and speak with companies who have used the provider if possible. Discussions on expectations, service requirements, budget, and other pertinent details should occur before hiring a 3PL, plus continued effective communication is important to ensuring key players are on the same page.
When times are tough, whether due to extraordinary market conditions like the ones today, or just about any other circumstances, a 3PL can help companies work through problems without the large capital outlay often required with internal operational improvements. Wondering how a 3PL could help your company through a crisis? Contact BlueGrace today to get a free supply chain analysis from one of our experts!
Weather events can put a drastic slow down on your operations and unfortunately, it’s practically impossible to predict exactly when these events will happen. Sure, there are seasonal weather events like snow and hurricanes, which gives us a reasonable timeframe in which to expect these types of events. But even then, it still becomes a matter of “wait and see” as to whether or not the event will come to pass. And what about the events that we don’t expect such as nor’easters, polar vortex, or wildfires? There are certain catalysts that can create a potential for these events, such as an extended drought, but there’s no way of knowing for sure until the event is actually happening.
In the event of something truly catastrophic, such as a hurricane, there’s even more pressure for the trucking industry to keep rolling on schedule.
For most businesses, bad weather simply means staying home for the day and waiting for the weather to pass. Trucking companies, on the other hand, don’t have that luxury. Drivers are still expected to maintain their routes and delivery schedules, in spite of bad weather conditions. In the event of something truly catastrophic, such as a hurricane, there’s even more pressure for the trucking industry to keep rolling on schedule.
Severe weather events can disrupt the supply chain causing lag and bottlenecks, especially during a true black swan event in which trucks are rerouted for emergency relief.
For shippers and manufacturers, weather events can wreak havoc on delivery schedules, even when the weather event is thousands of miles away from you. Severe weather events can disrupt the supply chain causing lag and bottlenecks, especially during a true black swan event in which trucks are rerouted for emergency relief.
So what can you do to prepare your supply chain against such events?
A Reason for the Season
Winter or summer, springtime floods or tropical storms in the fall, Mother Nature has predictably unpredictable conditions to throw at us. Plan in advance for alternate routes and parking locations if the regular road is closed and the usual truck parking is filled. Know in advance where road construction is planned. Always carry emergency gear appropriate to the season. Have a reliable response ready when faced with unreliable weather conditions.
Part of preparing that reliable response is having good resources to turn to for accurate information. Every truck driver and every motor carrier dispatcher should have a list of phone numbers and websites for up-to-date reports on local weather, road closures, road construction and emergency notifications, such as during floods and storms. There are, of course, excellent commercial websites, products and services available.
Here is a guide to begin building your own list of resources:
Weather: The National Weather Service is a nationwide network of radio stations broadcasting continuous weather information from the nearest National Weather Service office. Weather radios are not expensive, and some can be powered with a variety of sources.
Road closures: You can find out what road conditions are like in any state with Drive-Safely. Dial 511 from your cell phone for local road closures.
Always pull off the road and park in a safe location before checking websites or placing a phone call. Predictable responses and resources will help you meet the unpredictability of Mother Nature.
Dealing with Sudden Spot Rate Hikes
One of the major aspects to keep in mind when you’re planning for weather events is how truckload rates can be affected by the weather. Since supply chains have become a global engine, a disruption in one location can cause problems in another. For shippers, that disruption can mean unexpectedly higher rates for shipping.
Here are a few best practices to dealing with a sudden surge in spot rates.
Consider working with a third-party logistics (3PL) provider to augment your available capacity and carrier options: Outsourcing eliminates the burden of completing work in-house, but it still relies on efficiency in operation. 3PLs holistic approach, buying, and negotiating power can help augment your operations year-round.
Explore intermodal and multimodal shipping options when the first chances of a storm’s arrival become apparent: Intermodal and multimodal shipping are usually used interchangeably, but both offer unique advantages to getting around after a major weather event.
Increase the shipping budget through proactive, cost-saving measures through year-round operations: Cost-saving measures, such as improved dock management and load planning will naturally lead to savings in the budget. Such savings must not be 100% logged into the company profile. Instead, a percentage should be allocated for use in handling stretches in the freight budget after a disaster. More importantly, gains in efficiency will build resiliency and agility, allowing the supply chain to flex to meet the demands after a disaster.
Batten Down the Hatches at HQ
Spot rates are one way to deal with weather events abroad, but what happens when the storm is on your doorstep? Trucks being diverted can slow down your supply chain but when your base of operations is out of commission, everything comes to a grinding halt. Having a robust plan in place is necessary, especially if you operate in a location where inclement weather events is a yearly risk.
Having the right infrastructure in place should be your first step.
Having the right infrastructure in place should be your first step. Does your main office have a contingency for backup power? How about internet access? Can your employees remotely access your company’s phone and operating systems? Something so simple as backup generators and remote desktops can keep operations moving despite external factors.
Consider your personnel as well. Flexibility and cross-training of your staff mean that everyone on your roster is capable of handling a wider array of responsibilities. This is especially crucial during situations of crisis management when your A-team for customer service might be occupied with other necessary tasks.
The better prepared it is, the more efficient it will be when it really counts.
