Domestic Offshore Shipping: 3 Helpful Tips to Improve Performance

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Marine transportation is not only a method of reducing logistics spend, but also carbon emissions. According to a study conducted by Martin Associates, it’s estimated that maritime shipments save companies approximately $3.6 billion/year, as compared to land alternatives. Furthermore, in an era where companies seek to differentiate themselves by means of green initiatives, quantifiable emission reductions can provide companies with a concrete example of reducing their carbon footprint.

In a shipping environment of volatile rates, capacity concerns, and limited alternatives, offshore shipping can pose a difficult challenge for many supply chains. Whether shipping to Alaska, Hawaii, or Puerto Rico, there are, however, some key considerations to maintain margins and ensure a seamless delivery.

1. Dimensions Are Key

Container and pallet dimensions are critical when shipping offshore. These shipments are rated based upon both weight and cubic measurement. Be prepared to have the bill of lading handy - including information about the shipment content, cubic dimensions, origin and destination zip-codes, and special delivery needs (lift gate, white glove, residential delivery, etc.)

Cubic-ft Conversion: Multiply length by width by height (in inches) and divide the total number by 1,728 (cubic inches/cubic foot). Solution is the volume in cubic feet.

2. Know Sailing Schedules and Customs Requirements

Pay particular attention to sailing/delivery schedules to ensure on-time performance. Develop a contingency plan with your partner - in the case of acclimate weather, construction, or need for expedited delivery.

Differentiate between Freight Terms and Payment Terms. Steamship operators are limited to a liability of no more than $500.00 due to Maritime Laws. Consider purchasing optional insurance for high-end items to mitigate handling and transit risks.  

From a compliance standpoint, understand Customs and Border Protection security requirements. For shipments to Puerto Rico, in particular, remember to file a Shipper’s Export Declaration (SED) utilizing the U.S. Custom’s Automated Export System (AES) for product values exceeding $2,500. Failure to do so will cause shipment delays.

http://www.cbp.gov/xp/cgov/trade/automated/aes/

3. Find a Trusted Partner

Last-mile logistics is critical for off-shore shipments, and shouldn’t be treated as an afterthought. Partner with a transportation provider that maintains a local presence to not only limit the number of hand-offs, but also streamline the delivery process. Furthermore, ensure that your partner has the visibility tools to monitor shipment status, and can customize their supply chain and logistics services to your needs.

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MABD Compliance: 3 Internal Considerations to Combat Penalties

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Large retailers are known to maintain strict inbound policies to improve their supply chain efficiencies. For Wal-Mart, in particular, Must Arrive by Date Compliance (MABD) is a strategic demand used to accelerate “speed to market,” and streamline the sourcing and procurement of the products they sell.

For shippers, however, MABD compliance translates to risk. How can shippers find a balance between compliance and cost-savings? How can they focus on their core-competencies when the risk of a chargeback totals 3% of the COGS?

As mentioned in, “Third Party Consolidation: Minimize Risks and Maximize Rewards” and "Third Party Consolidation: How Retailers Can Deflect the Cost of EDI," the ideal solution to combat the cost of vendor compliance penalties and identify cost-savings in transportation spend is third party consolidation.

However, prior to implementing such a distribution strategy, manufacturers and wholesalers must consider the following:

1. Is the ROI attractive?

What is the cost of a lost customer? What percentage of revenue-lost is a result of vendor compliance? Will third-party consolidation create a value proposition to attract additional customers?

2. Is there a sustainable competitive advantage (SCA)?

To achieve a SCA, a distribution partnership must exploit manufacturing assets and competencies, while neutralizing weaknesses. Are we capable of optimizing supply chain performance internally? Coincidently, what benefits would result from re-focusing on the innovation of new products and customer service - rather than supply chain and logistics?

3. Will our present strategy have success in the future?

A distribution strategy must be capable of surviving the ever-changing dynamics of the retail market. Is our present distribution strategy capable of adapting to changing market conditions? Is potential synergy captured by our present distribution model?

What are some other considerations prior to adapting a Third Party Consolidation Strategy?

Photo by Esther Gibbons

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HOW IT WORKS:

The following diagram illustrates how Third Party Consolidation works:

A Multi-Vendor Consolidation strategy allows manufacturers and wholesalers to ship smaller, high-frequency LTL/TL orders to a 3PL Consolidation center and maintain a safety stock. When retailers, like Wal-Mart, place an order; loads are then quickly assembled and mixed with other orders to compose one, 100% retail compliant, truckload shipment. In the process, prepaid freight costs are divided, and risk of charge-backs is substantially decreased.

Additional benefits include:

• Reduced lead times on vendor orders

• Reduced transportation costs

• Improved on-time performance

• Increased visibility through integrated TMS and WMS

• Systems integrations, i.e. EDI

Supply Chain has a New Sherriff: Third Party Logistics in DFW

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The Panama Canal Expansion Project has exponentially increased the amount of growth and development along the Atlantic and Gulf Coasts. Impacting everything from port and rail-line infrastructure, to warehousing and terminal development, the project’s completion (in 2014) will mark a dramatic change in U.S. supply chains and identify a new “epicenter” for distribution within the U.S.

For the industry, the canal’s expansion will allow vessels to double their capacity, while maintaining an all-water route to consumer markets along the U.S. Gulf, East Coast, and Midwest. Conditionally, in-midst of oil price volatility and growing port congestion along the West Coast, the prospective cost-savings of maximized rail and sea transport will make the “new” Panama Canal a “juggernaut” in the world of logistics.

According to the Journal of Commerce, West Coast ports currently handle 50 percent of the U.S. containerized trade, including 70 percent of U.S. imports from Asia. Going forward, the Panama expansion will allow for Asian imports to be much more prevalent on eastern ports. In-fact, according to projections by Trade Canada, the expanded system is expected to increase intermodal traffic by some 200 percent by 2025, versus a projected 90 percent increase without the expansion.

Cities along the Gulf and East Coasts are already investing in new transportation and supply chain infrastructure to accommodate the projected traffic. In fact, the ports of Savannah, Charleston, Jacksonville, Miami, Baltimore and Philadelphia have all announced plans to enlarge and deepen their channels to make way for larger ships.

While in-land cities, such as Atlanta, Chicago, and Columbus are expected to also benefit greatly from the import shift; the non-port city of Dallas-Fort Worth (DFW) will become a new “hotbed” for intermodal distribution throughout the U.S.

3 reasons to invest in the Dallas, TX Market:

1) Infrastructure

The city of DFW will have a great impact on how companies, with global supply chains, locate and distribute their products. Fortunately, the DFW Metroplex already boasts the nation’s most sophisticated transportation and logistics network that includes highways (I‐35, I‐30, I‐45), Transcom Railroad Corridor, DFW International Airport, Alliance Airport, and the Dallas Logistics Hub (DLH).

2) Centrality and Cost

As manufacturers and retailers aim to maximize ‘speed to market,’ while minimizing cost, the location of a company’s DC is critical in maintaining a competitive advantage. DFW’s proximity to the Port of Houston allows companies to utilize its advanced transportation and logistics networks to directly serve a large portion of the consuming U.S. population. Furthermore, according to the U.S. Department of Transportation, 93% of the U.S. population can be reached via truck within 48 hours. Conditionally, 37% can be reached within 24 hours of shipment from the DFW-area. From a cost standpoint, DFW also maintains the lowest distribution costs to the top 50 U.S. consumer markets of any region (CF Lynch & Associates).

