2013 TLC Conference ImportExport Best practices April 22 2013 San Diego CA by Jerrod Slaughter Corporate Transportation Manager International Whats the big deal What does a shipper really want ID: 774294
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2013 TLC Conference:Import/Export Best practices April 22, 2013San Diego CA by Jerrod Slaughter, Corporate Transportation Manager
International: What’s the big deal?What does a shipper really want?Simple … ReliabilityFlexibility Market competitive rate
Shipper Perspective - Plan a strategy!!
Understanding Ocean …What are the basics?
Ocean: important for a shipperContainer Rates Type of delivery is neededContainer Size Container RoutingEssential Accessorial TermsSurcharges Bunker (Fuel) Peak Season Surcharge (PSS) General Rate Increase (GRI) Essential Service Terms Space Guarantees Minimum Quantity Commitment (MQC) Detention & Demurrage Delay In Transit (DIT) Performance levels / KPI Bookings Transit times
Rates: define services neededWhat type of delivery is needed?Container Yard (CY)Inland Port Intact (IPI)Store Door Delivery (SDD)Container Size 20 FT (TEU), 40 FT (FEU), 40 FT High Cube and 45 FT RoutingAll Water Service (AWS) Landbridge (Not through Panama Canal) Rates
Essential Accessorial TermsSurchargesAdvance Manifest Fee (AMS)Chassis Usage Surcharge (CUS)Document Fee (DOC)Terminal Handling Fee (THC)War Risk Surcharge (WRS) Etc. (See 40+ other terms)Bunker (Fuel) Floating schedule Peak Season (PSS) Typically June 1 st through October 31 st General Rate Increase (GRI) / Rate Restoration (RRI) Any time based on Carrier / Alliance
Essential Service TermsSpace GuaranteesHong Kong to Los Angeles – X FEU?Minimum Quantity Commitment (MQC)How many FEU’s a year? What is the right number?Detention (out gate)& Demurrage (in gate at Port) Agreed days known as “Free Time” Days (calendar or working) Delay In Transit (DIT) Key Performance Indicator (KPI) Booking acceptance Service Strings / Port to Port On-Time
“Best Practice”: get a Boilerplate If you don’t have contracts today or do find undesirable terms then evolve …One step at a time! Partner with internal Legal CounselSeek help on “boilerplate” by modeInclude terms with Request For Quotations (RFQ)How will incumbents react? