Is Your Transportation

At Its Best?
The Top 10 Transportation Management Best Practices

WHITEPAPER
JANUARY 2010

nulogx
Transportation Management Solutions
 CONTRIBUTORS
Gary Breininger, President, Breininger Associates
Rob Fenwick, VP Transportation, Maple Leaf Consumer Foods
Sylvie Messier, Corporate Transportation & Customs Manager,Ipex Management Inc.
Doug Payne, President & COO, Nulogx Inc.
Alan Saipe, President, Supply Chain Surveys Inc.
Jorge Villalobos, National Transportation Manager, Acklands-Grainger Inc.

FACILITATOR
Scott Irvine, VP Business Development, Nulogx Inc.

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX
 Is Your Transportation At Its Best?
The Top 10 Transportation Management Best Practices
As your business grows, it’s only natural that it becomes more complex and challenging to manage. Your
transportation processes are no different. Freight costs can represent a significant component of your supply
chain – often around 5-7% of sales for manufacturing, retail and wholesale/distribution companies. For many
firms the fact is this responsibility is not managed as well as it could be — which means fertile ground for
significant improvements.

F
reight costs can represent a significant component of your supply
chain — often around 5-7% of sales for manufacturing, retail and
wholesale/distribution companies. For many firms the fact is this
responsibility is not managed as well as it could be — which means
fertile ground for significant improvements.

Here’s what the best in the business are doing to succeed. Typically, they have
significant freight spends (annual budgets greater than $10 million). But that
doesn’t mean if your operation and budget are smaller there’s not a lot to learn—
and many good reasons to follow their lead.

1. Pay Attention (Or, Pay More For Your Freight) What you are overlooking
What you’re overlooking may be costing you more than it should. Much more. may be costing you more
One of the biggest mistakes companies make is to assume that everything is in than it should.
order because their transportation costs are in line with past experience. “Sales
are up 10%, so transportation will be up 10%” is a usual approach to managing
this function. “Not necessarily so”, say best practice leaders.

Understanding the strategic and cost implications of your company’s

transportation operations—then forming and implementing a comprehensive
transportation plan—can play an important part in your success.

And most importantly, pay attention to your customers!

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX PAGE 1
 You can’t manage what 2. Measure. Monitor. Manage
you can’t measure. You can’t manage what you can’t measure. And today, most Transportation
Managers are missing the timely and accurate information they need to
track trends, identify problems and take action proactively. That’s because
the spartan and much-delayed data pulled from an Accounts Payable or
ERP system does not typically provide the right numbers in time to make a
significant difference.

To capture meaningful data within an actionable time frame, some sort of

business intelligence system is required at a minimum. This could range
from a Freight Auditing Solution, to a Data Warehouse linked to an ERP
application, or most comprehensively to a full blown Transportation
Management System.

Such a system supports and drives management decisions by collecting

accurate data, consolidating it and delivering as close to real time feedback
as possible. So, a Transportation Manager can take confident action knowing
what factors (eg routing guide compliance, fuel surcharges, accessorial
charges, weights and shipment counts) are changing in the mix—and why—
without spending hours, if not days, extracting data and creating complex
spreadsheets.

Working effectively with 3. Align Transportation Strategy with Corporate Goals

your carriers takes strong Is your company’s success dependent on customer service and speed to
relationships. market? Or, on strict cost containment and price competitiveness? The
business you’re in, and the role shipping plays within your operations, should
directly shape your transportation strategy.

With an appropriate transportation strategy in place, all involved in making

day-to-day operating decisions will understand the company’s goals and
priorities—and make the right calls. For example, it may make sense to spend
hundreds of dollars extra for a faster level of service if the result is a reduction
in inventory worth thousands of dollars. Alternatively, it probably does not
make sense to use expedited road carriers for stock transfers when intermodal
service would meet delivery requirements.