3) A Strategic Edge

With the Panama Canal expansion expected to increase the flow of goods through the Port of Houston, it’s important to recognize that a combination of “larger ships and fewer trips,” doesn’t necessarily translate to lower costs. To develop a competitive edge, companies must see the Panama expansion as a “value-added route,” as opposed to a passage-way between the Pacific and Atlantic oceans. A 3PL model for warehousing and transportation management (TMS) enables companies to take advantage of “pauses” in their supply chain, and add value to their products as they await their next destination. Furthermore, the flexibility of a 3PL model will accommodate for inventory fluctuations, reduce capital expenditures, and mitigate risks.

Companies seeking to optimize distribution patterns throughout the region should consider third-party logistics services in the DFW-area. Due to its strategic cost and service advantages, and in midst of a revamped Panama Canal, DFW will soon be the hub for supply chain and logistics – both domestically and abroad.

How is your company planning to alter its product-flow in midst of the “new” Panama canal? What challenges are being faced in doing so?

Forward Stocking Locations: Optimized Logistics for Service Parts

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In this economic climate, many companies are evaluating their distribution models to optimize transportation efficiency, while attempting to reduce annual transportation spend. This task, however, can be difficult when the demand for maximized up-time is necessary to stay ahead of competition.

Years ago, only companies with limitless resources could afford to maximize their up-time for critical parts. But those years have now passed.

As transportation costs continue to increase, as described in Transportation Management: Stop Leaving Cash on the Table, forward stocking has identified itself as a strategic solution for optimized transportation efficiency.

Often referred to, but rarely defined, forward stocking locations (FSL) allow companies to mass produce critical parts, and store them in strategically positioned depots that are closer to their customer markets.

In other words, forward stocking helps leverage inventory holding costs and decentralizes distribution - allowing for reduced transit times and the ability to expand into new geographic markets/increase sales. Without increasing fixed costs and investing in additional capital assets, FSLs can dramatically offset transportation costs and provide an integrated solution to meet your Service Level Agreement (SLA) goals at the lowest possible cost.

The diagrams below help illustrate the implementation of an FSL strategy. Note how transit times and transportation costs seemingly reduced. Furthermore, sophisticated IT Technologies enable you to optimize inventory levels, and provide real-time visibility of your service parts inventory across all locations. FSLs can also support additional value-added services, such as kitting, sequencing, and sub-assembly.

So whether shipping spare parts to immediately return an aircraft on ground (AOG) to service, or maximizing equipment up-times for high-urgency sectors - like medical services, aerospace, telecommunications, and precision manufacturing; consider an FSL strategy to optimize transportation efficiency and combat transportation costs.

What are some industries where an FSL strategy could be of value?

Third Party Consolidation: How Retailers Can Deflect the Cost of EDI

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The broad concept of technology has a great influence on the world today. From lithium batteries to iPhones, 3DTV’s to solar panels – technology is considered by many as the greatest product of science and engineering. Within the supply chain industry, in particular, technology is not only represented by the end-product, but the processes to which raw materials are transformed into finished products, and transported from manufacturer to retail distribution.

For big box retail distribution, like Wal-Mart, EDI (Electronic Data Exchange) has established itself as a competitive force for efficient and continuous replenishment. For smaller companies, however, the benefits of EDI and the ability to have big box retail as a customer can be outweighed by the high costs of software implementation. 

To be brief, EDI is defined as the framework for which big box retail handle transactions with their suppliers, and their suppliers’ suppliers. In other words, it’s a direct computer transmission of orders and transactional information between an entire supply chains. For larger firms, this equates to improved productivity, enhanced data accuracy, and ultimately, cost savings. 

In practice, Wal-Mart is one of the largest users of EDI technology and hence, expects compliance amongst its suppliers. In doing so, this allows Wal-Mart to accurately predict when products should be stocked and streamlines the replenishment process. This increased efficiency, in turn, allows them to improve customer service, lower expenses, and ultimately, ensure an “Everyday Low Price.”

For smaller companies wishing to do business with Wal-Mart, the benefits of EDI are typically outweighed by the high costs of software acquisition and implementation. Furthermore, the annual costs of licensing fees and monthly mailbox VAN (Value Added Network) fees serve as additional cost barriers.