Having the right infrastructure in place is only the beginning, it’s important to have a plan in place for when the weather turns awry. More importantly, your team should know and understand the procedures for when such events take place. The better prepared it is, the more efficient it will be when it really counts. To speak to one of our freight experts, contact us at 800.MY.SHIPPING or fill out the form below
The United States-Mexico-Canada Agreement (USMCA) is the new trade deal between the three countries. It is set to replace the North American Free Trade Agreement (NAFTA) which was in effect since January 1, 1994. As on date, the new trade agreement has already been approved by the Senate Finance Committee and it is due to be presented in the full Senate in the latter half of January 2020. While Mexico has already ratified the new trade deal, Canada is yet to ratify it.
The Office of the United States Trade Representative describes the new agreement as: “The United States, Mexico, and Canada have reached an agreement to modernize the 25-year-old NAFTA into the 21st century, high-standard agreement. The new United States-Mexico-Canada Agreement (USMCA) will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.”
The Trade Representative’s website also quotes President Trump on the new agreement, saying – “USMCA is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.”
In short, the new agreement aims to update the provisions of NAFTA to suit the current economic and business scenario.
How Does The New Trade Deal Benefit The US?
The new trade agreement provides the US with benefits in the areas of intellectual property, digital trade, De minimis, financial services, environment, currency, and labor. It is also expected to help improve agriculture trade in the region and boost manufacturing activities.
According to an article published in CNN.com, which quotes data from the US International Trade Commission, a federal government agency, the initial phase of the new trade agreement is expected to add around 176,000 jobs after 6 years of its implementation and increase the GDP by 0.35%. It is also expected that the USMCA will help streamline trade among the three participating nations and provide them with opportunities to optimize trade transaction costs.
What Will Be Its Impact On The Shipping And Logistics Industry?
Like all cross border trade agreements, the USMCA will also have some amount of impact on the shipping and logistics industry. Chapter seven of the trade deal talks in detail about the Customs and Trade Facilitation aspect of the agreement, the points mentioned here will directly affect the shipping and logistics industry. Some of the key points are:
Digitalizing regulations: Lack of proper and accurate regulatory information is one of the biggest hindrances to cross border trade. Incorrect information or cumbersome data gathering process often keep small businesses away from expanding their trade. USMCA aims to eliminate this primary barrier to trade. It has provided guidelines to the trading partners to provide easy, free, and online access to the country’s regulations, trade procedures, laws, duties, various charges, and documentation requirements.
Online documentation processing: In keeping with the current times, the USMCA has directed the member nations to leverage technology to simplify and speed up the process. The trade deal requires the trading partners to create a digital platform to submit customs declaration and other required documents and make the system accessible to all concerned parties.
Streamlining compliances: In Article 7.11- titled Transparency, Predictability, and Consistency of Customs Procedures, each of the participating nations are expected to create uniform trade/export-import rules and regulations for their country. This will not only help smoothen the trade procedure but will also simplify it.
Increase in De minimis: In the new trade deal, the US has acquired an increase in the De minimis shipment value from both of its trading partners. When the USMCA comes into force, in addition to the current USD $50 threshold for tax free shipment, the US will also get duty free shipment up to USD $117 from Mexico. Canada has also increased its De minimis shipment value from C$20 to C$40 and will offer duty-free shipments up to C$150.
A higher De minimis value will help both small businesses and transporters to increase their trade with the two partner nations without having to bear the burden of additional duties and taxes.
Express shipments: One major complaint shippers have is delay in shipment release at customs. This point has been addressed in the new tri-party trade deal under the express shipment clause. The clause asks the nations to process all documentation prior to shipment arrival and expedite the release of such shipments if all required documents and data have been duly submitted.
Single window: To speed up the cross border trade, the new agreement has made provisions to set up a single-window clearance system that is technology-based. It also instructs the trading countries to ensure that the system timely informs the exporters, importers and other users of the status of their cargo.
Along with these provisions, the USMCA has also taken into consideration import-export aspects like post-clearance audit, risk management, protection of trader information, and creation of a committee on trade facilitation among other various provisions with an aim to boost trade in the Northern region.
If you would like a FREE supply chain analysis or if you would like to know more about how the Customs Administration and Trade Facilitation rules and regulations impact your business, get in touch with our team today at 800.MY.SHIPPING or fill out the form below !
The 24th Annual Third-Party Logistics Study for 2020 has been released and it shows a growing success between shippers and their 3PL partners.
“The majority of shippers, 93%, report that the relationships they have with their 3PLs generally have been successful. A higher number of 3PLs, 99%, agree that relationships have generally been successful,” the study says.
As 3PLs continue to offer a wider array of services, shippers have been eager to leverage what they have to offer.
The study continues to find that shippers and their 3PL partners are developing a much greater awareness and synchronicity of goals, as well as how data sharing and new technology can help them advance those goals. As 3PLs continue to offer a wider array of services, shippers have been eager to leverage what they have to offer. The result is an optimization of the supply chain, reduced costs, and the creation of overall value within the supply chain.
“This year’s study once again proves that shippers and their 3PL providers are strengthening their relationships and continually moving toward meaningful partnerships. They are collaborating to accomplish their supply chain goals and improve efficiencies. The available evidence confirms that both parties are creating reliable solutions and improving the end-user experience for the customer, which is allowing shippers to use the supply chain as a strategic, competitive advantage.”