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX PAGE 2
 In reality, most companies
don’t tender their freight
as often as they should.
Thankfully there are
systems available to assist
in this.
IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX
4. Strong Relationships Are Worth More Than Money
For most shippers, getting good value means building a customized and
integrated solution consisting of multiple modes and carriers. Doing this
well requires developing excellent relationships with your carriers and
understanding the relative strengths and weaknesses of each so you build the
best network for your needs.
Also, as you are building your solution, your logistics providers should
be customizing their solutions to meet your needs too. Good ones will
understand your business and work to develop process improvements that
benefit both your operation and theirs. And when things go wrong, it is
far easier to fix the service with the current provider than replace them.
Building your network, and working effectively with your carriers takes
strong relationships based on mutual trust and open communication. Good
relationships such as these extend far beyond the bottom line.
5. Tender Freight On A Regular Basis
(Controlling Cost and Quality)
Yes, good working relationships with your carriers are extremely valuable.
But you still need to pay a fair rate for the service you are receiving. The
only way to know for certain, is to tender (or RFP, Request for Proposal) all
of your freight—though not necessarily all at the same time. The frequency
that you do this will depend on a number of factors such as market conditions,
changing operating conditions and corporate procurement policies.
A structured and disciplined procurement event will ensure that carriers put
forward their most competitive proposal. It is important to bundle as much
similar freight as possible into your bid (a company-wide aggregation) so
carriers are bidding on the largest opportunity possible. This may require
aligning contracts to expire either at the same time, or on a staged basis
depending on your scope of operations and procurement strategy.
Provide honest and accurate information on your shipping requirements
and patterns. It is important to note that the intent should be to get “fair”
rates from carriers. (Proposed rates that do not reflect your actual operating
conditions, or that are not compensatory, can ultimately result in poor
service and additional costs that extend well beyond dollars saved on cheap
transportation.) Keep in mind, changing providers can cause disruptions in
your supply chain. So frequent switching is not recommended unless there are
significant service or cost issues.
PAGE 3
 In reality, most companies do not tender freight as often as they should –
mostly because bids are very complex and time consuming. Evaluating and
ranking each bid’s impact on your business, and ultimately selecting the right
mix of carriers could require an enormous number of ‘What If?’ scenarios.
Thankfully there are systems available to assist in this analysis.

Good transportation managers are adept at negotiating well with carriers to

secure competitive contract rates. However “great” transportation managers
will also seek to understand the detailed accessorial charges that might
increase overall costs, and work to find opportunities to reduce or eliminate
the cost of variable, seasonal or incidental charges that may result.

Another complexity, is actually knowing if you saved any money as a result

of your bid. With so many changing factors it can be tough to tell if your
changing transportation expenses are due to good negotiations or changes in
volume, distance travelled, or accessorial charges.

The good news is that the same systems that can help you analyze the bids,
can also be very helpful in providing ongoing monitoring and ultimately
determine if you achieved your objective.

If freight managers stray 6. Create A Corporate Routing Guide—And Stick To It

from their routing guide, Having tendered, and selected your transportation partner(s), actualizing
leakage occurs. your new found benefits relies on creating a Corporate Routing Guide —and
complying with it. National, and regional, freight managers use the Routing
Guide to determine which carrier is used for a particular shipment. For some
companies this takes a shift in operations at a minimum, and a change in
culture more broadly. If freight managers stray from the guide “leakage”
occurs; your company won’t ship the volume it has promised its carriers, so in
turn it doesn’t qualify for the negotiated volume discounts.

Large companies, in particular those with multiple shipping locations and

a large number of freight users, will need to invest time educating and
informing their internal stakeholders on optimal transportation practices. In
addition, these users will need a comprehensive set of tools to assist them in
making the correct carrier choice and ensure the delivery is made in the most
cost effective way. In addition to routing guides, these tools could include
standardized freight reports, process manuals, as well as rating engines and
potentially a Transportation Management System.

Routing Guide compliance is important because transportation companies will

often be more responsive with both price and service proposals to shippers

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 that represent a larger share of their business. Therefore consolidating your
spend with a core carrier program often results in both better service and
better prices. In addition, LTL and Small Parcel carriers with fixed networks
generate economies of scale when they channel large volumes of freight
through their networks, which can be passed on to their preferred/high volume
customers as discounts.

The devil is in the details –
Audit every invoice.
7. Audit Every Carrier Invoice (The Devil is in the Details)
The simplest way to drive out 2-5% of your freight costs is to audit your
invoices. That’s because this fast and furious business is rife with billing
mistakes. According to a recent CITA benchmarking study, more than 14%
of shippers surveyed stated that more than 5% of their LTL and TL invoices
contained errors, while more than 50% of LTL shippers reported error rates
of greater than 1%. Incorrect weights, inappropriate contract rates, duplicate
invoices, missed consolidations, and unapproved accessorial charges are a few
errors (unintentional or otherwise) that run up your bills.

While auditing can be done manually, rating shipments can be mindboggling.

The most efficient way to measure and monitor activities is with a
computerized Audit System, or Transportation Management System (TMS)—
your own, or outsourced. These systems can capture every detail of every
shipment in a database for review and analysis. Such a system may not
only pay for itself by generating savings—every invoice is compared to
the contract—once implemented it becomes a strategic management tool:
providing analytics and insight into your transportation activities.

In a recent case study, 8. Eliminate Manual Processing (Benefit from TMS & EDI)
the efforts of 3 people Increasing the efficiency and effectiveness of your transportation operations is
working all day, every key to your success. One option to accomplish this is using a Transportation
day, to optimize loading Management System that leverages 2-way electronic information exchanges
and shipping was done by such as EDI (Carrier <-> Shipper). Another option is an Audit System that
a new TMS in 5 minutes
receives electronic invoices—streamlining work and eliminating manual
with superior results.
processes. Such systems can rapidly and seamlessly create load plans, select
carriers, rate and tender shipments, audit invoices and more. In a recent case
study, the efforts of 3 people optimizing loads and managing shipments, was
done by a new TMS in a 5 minute daily routine; with superior results—saving
the company $250,000 in annual freight costs alone.