To counter this challenge, small retailers must consider Third Party Consolidation as a viable solution.  As discussed in, “Third Party Consolidation: Minimize Risks and Maximize Rewards,” 3PL’s can provide in-house EDI capabilities without the costly investment in infrastructure. Furthermore, in the big box retail-sector, a consolidation strategy allows manufacturers to reduce logistics spending by forgoing the costs of carrying excess inventory while ensuring compliance with Wal-Mart’s MABD (Must Arrive by Date) and vendor compliance demands.

In this economy, when cost-savings is an utmost priority, Third Party Consolidation is a viable solution to deflect to cost of EDI Implementation and maintain healthy relationships with big box retail.

Refer to "MADB Compliance: 3 Internal Considerations to Combat Penalties" for a listing of three strategic considerations prior to adapting a consolidation strategy, and an illustrative look at Third Party Consolidation.

Third Party Consolidation: Minimize Risks and Maximize Rewards

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For many companies, dealing with large retailers like Wal-Mart and Target can be a very challenging task. Such partnerships may represent 70-80% of sales revenue, and meeting the supply chain and logistics performance expectations can deter a firm from its core competencies.

The fact of the matter is, in this economy, competitive forces require large retailers to demand better products, faster delivery, and decreased costs. This creates a rippling effect amongst manufacturers – as the skyrocketing cost of transportation management, and the threat of chargebacks is a mean of lost revenue and even lost business.

To help offset these challenges, and defer the cost of on-hand inventory/storage, Third Party Consolidation Programs have emerged as a competitive weapon.

Logistics' Impact on Revenue

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How can you help your company retain and secure top customers…not just cut costs?   It’s no secret that the quickest way to lose a customer is to screw up their first order and/or reoccurring orders…and no one can afford to lose a customer in our present economic times, especially not a top customer.

3 Ways that Logistics Retains and Secures Top Customers

• Reliability – Are your orders arriving on time and accurate over 99% of the time?  These are the best in class expectations/KPI of many demanding customers.

• Visibility – Can your customers track the steps in their orders from the time they’ve placed it to the time it’s in their hands?  If you don’t demonstrate control in the order process by knowing where your customers’ orders are at all times how can you expect them to “trust” you to fulfill their orders properly over 99% of the time?

• Pro-Active Communication – It’s inevitable that something will go wrong and when it does are your customers finding out from you pro-actively or having to find out for themselves and react to the situation at the time they thought they’d have their accurate and intact order?  The time difference between when you find out about a problem with an order and when it is supposed to deliver is crucial as it allows you, your customer, and your third party logistics provider the time to find a solution to still meet the needs of their order.  It’s no secret that time equals money.

Don’t let your budget reductions limit your ability to improve the impact that logistics has on revenue.  Customers are asking more of their vendor’s logistics capabilities everyday and your competitors are searching for ways to either stay ahead of you or leap frog you in terms of your logistics capabilities.

What have you implemented, are you implementing, or are you contemplating on implementing to stay ahead?

Image By: DonkeyHotey 

Transportation Management: Stop Leaving Cash on the Table

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Manufacturers and distributors can agree that improving transportation efficiency, while reducing overall transportation spend, is the “bread and butter” to any logistics strategy. After-all, optimizing transportation correlates directly to higher margins, greater sales, and quarterly success.

However, as concluded by the Cleveland Research Company’s Transportation Industry Monthly: Trend Analysis, demands for LTL/Truck load shipments continue to increase year-over-year. In fact, during July 2011 demand for LTL services was 5% higher than in July 2010. This excess demand creates a “carrier-friendly” pricing environment, and inevitably increases your annual transportation spend.

So how can one counter-act the basic economic principles of supply and demand, and fight increasing shipping costs?

