“Time is Money” – And Intermodal Can Save You Both

By Dan Beers and Ben Enriquez, Transplace

Left to right: Dan Beers, Ben Enriquez

Left to right: Dan Beers, Ben Enriquez

The U.S.–Mexico border is one of the busiest and most economically important borders in the world, with nearly a billion dollars’ worth of goods crossing each day – 80% of which are crossing by truck or train.¹ Driving this trend are manufacturers and CPG companies that are seeking out Mexico as the preferred location for near-sourcing their operations. A growing number of U.S. retailers have begun opening stores in Mexico to grow their customer base and drive profits by capitalizing on the country’s developing middle class.

Land (and lanes) of Opportunity?

Mexico has presented significant growth and cost savings opportunities for many companies looking to:

  • Decrease time-to-market
  • Reduce inventory warehouse space
  • Speed up cash-to-cash cycles
  • Cut transportation costs

This low-hanging fruit has led to operational efficiencies for companies doing business in Mexico – yet, for many, there is still significant untapped opportunity by shipping freight using intermodal. To take advantage of the reduced transportation costs and time savings afforded by rail, shippers are starting to convert their domestic shipments from over-the-road (OTR) modes to intermodal.

Presently, many shippers still don’t fully understand the process and opportunity of shipping into and out of Mexico using multiple transportation modes. This hesitation has also harbored concerns from some shippers that view intermodal as a slower, lower quality service. However, cross-border opportunities have changed over the last few years to allow for seamless transportation of goods and quicker service at lower costs.

Intermodal Benefits Abound

When shipping by truck alone, wait time at the border can vary from a couple of hours to several days. This is due to both the large volume of trucks going across the border and the lengthy, complex, yet necessary inspection processes required by U.S. and Mexican Customs. In contrast, there are multiple time and cost benefits to shipping via rail:

  • Wait time can be significantly reduced if not avoided, as containers are not subjected to the same inspections as OTR trucks
  • Therefore, containers will never have to be inspected at the border when moving inbound into Mexico, and companies can ship door-to-door without their products ever having to be unloaded for inspection
  • On average, rail is four times more fuel efficient than over-the-road truck, and each ton-mile of freight moved by rail rather than highway reduces greenhouse gas emissions by 75% ²

Shippers should certainly be aware of how to take advantage of the opportunities and benefits presented by intermodal, allowing them to bypass border crossing issues with customs and congestion at the border while reducing transportation costs.

What complexities of crossing the U.S.-Mexico border are you currently facing?

¹ http://www.state.gov/r/pa/prs/ps/2010/05/142020.htm

² Association of American Railroads. Freight Railroads Help Reduce Greenhouse Gas Emissions.

Top 10 Tips for Successful Truckload Sourcing

“Shippers are risk adverse and would rather align with core carriers to keep service high,” said Cindy Bosecker, Director of Engineering for Transplace and webinar presenter, after sharing a “Truckload Bid Savings Gap Analysis 2008-2014-Q1” visual at a recent webinar focused on truckload sourcing. 

That webinar, “The Three B’s in Truckload Sourcing Best Practices: Better Planning, Better Bidding & Better Decision Making” included insight not only from Cindy, but also representatives of Big Heart Pet Brands, SciQuest and colleague Ben Cubitt, Transplace SVP, Consulting and Engineering. Transportation sourcing event planning, bidding and decision-making best practices and examples were discussed, including top tips to keep in mind.

Read on to find out what top sourcing event tips can help you achieve the 3 B’s!

To learn more about truckload sourcing, click here.

Are we missing any tips? Which one do you think is the most important?

Advanced Bid Design - Robust Lane and Carrier Classification

By Ben Cubitt, Senior Vice President of Consulting and Engineering and Cindy Bosecker, Director of Procurement, Transplace

Ben_Cindy_Webinar.jpg

There are three critical phases or elements of a truckload bid event – the upfront development of bid strategy, the execution of the bid, and the use of scenario management tools to drive final bid assignments. This post is focused on the middle phase - bid execution - and shares Transplace’s tips on how to use advanced robust lane and carrier classification to optimize bid results. 

Every shipper understands that “a lane is not always a lane” and that not all carriers are created equal. Given that, there are two types of lane classifications that need to be considered. The first is overall lane requirements and freight characteristics.  These include lane requirements like live load or drop trailer, typical order lead time (less than 24 hours, 24 to 48 hours, greater than 48 hours, etc.), and equipment required.

The second classification assists in the bid analysis and segments lanes into sourcing groups that align with strategic goals or requirements. The exercise of classifying lanes up front leads the team to really think about what lane types are in your network and which have special requirements or profiles that will impact final carrier selection. Many shippers have not historically taken the time up front to do so, as they are weighed down by just the effort required to plan, execute and manage the rollout of a bid.

Tips to Improve Lane Segmentation and Classification:

  • Evaluate how lanes are segmented for business purposes (inbound, outbound, by site, by product family) – How do YOU look at the network?
  • Classify lanes based on service expectations which will allow tolerance testing for change. For example, understanding which of your customers are low risk or high risk from both a service perspective and a penalty perspective may change how you select carriers. Which customers have especially demanding on-time delivery KPI’s or large penalties for late or even early deliveries? Which lanes deliver to customers or plants that may impose heavy fees for “line down time” or “spoiled or damaged” production materials if a delivery is late?
  • Shippers generally want to classify lanes as internal replenishment lanes, customer delivery with flexibility lanes, or critical tight time window lanes. These classifications help a shipper evaluate scenarios where more aggressively priced carriers or higher service profile carriers should or should not be favored.
  • Include indicators on how the lane will be assigned (by lane, by origin, by a particular grouping).
  • Shippers may want to look at the bid lanes for a particular product family or for a geographic region holistically, and therefore the segmentation should be included up front. 

