-- Key for Logistics Effectiveness
a very key element of the logistics process
and the supply chain which runs from vendors
through to you to your customers.
the movement of product, service/speed and
cost which are three of the five key issues of
effective logistics. It also impacts with the
other two logistics -- movement of information
and integration within and among suppliers,
customers and carriers.
A transportation strategy, to be effective in
supply chain management, is not playing one
carrier off against another. It is not beating
down rates. Rather it is a way to respond to
the dynamics of your business, its customers,
suppliers and operation.
The strategy, regardless of whether you are
involved with domestic or international, is
much more and should recognize
The supply chain
involves continuous and efficient movement of
product from vendor to manufacturer to
customer. Therefore the transportation program
must reflect and meet the customers needs. The
time and service aspects of transportation are
Shipments must move timely. Customers demand
their shipments be delivered as they
require--on the date needed, by the carrier
preferred, in the proper shipping packaging
method and complete, both shipped complete and
delivered complete and in good order.
able to have a transportation program which can
do this provides customer satisfaction and can
give your company a competitive advantage.
Mode selection :
How will you move your product, by air versus
surface? What roles do transit time play in
your supply chain? How will the inventory and
service impacts be measured as compared to the
Volume creates carrier/forwarder attention.
Even if you have no strategy, the number of
carriers trying to meet with you will make you
develop one. Infrequent shipping dictates
attention with volume creates a competitive
interest in your business. But there is
another side to this attention, you cannot
divide your business among many carriers. You
cannot do this for two reasons. First, as you
fracture your business, you fracture your
negotiating or leverage position. Second, you
will not be able to develop carrier alliances
which you need to meet the supply chain
Developing supply chain
responsive programs requires effort by both
the carriers and you. Transportation must be
responsive and can create a competitive
advantage. Doing this means a focus with a
You need to know how
well your strategy and your carriers are
performing. This takes two approaches. One is
Measuring means comparing
performance versus standards. What is the
actual delivery to customer performance, on a
macro basis, carrier and customer by customer
A macro measure can hide a problem even
if the overall measure is good. And, with
supply chain management, you are focusing on
each customer and delivery location he has.
You should measure your costs to make sure
they are controlled. Where are you spending
your transport dollars and how well?
cost data tied with sales and shipping data
makes a great data base for budgeting and
managing costs. It provides data for
negotiations, developing good freight costs
for sales and accounting, for studies and
Benchmarking means learning what other
companies do--the best practices. Very often
benchmarking is not done with a company in
your industry. Competitors are not likely to
share information. And best practices are not
the exclusive of one industry or company.
Regulatory impact :
Regulatory changes can
change, for better or worse, your strategy.
The recent demise of the Interstate Commerce
Commission eliminated a safety net for
shippers, especially for small shippers.
Shippers now need to work with carriers with
whom they can develop contractual
relationships which reflect the new transport
world as to liability, freight class, rate
changes, accessorials and other needs.
Potential regulatory changes with the
appropriate authorities can also change your
strategy. For example, if there is real
maritime deregulation, then steamship line
conferences will lose their antitrust
protection with setting rates and capacity.
Shippers will not deal through or with
conferences. Instead they will deal directly
with steamship lines for service contracts and
Carrier mergers and alliances and closings
This is an important and difficult issue. In
the fifteen years or so since motor carrier
deregulation, there have been significant
Many carriers went out of business.
Others changed their focus from truckload to LTL. New truckload carriers came into being.
Maritime has its issues. Large steamship lines
in the trans-Pacific and trans-Atlantic trade
formed alliances. Now with the recent merger
of P&O and Nedlloyd, mergers are beginning to
You have analyze what is happening within each
mode and align your strategy with carriers who
will still be viable in five years. A great
strategy with a carrier who is taken over or
goes out of business is suddenly not a good
strategy. Now you have to develop one with
another carrier, and that takes time.
Change is happening. It is not a
question of whether or not it happens. The
only question is how quickly it occurs. Your
strategy has to be ready to change. New
customers. New products. New businesses. New
suppliers. New corporate emphasis.
these can dramatically change your strategy.
Recognize that change will occur. Keep an open
ear and mind to other modes and carriers. The
times they are a changing--and so will your
Transportation is critical to
logistics and supply chain effectiveness. It
impacts throughout the key issues of logistics
effectiveness and the global supply
chain. To meet the dynamic requirements of the
supply chain, you must have a dynamic strategy. It
must be responsive, both as to service and cost
demands of your customers and your company