3PLs Are Rising to the Occasion
Currently, both shippers and 3PLs have been enjoying favorable economic conditions both at home and abroad. That is not to say that it has been a perfectly smooth road as both continue to face challenges in transportation capacity and facility-based resources. However, the relationship has proven to be beneficial to both parties as they’ve worked together to overcome tight customer deadlines and raise both customer and consumer satisfaction levels.
Another advantage to the relationship between 3PLs and shippers is the ability to adapt to and overcome challenges .
Shippers, of course, have higher expectations of their service providers and third-party providers have responded by increasing not only their service offerings but also their innovations when it comes to overcoming challenges within the current market environment. Simply put, transportation and logistics companies are realizing that the focus needs to be placed on digital capabilities, cost and asset efficiencies, and a broader range of services to meet their customers’ needs.
Current Global Market Challenges
The logistics and freight industry is in a state of flux currently. New technologies, tighter regulations, and growing customer expectations are all forcing necessary changes to the supply chain. According to the 2020 study, here are some of the biggest challenges shippers and 3PLs are facing to date.
Growth of e-commerce: E-commerce and the “Amazon effect” have had a tremendous impact on brick and mortar retailers. The result is that many of them are branching out into omni-channel marketing and distribution to meet customer needs. This adds a whole new layer to existing logistics and supply chain structures.
There are both domestic and global economic changes that are putting pressure on supply chains to adapt and react.
Economic uncertainty: There are both domestic and global economic changes that are putting pressure on supply chains to adapt and react. Many of these include sourcing new suppliers and improving cross border relationships with trading partners. There are also signs of slowdowns within certain major global economies which will soften demand and create new challenges for shippers.
Driver shortage: This problem is not unique to the United States, but it’s certainly one of the most prevalent locations. With the average age of the American truck driver approaching retirement, there is a decided lack of interest in younger generations to get behind the wheel. ATA’s chief economist, Bob Costello estimates that the current 60,000 driver deficit could reach 160,000 by 2028.
Disruptive technologies: While disruptive technology breeds innovation within the industry the difficulty of adapting and integrating these new technologies also increases. Some of the disruptive technologies impacting supply chains include the use of drones, autonomous vehicles, cloud-based capabilities, artificial intelligence (AI), internet-of-things (IoT), blockchain.
While dealing with all the above challenges, there’s also the challenge of keeping pace with the competition.
Competitive challenges: While dealing with all the above challenges, there’s also the challenge of keeping pace with the competition. Especially as there is a new start-up for every day that is poised to disrupt businesses, business models, or even entire industries. This applies to all, trading and manufacturing companies, as well as logistics providers, who are attempting to differentiate themselves from a growing number of startups backed with millions of dollars worth of venture capital investments.
The take away from the survey is that shippers and third party providers are growing and prospering together.
The take away from the survey is that shippers and third party providers are growing and prospering together. As new challenges arise, shippers are looking to 3PLs for answers, innovations, and solutions. Conversely, 3PLs are looking to build long term and steady relationships with shippers as the number of providers continues to grow.
With growing uncertainty in the geo-policitical arena, new technologies, and the explosive growth of e-commerce, it’s likely that we will continue to see growth in the relationships between shippers and 3PLs. For more information on how BlueGrace can be the partner to help strengthen and bring visibility to your supply chain, call us at 800.MY.SHIPPING or fill out the form below to speak to one of our experts.
According to the 2020 Third-Party Logistics Study, data analytics is not only becoming more viable in the logistics industry, but it’s also becoming a necessity and make a difference. With the growing storm that is e-commerce, brick and mortar retailers have had to step twice as fast in order to stay in the game. Especially, when you consider some of the power plays made by the internet titan, Amazon. As one of Amazon’s biggest sources of competition for domestic goods Walmart, in particular, has tightened their game up significantly.
In particular, Walmart uses some stringent policies to ensure that shelves stay stocked and goods are arriving exactly when the retail stores need them to. First is the Must Arrive By Date (MABD) provision, which means that suppliers must have deliveries to the store within a certain delivery window, typically four days, while also having a high invoice accuracy. This is a fairly standard industry practice for retail stores to ensure timely deliveries.
Failure to meet these requirements could mean a 3 percent chargeback per case value of each missing item.
However, Walmart as since followed that up with their heavy-handed On Time In Full (OTIF) policy. Now suppliers must have deliveries at the store within a two-day window, no later and no earlier either (even early deliveries will still be penalized.) Failure to meet these requirements could mean a 3 percent chargeback per case value of each missing item.
As of April 1st of 2018, the company made the policy even harder. Prior to then, the OTIF policy stated that full truckload shipments needed to meet a 75 percent OTIF rating and less-than-truckload shipments needed to meet 33 percent OTIF to avoid fines. Now, FTLs are required to meet an 85 percent standard (down from the lofty 95 percent they had originally planned) while LTL requirements have increased to 36 percent. In addition to the chargebacks, too many violations could cause a shipper to fall out of favor with Walmart and lose supplier status, which would be a major financial hit for most companies.
But what happens if demand is peaked and capacity is booked?
