Transportation Sourcing

Transportation Improvement Transportation Sourcing Supply Chain Optimization Technology

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Client Situation:
A $6B building supply company was in process of emerging from bankruptcy and wanted to continue to drive internal and external improvements with its highly regarded carrier community.

CSSI Role:
CSSI was engaged as part of a larger major-consulting firm project to manage a concurrent strategic sourcing effort for the company’s dry van, flat bed and tanker transportation carrier base. The total spend exceeded $300M annually on over 450,000 loads.

Approach:
The team leverage a leading internet based transportation RFI/RFP sourcing solution to provide rapid distribution and analysis of carrier bid data (over 200 total carriers). Custom optimization capabilities were defined and implemented by the team to enable analysis of various flatbed payload options. Combinatorial bid optimization techniques were leveraged to assess multiple rounds of carrier bids. Significant face to face negotiations were strategically driven to gain additional savings and operational improvements with the carriers.

Results:
Total savings exceeded 8% of spend, in a pro-carrier market. Carrier’s commented that the RFP process was well communicated and presented in a fair environment that allowed each carrier to define its optimal role for the company.

Transportation Sourcing

Reduce freight spend, improve carrier relations, increase control of your transportation shipments.

CSSI Consulting's transportation consultants have procured over $3B in freight for our clients. Using an industry leading methodology, we leverage the latest technologies to expedite and optimize results for our clients. If your annual transportation spend is from $10 to $200 million (or greater), contact us to see how we can save you money and improve your transportation services by undertaking a strategic transportation sourcing process.

We have experience in the following transportation modes:


Full Truckload / LTL - Dry Van - Reefer - Bulk - Flat Bed - Tanker	Small Package - Domestic - International - All service types - Air - Ground	Air Freight - Domestic - International - Priority - Deferred - NFO Service	Ocean Freight - Full Containers - LCL / NVOCC	Rail - Box / Flat Car - Hopper / Bulk - Intermodal - Class I / Regional	3PL Operations - Transportation Management Outsourcing - All modes, LLP's - Global Coverage

How we can help you:
In today's increasingly complex economic and global trade environment companies are ever more dependent on their transportation and logistics providers for on-time, cost-effective service and visibility throughout their supply chain. Our comprehensive, data driven sourcing approach is designed to delivering win-win results to you and your carriers. In comparison to other firms that may just offer a technology solution with less experienced consultants to "run the numbers" CSSI's sourcing activities include:

Establish corporate-wide scope and objectives
Complete comprehensive data collection and baseline analysis
Define sourcing strategy and communications plan
Build and release RFI/RFP
Analyze and optimize results by leveraging advanced optimization technologies
Establish detailed negotiation strategies
Negotiate and select carriers
Define implementation requirements and strategies to enable targeted results

Results:
Results are never the same for any two companies, but our experience across dozens of companies, and multiple industries have given us confidence in our ability to deliver results that are real and implementable. Our expertise can help save your company millions of dollars with bottom line savings ranging from 6 to 14%, improved service delivery and sustained benefits through improved baseline shipment information.

Market Updates:
(Update: Q3 2011)

Air Freight: With so much pressure continuing on the airlines this summer (fuel, FAA, global economy), it may be time to postpone any air freight sourcing. Air travel and freight volumes dipped lower in June, compared with levels in May. The recent falls in business confidence are also worrying carriers as major air freight markets remain stagnant, below their 2010 peak with new capacity being added on both air travel and freight markets (at two per cent, faster than growth in demand). As capacity has overtaken demand growth, passenger load factors in June were one per cent below 2010 highs and freight load factors were four per cent points down. Look for falling load factors to undermine unit revenues and yields going into Q4, with further pressure from lower peak season volume.

Ocean Freight: Continued capacity increases and weakened demand will further reduce carrier revenue as business volumes suffer across most trade lanes. Look for further pressure on Trans-Pacific rates as added capacity continues to outpace demand (capacity if up over 19% for year). Look for peak season volume to be around 2010 levels, with some port TEUs increasing only 4-8% over the 2010 numbers. Bulk pricing will continue downward pressure internationally, with some increases expected domestically.

Rail and Intermodal: If you haven't increased your rail and volumes during these times, it is not too late. If you have the opportunity to switch modes, you will be able to bank the savings - but if you are already strong in IM or rail, expect to get a rate increase. This is the one area that we have seen stickiness in the rates with expected increases of 5% for 2011.

Truckload: Although we have seen some carriers push rate increases of 10%+ in an effort to re-establish the "pendulum swing", the results that shippers can expect continue to vary widely. If you have not sourced OTR freight in over a year, you might be used to hearing how bad the market is. And, if you are unable to change carriers, fix internal processes and simply don't want to worry about it, then accept the premise that rates will increase from 4-6% on average. If, however, you are willing to look into the mirror, establish yourself as a strong partner to the carriers, address internal processes that make you and your carriers inefficient and not accept a rate increase as a given, then go to market. As always, savings will depend on the baseline, but they are still available today and believing that rates will only go us is the same as saying the stock market will only go down...

LTL: With YRC, Con-way, ABF and UPS all pushing mid year increases, we expect at least some of this to stick. The average increase is 6.9% 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.

3PL: The 3PL marketplace has been surprisingly resilient during the economic downturn. Many providers have used this time to refocus on core market solutions, while others have looked to swallow competition and market share. This time can be well spent for clients that are also taking inventory of what they do well, and what can be outsourced. Good partners are available and aligning these now can put you in good position as we emerge from the global challenges we are all facing.