Global Logistics and Supply Chain Strategies - October 2008 - (Page 49)

ment software, either as a user or through a third-party, is essential to take advantage of many of the fuel saving opportunities out there, says Ferrell. In a recent survey on Fuel Saving Strategies by the Supply Chain Consortium, the need for TMS was a consistent theme, he says. “Whether you are talking about converting truckload shipments to intermodal or LTL shipments to multi-stop truckloads or your pallet configuration or zone skipping for parcel shipments, you need TMS.” Ferrell says he was “smacked in the face,” to realize how many companies that have a pretty good TMS are not using it to the fullest ability. “We see pretty robust systems where companies have turned off some of the functionality or where there are people whose full-time job seems to be to override the system,” he says. “These are things that could be easily addressed and the savings would be immediate. It’s a ‘no-brainer.’” One key way that TMS can help is to enable better visibility to both inbound and outbound freight, says Ryan. “We find that many manufacturers and retailers still are focusing all their attention on their outbound freight and not paying attention to their inbound,” he says. “Maybe the inbound move is handled by the supplier or even by their own fleet, but because there is no connection between inbound and outbound freight, those inbound trucks usually go away empty. Managing inbound and outbound together certainly could help fill those trucks up and save a lot of fuel.” A related step is for shippers to allow carriers to see both inbound and outbound moves so that they can bid on combinations that make sense for their business. “There would be many more opportunities to reduce empty miles and reduce costs if inbound and outbound were tied together,” he says. “I’m surprised at how few companies can actually administer that kind of approach. From a transactional standpoint, the coordination of inbound and outbound is very weak.” When suppliers control the inbound movement, transportation is often embedded in the delivered product price, which is another practice that companies should look at, says Lehmkuhl. “With transportation costs on the rise, this type of pricing may not be a good idea. Decoupling the logistics expense from the piece price gives more transparency and more control over that expense.” This is a high priority with some customers because their suppliers have increased piece prices and blamed fuel for the increases, he explains. “We could not analyze whether those increases were legitimate because there was no transparency,” he says. Even if a company decides in the end to allow a vendor to continue embedding transportation in the delivered price, they should at least demand to see a decoupled price when comparing price options, says Ryan. “This allows you to see how efficient the vendor is with their transportation management. If you know the freight component you can see if one vendor is better than another in particular lanes or better than if you controlled the transportation yourself. Then you can decide whether to use their freight arrangement, but it shouldn’t be a default position.” David Rutchik, a partner at consulting firm Pace Harmon, Vienna, Va., strongly urges companies to decouple accessorial charges as well, including fuel surcharges. “A lot of carriers follow what I call the ‘law firm model’, where the law firm charges $1 per page to make a copy of documents, a charge that has nothing to do with the actual cost,” he says. “These accessorials often are not aligned with actual costs and often are not all tied to the same indices. But people tend to look at them almost like an incremental tax and so they don’t question them. Customers could get a lot more visibility into their freight charges by demanding a la carte accessorials and, of course, the fuel surcharge is the largest of these.” In managing fuel surcharges, the key is to make sure there is some incentive for the carrier to be as efficient as possible, says Ryan. “If it is a straight pass through, there may be insufficient incentive for a carrier to update its fleet,” he says. Ward agrees. “A carrier with a good, new fleet, especially one operating in the flatlands, should be getting 6.5 to 7 miles per gallon, he says. “Customers need to ask their carriers about their miles per gallon and anything else that gets to the consumption of fuel.” This is not just important for cost reasons but also for sustainability programs, which are increasingly important to shippers, he says. “All of our customers are asking about our carbon footprint and how we impact the environment,” says Miller. “It’s a really big issue for them and we have employed full-time leadership to drive and maintain our focus on sustainability.” “Right now the drivers for fuel efficiency and the drivers for being green are coming together to support each other,” says Schecterle. “We see those two things going hand in hand.” Most carriers do not need their customers to challenge them on either fuel efficiency or sustainability because it is to their own advantage to be as fuel efficient and as green as possible. Many already have taken steps such as reducing the maximum miles per hour that trucks are allowed to run from 68 or 65 to 63 or even 60. Other common practices are the use of automatic sensors to check for engine efficiency and proper tire inflation, automatic engine shutdowns to decrease idling and the use of auxiliary power units for heating and cooling. Sensors also are being used to monitor an operator’s driving habits and increased attention is being paid to driver training and to incentives for drivers to operate vehicles more efficiently. “I believe that high fuel costs will essentially end up being an inefficiency tax,” says Ferrell. “It will inspire companies to start doing the things they should have been doing all along, but never needed to because the pain wasn’t great enough, and to stop doing silly things they never should have been doing because the added cost was not that big of a deal. Well, at $4.50 a gallon, it’s a big deal.” To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Resource Links Con-way Freight, www.con-way.com Penske Logistics, www.penskelogistics.com Schneider National, www.schneider.com Ryder System, www.ryder.com Transplace, www.transplace.com SmartOps, www.smartops.com Tompkins Associates, www.tompkinsinc.com Center for Transportation & Logistics, ctl.mit.edu ILOG, www.ilog.com Hitachi Consulting, www.hitachiconsulting.com BravoSolution, www.bravosolution.com Aberdeen Group, www.aberdeen.com The Allen Group, www.allengroup.com LeanLogistics, www.leanlogistics.com ArrowStream, www.arrowstream.com Pace Harmon, www.paceharmon.com www.SupplyChainBrain.com GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES 49 http://www.SupplyChainBrain.com http://www.con-way.com http://www.penskelogistics.com http://www.schneider.com http://www.ryder.com http://www.transplace.com http://www.smartops.com http://www.tompkinsinc.com http://ctl.mit.edu http://www.ilog.com http://www.hitachiconsulting.com http://www.bravosolution.com http://www.aberdeen.com http://www.allengroup.com http://www.leanlogistics.com http://www.arrowstream.com http://www.paceharmon.com http://www.SupplyChainBrain.com

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Global Logistics and Supply Chain Strategies - October 2008

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