For shippers, OTIF can make for a tight schedule. But what happens if demand is peaked and capacity is booked? What if there’s a major weather event that has the logistics network scrambled? Shippers need better tools at their disposal to keep things running smoothly, and that’s where data analytics comes into play.
How Analytics can Make a Difference
There is a truly astounding amount of data that can be captured within the supply chain. As more companies begin the process of digitizing their operations and automating their systems, just about everything can be tracked, traced, quantified, and speculated. The challenge, however, is making sense of it all. There is such a surplus of data that it leads to a sort of data overload and can turn even the most avid analyst catatonic.
Analytics turns this vast amount of information into insight, according to the 2020 Third-Party Logistics Study by Infosys Consulting, Penn State University and Penske Logistics presented at the CSCMP Edge conference in Anaheim, California. And with this insight, “you stand a much better chance of improving your operations,” says John Langley, professor of Supply Chain Management at Penn State University.
Real-time information can help to match supply with demand. But that’s not all it can do. Far from it, in fact.
To some degree, the logistics industry has already started to use real-time data and analytics. Langley sites dynamic pricing in freight for an example. Here, real-time information can help to match supply with demand. But that’s not all it can do. Far from it, in fact.
For shippers, there is a wide array of challenges they encounter on a daily basis. Of the shippers that responded to the 3PL study, many agreed that the use of analytics would be helpful to many facets of their operations as well as overcoming the challenges they face day to day.
Type of problem
% of shippers who said analytics would be helpful
On-time and complete order fulfillment
Freight costs per shipment
Cost to serve
Order-to-delivery cycle time
Langley says that analytics is ideal for tracking and improving a KPI like Walmart’s OTIF, because the policy itself is a compound metric. And while it might be easy to villainize Walmart from a shipper’s perspective, they aren’t the only company to use aggressive tactics like this. Target, Kroger, Costco, and others are also tightening their regulations in order to keep their shelves stocked.
Learning From Your Mistakes
Perhaps one of the most powerful tools of data analytics is it gives you a different perspective of your operations and allows you to drill down to pivotal details. Why was your shipment late? Why were there missing pieces? Analytics can determine the cause and effect relationships to target the root cause of the issue while sorting out coincidence and other anomalies. In other words, real-time data analysis allows you to track where things went awry and focus on improving operations so that particular issue doesn’t happen again. “If you can measure it, capture it, analyze it, you can use it to your advantage in terms of knowing more about your own processes,” Langley says.
Getting to be a supplier for Walmart is no small matter.
Getting to be a supplier for Walmart is no small matter. For companies that already have that title, keeping it is important. However, even shippers that don’t have the best scorecards, analytics can prove to be a useful bargaining chip. If you’re able to prove yourself, and that you have the right measures in place to improve operations, it’s likely that you can demonstrate your worth as a supplier and make it to the “in” list.
For a better understanding of how to navigate OTIF and other ways to improve your operational efficiency, check out our white paper: Walmart: the retail-supplier relationship. You can also speak with one of our experts by calling us at 800.MY.SHIPPING, or filling out the form below.
As companies mature and the market changes, our understanding of crucial operating components of any industry has also grown. Supply chain transparency, in particular, has come a long way over the past twenty years. Transparency within the supply chain has gone from an unrecognized concept to a focus item for the C-Suite across a vast number of companies and industries. Given the current state of the market, it’s no small surprise either.
So in order to begin understanding transparency in the supply chain, we first need to define it.
Many, if not all, companies are facing increasing pressure from governments, consumers, non-profit / activist groups, and stakeholders to provide more information about their supply chain. Failure to do so could mean some serious damage to the company’s reputation. Slave or forced labor conditions, health and safety violations, animal exploitation, and child labor are all becoming hot button topics of the growing consumer conscience. While the reasons for explaining a higher need for transparency are clear, what is less clear is how to get there. Some companies are struggling to make a meaningful change to their operations to provide the much-needed levels of transparency.
As it is with most problems there is a lack of a clear and concise definition, according to an MIT study which conducted a survey of the apparel industry only to find wildly different results. So in order to begin understanding transparency in the supply chain, we first need to define it.
Understanding the Need Transparency
At its core, supply chain transparency is understanding what’s happening within the supply chain and being able to communicate that knowledge both within and outside the organization.
As we mentioned earlier, there is an increase in customer demand for insight into the supply chain, but it’s not without benefit. The researchers at the MIT Sloan School of Management found that consumers are willing to pay between 2 and 10 percent more for products produced by companies that have better supply chain visibility. The study showed that consumers place a higher value in a company that can prove the ethical treatment of their workers. What’s more is that this growing consumer base is seeking more information about product ingredients and materials, where the product is coming from, and the conditions in which it was produced.
As the demand for visibility continues to increase, so too will the potential fallout for companies that fail to provide it.
As the demand for visibility continues to increase, so too will the potential fallout for companies that fail to provide it. Over the last decade, there have been a number of scandals that have had a significant detrimental impact on company image and reputation. Slave labor in the Thai seafood industry and deforestation in Malaysia and Indonesia are ample examples of this.