While it may never be possible to completely replace all manual aspects,

leaders continually move in that direction. In the most productive systems
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 80% or more of carrier communications is electronic. Making that happen
may require shifting the burden of data input to your carriers and vendors.
With a web-based TMS, you can direct both your carriers and possibly
vendors shipping to you to a web page where they are responsible for entering
all required information. While rewarding, implementing such a system on
your own can be difficult and time consuming. An option is to partner with a
provider that has pre-existing connections to carriers, specialized resources
and industry expertise.

To optimize everything, 9. Optimize Everything: Shipments and Carriers

a TMS is an absolute (Baby Steps to Perfection)
necessity. To optimize everything, a Transportation Management System (TMS) is
an absolute necessity. In the best case scenario, your Enterprise Resource
Planning (ERP) system will interface directly with your TMS and your
Warehouse Management System. This level of systems integration provides
strategic, planning, cost and operational benefits. With the myriad of rates,
modes and lanes it is difficult to know which carrier is the best choice for any
given shipment. Charges can vary based on weight, destination and service
level required. An integrated system will help you capture, analyze and fine
tune all aspects of your shipping operations on a daily and/or shipment-by-
shipment basis.

The key in transportation is to consolidate shipments as much as possible

– the larger the shipment, the lower the relative cost. There are numerous
consolidate strategies – some are as simple as grouping same Origin-
Destination shipments together, others include building a multi-stop truck
load, or can be even more complex like setting up a consolidation point, cross
dock or pool point operation. These processes are very complex, and computer
dependent. The bottom line however, such a solution can generate freight
savings of 5 – 15%.

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX PAGE 6
 An objective and candid 10. Continuous Improvement (Test. Learn. Integrate. Repeat)
self-assessment of your Best practice leaders focus on process improvements wherever they can be
current Transportation found. At this level of refinement, your greatest strength is an open mind—a
Management practices willingness to ask ‘What If?’— to challenge ‘Because we’ve always done
is the starting point for it that way.’ Nothing is sacred. A few of the popular areas where leading
determining the potential
companies are finding improvements are:
for your company to
improve.
• Managed In-Bound Programs
• Network Modeling/Review
• Consolidation Strategies
• Multi-shipper Collaboration
• Cube and Load Maximization
• Customer Cost-to-Serve Analysis
• Modal Alternatives

As optimization strategies like these become more and more complex, there
is an increasing need for data analysis and systems to support learning and
understanding, and in executing on identified opportunities.

Given the interdependent nature of the business, such improvements

often happen in collaboration with internal departments (eg marketing
& production), logistics providers, or other supply chain partners. Their
input can be very valuable—sparking new ideas and uncovering hidden
opportunities.

How do your processes stack up?

An objective and candid self-assessment of your current Transportation Management
practices is the starting point for determining the potential for your company to improve the
productivity of this function.

Cost reductions in the neighborhood of 20% are not unheard of, all of this flowing directly
to the bottom line.

IS YOUR TRANSPORTATION AT ITS BEST? THE TOP 10 TRANSPORTATION MANAGEMENT BEST PRACTICES NULOGX PAGE 7
 Helping You Be Your Best: nulogx
These 10 best practices in transportation management have been compiled by Nulogx through
discussions with a number of industry leading Transportation Managers and consultants. Nulogx is a
Canadian-based leader in North American transportation management solutions, and has distinguished
itself by providing unparalleled insight, and best-in-class transportation solutions, to over 100 North
American shipping clients. The end result: improving clients’ transportation processes and reducing
costs.

Nulogx delivers unprecedented levels of service to North American shippers through the combined value
of a best-in-class TMS Application, expert Managed Services, and the largest Freight Audit and Payment
service in Canada. Nulogx’s business model is “Save As You Go”. There is minimal up-front investment
in systems, staff or other resources—so you generate savings almost immediately. Its transaction-
based pricing is quickly off-set by freight savings, creating an instantaneous and low-risk ROI for your
company.

Contact Us:
To learn more about how your company can implement Transportation Best Practices and directly
benefit from working with Nulogx, contact Scott Irvine, VP Business Development at
scott.irvine@nulogx.com or call 905.486.1162 x 208

http://www.nulogx.com
http://www.cgfi.ca

SPECIAL LIMITED TIME OFFER:

For a limited time Nulogx is offering qualified companies a free benchmark of their shipping costs
against the CGFI index. By doing this you will learn how your costs compare to the market in general,
as well as the source of this variance (e.g. carriers, regions, origins).

With one simple and easy assessment you will have the ability to gain insight into potentially large cost
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Request yours here: http://www.nulogx.com/transportation-assessment.html

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