The answer is quite simple. Proactively seek a partnership with a third party logistics provider (3PL) that provide you the tools and resources to manage your spend efficiently. Here are 3 reasons why:

1. A good 3PL analyzes current rates and freight requirements, and uses its market presence to leverage relationships with carriers to provide a least-cost routing model to its customers. In other words, they bid out your shipment to a multitude of qualified freight carriers within their network, and pass their negotiated savings on to you.

2. Looking beyond the price of an individual shipment, a 3PL can also dilute the indirect cost and time associated with quoting a shopping list of carriers, sorting through bids, and following up on shipments. By means of a web-based Transportation Management System (TMS), one can not only rate-shop multiple carriers within 30 seconds, but also manage shipping documents, receive up-to-the-minute tracking, and print transportation audit reports.

3. Working with a 3PL to manage transportation can also reduce the frequency and cost of chargebacks. 3PLs have extensive experience in transporting on-time, 100% retail-complaint shipments to some of the world’s largest and most demanding retailers. They can also provide a host of other Supply Chain and Logistics solutions, which enable them to customize their capabilities and provide value-added logistics solutions such as kitting, assembly, and reverse logistics to name a few.

So whether shipping spare parts to immediately return an aircraft on ground (AOG) to service, coordinating on-site “white glove” deliveries to our nation's hospitals, or fulfilling orders to a retailer - consider a 3PL partnership and fight the increasing transportation costs.

What are some other solutions to combat increasing transportation spend?

3 Considerations In Building an "E-commerce Juggernaut"

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E-commerce, as described in Building an E-commerce Juggernaut: 3 Reasons to Outsource Fulfillment, is one of the most important facets of modern business. In fact, one can argue that it has revolutionized the 21st century in a way that few technologies ever have. The history of e-commerce dates back to 1970’s, when electronic data interchange (EDI) and electronic fund transfer were first introduced. Since then, e-commerce has encompassed almost every aspect of business - including supply chain management, transaction processing, internet marketing and inventory management.

Prior to considering a fulfillment partnership, it’s important to first mimic the 3 following traits that serve as the foundation to building an “e-commerce juggernaut.”

1. Business Planning

Without thoughtful business planning and a clear understanding of your product – the leap from an “online store” to an “e-commerce juggernaut” can be quite treacherous. The purpose of a website is to first and foremost, sell products and services, while also present information, increase business visibility, and provide additional customer service. Hence, having a great product or service, in correlation to a clear - customized - vision will help attract targeted markets and increase both sales and customer satisfaction.

2. Inbound Marketing

Inbound marketing increases the likelihood of being found by your target markets. In other words, it’s the practice of bringing warm, qualified customers into your sales funnel. Some of the most popular inbound marketing techniques include blogging, interacting on social medias, and search-engine optimization. Inbound marketing involves creating and providing valuable content for your customers, promoting your content (not the product or service), building customer relationships, and increasing brand awareness.

3. Efficient Fulfillment and Customer Support

Having the infrastructure needed to satisfy a customer’s cyber experience and facilitate the fulfillment of any given order is essential for customer satisfaction. In fact, customer retention is deeply engrained to the way a company services its customers, and the reputation it creates within and across the marketplace. According to research by John Fleming and Jim Asplund, repeat customers generate 1.7 times more revenue than new customers. Furthermore, referrals among repeat customers are 107% greater than non-customers. Maintaining good communication with your customer support team and optimizing e-commerce fulfillment will have an instrumental effect on the customer shopping experience and build an “e-commerce juggernaut.”

Then, when supply chain optimization, itself, becomes the Achilles’ heel to a company – one should then seek outsource e-commerce fulfillment.

What are some other key factors in operating a successful e-commerce business?

Photo by myretailmedia

3 Considerations for U.S. Market Entry and Distribution

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The World Is Flat: A Brief History of the Twenty-First Century is an international bestselling commentary by Thomas Friedman that analyzes globalization within the 21st century.  Freidman argues that events such as the collapse of the Berlin Wall and technologies like the Internet have “flattened” the world and made it easier for entrepreneurs to experience a “level playing field” when entering foreign markets.