The backlash created from these scandals has forced the creation of new transparency laws around the world. Australia the UK have created new regulations to combat forced labor. The state of California has also created supply chain transparency laws (California Transparency in Supply Chains Act.) The U.S. Food Safety Modernization Act is targeting food safety and ingredient fraud. There are also further regulations to come from the Netherlands and Switzerland, with other countries to follow suit.
What this means for companies is that a lack of supply chain transparency can stop operations dead in their tracks.
What this means for companies is that a lack of supply chain transparency can stop operations dead in their tracks. Something as simple as missing origin documents could cause a shipment to be either held up or even turned away at ports which can result in a costly delay throughout the entire supply chain.
So Why Aren’t All Companies on Board?
You would think that with the new levels of consumer consciousness and the growing global regulations that all companies would be scrambling to build transparency into their supply chains. Yet, there are many companies that are either slow to act or not act at all.
One reason for the delay is that the supply chain itself was never designed to allow for transparency. Manufacturers and suppliers alike fear to expose their sources as they might lose the edge against their competition. Another explanation for being slow to act is inaccurate data coming from upstream, assuming there is data to be had at all. Lastly, there’s also considerable concern about the ROI for investing in supply chain transparency.
Despite the challenges, there are plenty of reasons to get on board with supply chain transparency.
The Benefits of Supply Chain Transparency
The returns gained from efforts made on improving supply chain transparency will vary by business model and industry but overall there are a number of benefits that are applicable to most companies.
One of the most straightforward benefits is that increased transparency means keeping in compliance with the new regulations that are being enforced. Operational risks drop as a result as companies no longer have to worry about being able to get freight through customs.
There are also considerable benefits to a company image that come with higher levels of visibility. Consumer conscience is a huge market factor right now. Customers are happy knowing that their products are made with care and concern towards the environment and the people working to make their products. As a result, they’re willing to pay more, which can help offset potential higher supply chain costs. Additionally, consumer trust and satisfaction also rise, which creates stronger brand loyalty and a larger customer base.
Better visibility means better, more actionable data, which in turn can help drive a company’s growth and profitability.
Of course, there are also operational benefits to be had by utilizing a highly visible supply chain. Better visibility means better, more actionable data, which in turn can help drive a company’s growth and profitability. That data also highlights areas of improvement, meaning a company can run leaner, cleaner, and a whole lot greener.
This isn’t a trend in the sense that we’ll see it fall out of fashion any time soon. Supply chain transparency is becoming an industry standard and will continue to flourish. If your company isn’t working towards transparency, it might be time to get started. For more information on how BlueGrace can help give you the visibility you need to gain efficiency, feel free to contact us at 800.MY.SHIPPING or fill out the form below:
There is a sense of uncertainty that is settling over the trade industry in the United States. With the Trump administration slamming tariffs down on Chinese goods, the market is starting to get uneasy. A similar threat levied at goods made in Mexico, which added to the tension but that has been settled, at least for the time being. For starters, the U.S. hasn’t been in a major trade war since the 1930’s, so no one really knows what will happen next. Not for sure at any rate.
The trade embargo then parallels the trade tariffs now; could create a supply shock on reliable and cheap imports.
However, history and time prove to be great teachers and we could draw conclusions from similar events that have happened more recently. In 1973, there was a trade embargo on Arab Oil. The trade embargo then parallels the trade tariffs now; could create a supply shock on reliable and cheap imports.
A History Lesson
The 1970’s embargo holds a very valuable lesson and could provide a possible insight into the current market climate. In 1979, towards the end of the embargo, American businesses, such as gas stations, began to tank as there was no affordable in-flow of new products. The remaining product then skyrocketed, reducing the purchasing power and confidence of the American Consumer.
The trade embargo was issued as a matter of retaliation when the U.S. sent armed forces into Israel as a result of an attack from Egypt and Syria. Arab oil exporters cut production and suspended further exports to the United States. The U.S. long used to the plentiful supply at $4 a barrel, was caught completely off guard when that supply jumped to $11 dollars per barrel. The bill for U.S. oil imports jumped from $28 billion in current USD up to $132 billion in a span of two years. To put that into perspective, that’s a tax increase of roughly 1.5% of GDP. The end result was the worst recession, at the time, since the 1930’s.
Costly adjustments to supply chains and business models had to be implemented which drastically slowed down growth for years.
The recession wasn’t the only impact, however. The recession ended in 1975, but there were a number of repercussions that were felt for many years to come. Costly adjustments to supply chains and business models had to be implemented which drastically slowed down growth for years. A considerable amount of companies and workers found that their skills, products, and factories which had been built on the precept of the availability of cheap oil, discovered they were no longer useful. This caused a drastic slowdown in growth and productivity after 1973 which took years to recover from.
Disrupting long-standing trade always comes with a price.
In much the same way that the United States was reliant on cheap oil imports from the Middle East in the 1970’s, they have also been reliant on cheap manufactured products from China. Now, the United States might be looking to untangle itself from Chinese production as trade and geopolitical tensions begin to rise. However, disrupting long-standing trade always comes with a price.
“Economists at Goldman Sachs estimate U.S. tariffs imposed or proposed on steel, aluminum, solar panels, washing machines and imports from China now equals an annualized $200 billion. Adding all threatened tariffs on Mexico brings that to $288 billion by the end of October. At 1.4% of GDP, that is roughly equivalent to the Arab embargo oil tax,” reads an article from the Wall Street Journal.