In addition to lane segmentation, shippers should also carefully evaluate their carrier base prior to a bid event. Carriers, both new and existing, should be classified by capabilities, strategic alignment, or other criteria. 

Keys to Carrier Classification and Alignment with Bid and Strategic Carrier Management Strategy:

  • Define characteristics of each carrier that you plan to use to evaluate e.g. asset versus broker, minority owned, customer approved, Smartway certified, etc. 
  • Identify carrier equipment capabilities and make sure it is called out in the information.
  • Evaluate your existing carrier base and set tiers within the program for carriers that you want to target to grow, maintain, or reduce their existing business through the bid awards.
  • Segment carriers based on performance and/or how strategically aligned they are with your company.  You may be comfortable using some carriers anywhere, but others may be restricted to certain areas of the business. Defining that up front saves significant time on the back end.
  • Classifying carriers into strategic groupings that combine both historical performance (tender acceptance rates, on-time pick-up and delivery, volume moved, etc.) and core carrier bid goals (grow volume, stay at or near same levels, limited usage, etc.). Three or four levels seems to work best and typical groupings are either Tier levels (Tier I, II, III) or other easy-to-use names (Platinum, Gold, Bronze) or (Strategic, Core, Niche, Local). 

Carriers are being inundated with bids and shippers have to strive to improve both how carriers evaluate their bids and how the shippers evaluate the carrier’s bid responses.  Best-in-class procurement technology platforms, like SciQuest, enable shippers to reach new levels of bid performance.  Make sure you are prepared to fully leverage the capabilities of these tools and that you design your RFP to help facilitate a more optimal bid outcome. 

The bottom line? If you need to drive a higher level of performance from your TL bid event, your success is increasingly driven by your upfront bid design.  The time spent segmenting your lanes and classifying your carriers makes the final bid scenario review more efficient and more impactful. Intelligently focused bid design will drive a stronger post bid core carrier group, increase savings and match service and cost performance with actual lane requirements. 

Want more information? Please join us for a webinar on Thursday, July 10th to learn more about how to develop bid strategy, robust bid execution and optimal bid awards. REGISTER HERE.

P3 Alliance Fall-Out – What Next?

By Mollie Bailey, Director, LCB International Logistics, Transplace

Last week, China took a hard stance and rejected the P3 Alliance. The P3 Alliance is very unusual in that it was to be a formalized network creating an alliance between the three largest global container lines – Maersk Line of Denmark, CMA CGM of France and the Mediterranean Shipping Company (MSC).  Both the United States and European Union regulators waved the deal through – however, the fact that the Chinese decided not to participate in the alliance was a shock for many globally and for our North American-based customers, because everyone assumed that it was a “done deal." 

The alliance was originally proposed because all parties, including shippers, importers and NVOs, are looking for rate stabilization. Ocean carrier pricing is a complex model involving many factors, and in recent years many trades have seen increased rate volatility along with carriers continually introducing additional capacity, which increases supply and thus drives down rates.

The hope for the P3 Alliance was to re-think the current ocean carrier operations model that everyone agrees is dysfunctional and there seemed to finally be carriers who are willing to do so. The P3 carriers were positioning the proposed alliance as an opportunity to reduce costs and gain efficiencies.   

However, if the alliance had come to fruition, it would have taken until 2016 to determine if their message was accurate.

In fact, there are a couple of problematic areas to the originally proposed alliance:

  • For large importers & NVOCCs that already had contracts with all 3 players (Maersk, CMA, MSC), the alliance was concerning due to the possibility of more consolidation of containers on fewer vessels and fewer sailings among those carriers.
  • Most Asia-to-US annual inbound contracts are negotiated with May 1st effective dates, so it’s very likely that in March and April some importers reached out to other carriers and potentially signed new contracts with non–P3 Alliance carriers in order to diversify their ocean network.

The scale that the P3 Alliance was hoping to achieve has been completely disrupted by the Chinese government’s decision.  However, the effects in North America are minimal – other than a warning to other carriers that they are going to have to be extremely thoughtful in putting these deals together moving forward. 

It is truly back to the drawing board for ocean carriers to figure out a new way outside of such a massive alliance to better manage business models that are currently highly inefficient. There is still great opportunity for formalized ocean partnerships and networks to reduce operating costs and control capacity, but it is going to have to be more strategically managed and negotiated in the future.  

What do you think about the rise and fall of the P3 Alliance? 

Shipper Symposium Snippets!

Twelve years in and we couldn’t be more thrilled that our Shipper Symposium has become such a great gathering of economic, transportation and logistics leaders.  Connecting our customers and partners with each other and listening to speakers address everything from NAFTA and cross-border shipping to fueling talent into supply chain logistics has led to true collaboration in the transportation industry. 2014 just might be at the top of our list for the best Shipper Symposium yet! 

Remembering some of the things we learned from this year’s speakers got us thinking about how we could share these Shipper Symposium tidbits with you.

We decided that there was no better way to appreciate those key moments than to explore some of the standout quotes we heard from our guest speakers and Transplace team members. 

Check out the infographic below for our collection of Symposium snippets!

Find more Symposium snippets of information by viewing videos of this year’s sessions here. Save the date for next year’s Shipper Symposium to be held at the Four Seasons Las Colinas in Dallas, May 4-6!

What did you think of the speakers at Shipper Symposium 2014?  What was your favorite quote or moment?