Cssi-Cosulting
3PL Outsourcing
Fuel Sourcing Strategies
Client Situation:
A leading pharmaceutical company had just completed a global air freight event and wanted to tackle small parcel, but did not have resouced to undertake.
 
CSSI Role:
CSSI was engaged to provide subject matter expertise and deep data analytics as lead for the global team.  The total spend exceeded $70M across 5 continents, 7 business units, 42 countries annually.
 
Approach:
The team collected and standardized one years' worth of global small parcel spend. Custom data analysis provided deep insights into historic spend rquirements and where global flows were required.  Team developed a global RFP allowing for cell level rates on country to country basis, all weights, all destinations and multiple currencies.  Scenerio based bid optimization techniques were leveraged for multiple rounds of carrier bids.  Directed negotiation strategies were provided for face to face meetings with the global providers, regionally and at global headquarters.
 

Results:
Total savings exceeded 15% of spend, in a complex, global market. Carriers commended team on comprehensive and 'fair' approach.

 

 

Transportation Market Updates

If you understand the market in which you are playing, you always have the upper hand against most competitors.
 
Market Updates:
(Update: Q2 2014)

Truckload:  The truckload market has regained its footing and we are seeing a tightening of demand.  Finally, there are some that are acquiring/investing in equipment, but this impact will be negligible for the near term and will not overcome the potential loss of 2-3% of the capacity within the past year. The biggest impact for any shipper that is considering sourcing truckoad is the fragmentation of the market.  For any change that you hear (and now see) that impacts rates on the upside, there remain long term partners - and new carriers - that are not sending predatory messages in their rates.  If you keep looking internally at cost savings opportunities, collaborate with your carriers, savings will be a natural result. Watch for changes in GDP, and expansion in housing, automotive and oil/gas (e.g.: fracking) sectors - if these continue to show strength in Q3/Q4, you will likely see targeted rate increases of between 2-5% before the end of the year... keep vigilant.

LTL:  With the major LTL providers having pushed through their annual GRI increases, we expect at least some of this to stick.  (Thanks in large part to Old Dominion who took a pass this year.)  The average increase is 3.9 - 5.4% for all non-contracted business, but not always across the board. If sourcing, expect slight increases (and, honestly, they may be due) - but use technology to lower the impact through optimization of the sourcing process and daily routing.

** Update ** Small Parcel:  Given the proposed changes in dimensional freight that FedEx recently provided, savvy shippers should expect additional changes to UPS' strategy during 2014.   For many shippers, this change by fedex for ground shipments may affect a large percentage of their shipping profile.  We take a more detailed look at the announcement <HERE>.  For GRI's, we anticipate that the 2015 rate increases will be just below that of 2014 (e.g.: below 4.9% average net increase) but again above inflation.   Plus, look for changes to accessorials, min charges and strengthened contract penalties.   If possible, source before GRIs are announced in the fall. 

3PL: The 3PL marketplace remains a hotspot in the economy with numerous acquisitions and mergers for 2014. This activity is good for the general shipper community as 'change' always represent new opportunities.  Good partners are available and aligning these now can put you in good position as the global continues to accelerate into 2015 and beyond.

Air Freight:  Airfreight continues to perform as the weakest of the transportation sectors.  Even with growing passenger and freight volumes, freight capacity remains available and rate increases are fleeting for the carriers.  Look for falling load factors to undermine unit revenues and yields going into Q4, with further pressure from lower peak season volume.    Exception:  HighTech industry will continue to see tight capacity on some hub lanes, export from China.  These trade lanes will remain tight for Q3/Q4 of 2014 and expect to see spot price spikes.

Ocean Freight: Ocean carriers are again attempting to pass rate increases onto the shipper community and are having some success with an earlier than expected peak season.   Carrier capacities are into mid/high 90% range for westcoast/eastcoast (respectively) ports which is pushing for the increase in peak surcharges (up from $300 to $400).  Over the longer term the sector will continue to be impacted by multiple issues: Chinese economic policy, possible dock strikes and dogged overcapacity with rate requests increasing. 

Rail and Intermodal:  Expect more pushing for rate increases in rail and intermodal to continue for 2014.   This sector has been leading all transportation areas on a consistent basis over the last 8 quarters as shippers were successful in shifting over-the-road to intermodal and rail.   There is a reason that Warren Buffet continues to be bullish on his rail portfolio - for shippers, it will continue to be a tough road.