In terms of manufacturing and supply chains, that could get ugly quickly.
What that fails to include, however, is the retaliation from China, which has threatened to counter these tariffs with tariffs of their own. In terms of manufacturing and supply chains, that could get ugly quickly, especially as many manufacturers will have to determine whether or not they can take the hit to their profit margin due to increased materials costs or undertake the time consuming and costly endeavor of trying to find and vet a new supplier.
Historically speaking, tariffs were meant to boost domestic manufacturing and production by protecting companies from cheap foreign competition. However, as production is largely globalized, imports often consist of intermediate goods that are moving from one supply chain to another and the U.S. doesn’t have any ready-made substitutes.
If ever there was a time to evaluate your supply chain and suppliers, it’s now. The uncertainty in the global economy is unnerving, to be sure, but optimizing your supply chain can help you to weather the storm without dumping the increased price point on your customers.
There is more to consider about these tariffs than simply a price point.
There is more to consider about these tariffs than simply a price point. What we learned from the oil embargo is that productivity and efficiency were drastically cut down, which took several years to recover from. Increasing efficiency now, giving your company the ability to make do with less, is instrumental in staying relevant in the global market.
BlueGrace helps our customers navigate through the constant changes the industry brings. No matter the situation, we are here to 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!
Managing cash flow, planning the financial outlay, keeping the balance sheet in order, and ensuring all financial compliances are met are a CFO’s core job function. But this is not all that a CFO does. The CFO is also responsible for identifying opportunities to reduce operating costs without sacrificing the quality of the products and services offered by the company.
But is it a good strategy to wait for things to go wrong to ask the CFO to step in?
Supply chain and transportation are two of the biggest cost centers in an organization. The cost for these functions is measured as a percentage of sales and differs from industry to industry. However, according to this McKinsey study, most industries report supply chain and logistics cost in the range of 1.8% to 10%. When costs remain within the industry parameters, supply chain and logistics are usually given the leeway to make their financial decisions. The CFO steps in only when the cost rise above the set industry norms or in case any other financial abnormality is noticed. But is it a good strategy to wait for things to go wrong to ask the CFO to step in? Wouldn’t the supply chain and the organization as a whole benefit if the CFO is a part of the supply chain decision making?
What Does the Corporate World Think of CFO’s Involvement in the Supply Chain?
The necessity of CFOs involvement in supply chain is not a recent phenomenon. A 2013 study by Ernst & Young aptly highlighted the importance of CFO’s involvement in the supply chain. Ernst & Young surveyed 423 CFOs and heads of supply chain around the globe to understand their view of a CFO’s contribution to the supply chain.
According to the results of the survey, of all the respondents, “only 26% finance executives and 21% supply chain executives said that the CFO’s contribution to the supply chain is based around a business-partnering model”. But this trend seems to be gradually changing as “70% of CFOs and 63% of supply chain leaders responded that their relationship has become more collaborative over the past three years”.
Organizations that have a collaborative relationship between the CFO and supply chain also tend to perform better.
The survey also revealed that those organizations that have a collaborative relationship between the CFO and supply chain also tend to perform better. “Among survey respondents with an established business partner model in place, 48% report EBITDA growth increases of more than 5% in their company over the past year, compared with just 22% of those that have not yet adopted this approach.”
In the past five years, the demand for CFO’s involvement in the supply chain has only grown. Last year, an article in the European Financial Review spoke about the book What CFOs (and Future CFOs) Need to Know About Supply Chain Transactions by X. Paul Humbert, Esq. According to the article, the book showcases not only the necessity of a collaboration between the CFO and the supply chain but also demonstrates how the company’s finances and its books are impacted by the decisions taken by functions within the supply chain:
“an organization’s financial results are intertwined with the performance of the purchasing function. Purchasing and purchased inventory affect the balance sheet and capital allocation.”
Another article in Smart Industry Update published in 2018, speaks on behalf of the CFOs seeking answers to supply chain issues which the CFOs may not have first-hand knowledge of. For example, the article lists the following three critical questions that CFOs should ask of their supply chain to be able to make better decisions regarding their supply chain and create better business strategies:
How accurate is our supply-chain visibility?
How quickly can we identify and address challenges in response to disruption?
How well can we respond to changes in the industry?
The survey and the two articles leave no doubt of how crucial it is for CFOs to be involved in the supply chain function and work in collaboration with the head of supply chain. In fact, it is not only the supply chain that needs the CFO, the CFO also needs the supply chain.
How The CFO Can Be A Change Agent For The Supply Chain
An article titled How Brilliant CFOs Use the Supply Chain to Drive Business Value – Do you know the questions you should be asking in Innovation Enterprise targeted at CFOs lists down possible areas that can benefit from the CFO’s involvement.
It says “If the answer to any of these questions highlights a potential issue then it is important to engage with the head of supply chain and agree a process to address the issue. It may also indicate that there is an opportunity to partner more closely with supply chain/operations to leverage the knowledge and skills of the finance team to enable better decision making in the business.”
The transportation offered also influences customer’s buying decisions
All the above areas are crucial from the financial, product, and delivery point and can benefit from a collaborative effort from the CFO and the supply chain. For example, let’s take a look at the second, sixth and eighth question. Freight costs are pegged around 3 – 5% of supply chain costs. Freight contract negotiation is one of the most important activities of the logistics function. It has an impact on the budget, affects the cost reduction KPI given to the logistics department. In B2C businesses, to a certain extent, the transportation offered also influences customer’s buying decisions. How can the function benefit from CFOs insight?
When the CFO is involved in this decision-making from the start, it increases the possibility of improvement in contract terms and in cost reduction.
On the cost reduction and financial front, the CFO, with their fact-based view of the organization, can help the logistics team negotiate better freight contracts. The rates negotiated in these contracts are based on a multitude of factors like government policies, fuel prices, political relations between trading countries, and global business environment. Logistics may or may not have insight into these issues, but the CFO and his team will have knowledge of what is going on in the business world. So, if they know there is a possibility of fuel prices changing in the next six months or a recessionary trend is being noticed, they can advise the logistics team to negotiate a short-term contract and revisit it later. Similarly, in the case of B2C shipments (ref Q6), the CFO and the supply chain head can negotiate for contracts with different delivery options in order to serve different customers. But this can only be done if the supply chain knows the financial viability of these options and that information can be gained only from the CFO of the organization. When the CFO is involved in this decision-making from the start, it increases the possibility of improvement in contract terms and in cost reduction.
Today, to be effective in their job and to create a competitive supply chain, CFOs need to lend their expertise to the supply chain and seek their inputs in the setting the goals and objectives of the company.
Long gone are the days when the CFOs limited themselves to matters pertaining to managing company finances. Today, to be effective in their job and to create a competitive supply chain, CFOs need to lend their expertise to the supply chain and seek their inputs in the setting the goals and objectives of the company.
At BlueGrace, we have found that working with organizations where CFOs are directly involved has helped turn over a new leaf and make significant cost reductions, positively impacting the supply chain of that organization.
We provide quarterly business intelligence reports that give updates on the savings targets you give to us, key performance indicators (KPIs), and special project updates. The CFO of a company, in particular, is able to use these metrics to budget and forecast for the organization moving forward. Connect with our team at 800.MY.SHIPPING or fill out the form below to find out how we can work with your CFO to build an efficient and optimal supply chain.
We’ve all heard that turnabout is fair play but in the trucking market, that mentality could make for a vicious marketplace. Of course, no one likes to pay any more for a service than they have-to, but given the fluctuations that happen within the freight market it’s all part of the game, right?
The problem is, when you focus solely on the bottom line, working relationships, the level of the provided services, and customer care can often be shoved to the wayside.
A Fairweather Friendship
While not all shippers will use and abandon their third-party (3PL) logistics providers during an economic shift, enough have done so in the past that left a bad taste in the mouths of 3PLs.
Shippers tend to shy away from their “partners” when times are good, capacity is plenty, truckers are looking for freight. When spot rates climb, however, shippers tend to look for shelter in the contract market which makes for a volatile spot market that makes matters much worse than they need to be.
If shippers weren’t as fickle during market shifts there would be more market stability. For shippers though, the bottom line is often considered as the most important factor.
During 2017 we saw both Hurricane Harvey hit the coast as well as the introduction of the Electronic Logging Mandate. As a result, shippers skipped the middleman and dropped their 3PLs, opting to work directly with large asset-based carriers instead.
A year later, spot rates have dropped as much 12 percent, according to data from DAT solutions, which are resembling those seen back in 2017 across several markets. Conversely, contract rates have risen, on average, about 14 percent in 2018 and have increased a further 6 percent this year.
With spot rates on the rise, shippers once again turn to third-party logistics providers with relatively no hard feelings. With negotiations underway, both parties more or less walk away happy.
Creating a Vicious Cycle
The same cannot be said for that type of mentality when it’s applied to the trucking companies, however. Here the negotiations tend to carry the memory of what happened the last time rates shifted in the favor of one side or the other. To be fair, that adversarial behavior does swing both ways. When capacity gets tight, trucking companies raise their rates to support the demand. When demand is low, however, and trucking companies are scrambling for a full load, shippers will push for lower rates, a behavior that seems to be hardwired into the business.
Here is where 3PLs can bridge that gap and help to even out the “revenge” style of marketing.
It’s hard for many companies to part with that “grudge” mentality, especially when both sides are angling to take advantage of one another when the market permits it. You’d be hard pressed to find a business that is willing to say “Sure, we’ll reduce our rates in favor of a good compromise,” and instead sounds more like “You raised your prices on us. Now it’s our turn.” Here is where 3PLs can bridge that gap and help to even out the “revenge” style of marketing.
The True Value of a 3PL
One of the biggest benefits of a 3PL is that they can help a shipper to access different parts of the very fragmented trucking industry. If a shipper has access to large trucking companies, a 3PL can give them access to smaller carriers, both of which have a place in a shippers supply chain.
“It’s hard to handle relationships with tens of thousands of carriers, so if you let the broker handle that portion, and you have a relationship with your top 10-15 asset based carriers, everyone can have a piece of the pie and work more collaboratively,” said Mark Ford, Chief Operating Officer at BlueGrace Logistics.
The main objective of any business is to conquer new frontiers and markets. And, to do this, it requires a wide logistics network and a robust, flawlessly executed logistics strategy.
As we explained it in more detail in one of our previous articles, 7 BENEFITS OF OUTSOURCING LOGISTICS TO A 3PL — The main objective of any business is to conquer new frontiers and markets. And, to do this, it requires a wide logistics network and a robust, flawlessly executed logistics strategy. Your 3PL partner is expected to and can help you achieve your business goals. They may either have their own network across regions or they may have business collaborations with transporters storage facility providers in different regions or a mix of these two, their own network in some cities and collaboration in another. They are thus better placed to help you expand and grow your business. To do this, all you need to do is work with them in a collaborative manner to din the most optimum solution to reach your customers.”
However, shippers who are too focused on their bottom line have a harder time seeing that value in a 3PL partner and might even remain hard pressed to change their ways.
It’s less a matter of saving a few cents on the mile, however, and more about creating a sustainable and, more importantly, profitable supply chain.
It’s less a matter of saving a few cents on the mile, however, and more about creating a sustainable and, more importantly, profitable supply chain. For shippers who are willing to keep an open mind and maintain a good working relationship with carriers and 3PLs alike have a great opportunity to build longstanding and mutually beneficial relationships. Utilizing a 3PL as a broker can help to save money when the markets fluctuate, but using them as a supply chain consultant is where they can truly save in the long run.
There are a number of other benefits that can come from working with and outsourcing your logistics to a 3PL. Not the least of all, a better and stronger bottom line. If you would like to speak to one of our experts, call us at 800.MYSHIPPING or fill out the form below.
To outsource logistics or manage it internally is a major point of consideration for organizations. The decision is usually arrived at after extensive cost-benefit analysis of both the alternatives. While the outcome is often based on the size and nature of the business, availability of capital and manpower, geography served, operational risks involved and extent of control an organization is willing to let go of, outsourcing is increasingly becoming a favored option. Below we will highlight the top seven reasons why you should consider it too.
While your in-house team may be expert at all the functions, the complex nature of the job makes it challenging for them to do all of it by themselves.
Expertise: Logistics is a very dynamic function. A logistician is required to understand business strategy, manufacturing planning, inventory management, and the nitty gritty of different modes of transportation depending on regions served. Along with having expert knowledge of these functions, they are also expected to be good at creating strategies and implementing them. It also requires a lot of coordination and collaboration with various service providers and government regulatory agencies. While your in-house team may be expert at all the functions, the complex nature of the job makes it challenging for them to do all of it by themselves. A 3PL has expertise in all these functions, they also have a connection with external agencies. They can take over the more tedious and complex jobs, freeing your team to strategize and plan the business.
From negotiating rates, booking the freight, providing storage, arranging for the transportation, getting the shipment loaded to following up on the shipment till it reaches the final destination, a 3PL can do it all.
Taking product to market: A 3PL arranges the transportation – local or international, to ensure that your product reaches the intended destination on time. From negotiating rates, booking the freight, providing storage, arranging for the transportation, getting the shipment loaded to following up on the shipment till it reaches the final destination, a 3PL can do it all. In the case you have international shipments, a 3PL has the experienced professionals to manage that as well. How much and how a 3PL contributes to the process depends on the organization that it works with.
Trained staff: A 3PL not only brings in the logistical facilities like warehouse facilities and transportation, but it also brings with it trained personnel who are equipped to handle the day-to-day logistics of the business. 3PL staff is trained to handle the exigencies of the business and deliver on the KPIs you set for them.
This is the age of digital logistics.
Technology: This is the age of digital logistics. A 3PL brings with it specifically designed, trusted, and ready-to-use systems and processes that can manage the end-to-end logistical process on a single platform. Most of the 3PL service providers are also open to customizing or integrating their digital platforms with that of the organization they work with. This flexibility offered by a 3PL not only helps the organization bridge the gaps in its systems but also helps it to do it at a comparatively lower cost.
Large network: The main objective of any business is to conquer new frontiers and markets. And, to do this, it requires a wide logistics network and a robust, flawlessly executed logistics strategy. Your 3PL partner is expected to and can help you achieve your business goals. They may either have their own network across regions or they may have business collaborations with transporters and storage facility providers in different regions or a mix of these two, their own network in some cities and collaboration in another. They are thus better placed to help you expand and grow your business. To do this, all you need to do is work with them in a collaborative manner to find the most optimum solution to reach your customers.
A 3PL not only has the means to do so, but also the technology and the trained staff to execute the process efficiently.
Dedicated customer service: Logistics is now a major part of customer service. Obtaining the right product, packed in the right manner, at the required delivery time is on every customer’s wishlist. This can only happen if the ordering process and logistics are synchronized and managed correctly. A 3PL not only has the means to do so, but also the technology and the trained staff to execute the process efficiently.
Cost Reduction: Last but not least, outsourcing logistics and allied activities to a 3PL not only provides all the above benefits and improves efficiency but also reduces operating costs and administration overheads.
When companies want superior supply chain management services and best-in-class technology, they turn to BlueGrace®. Why? Our progressive approach to transportation management helps customers of all sizes drive savings and simplicity into their supply chains.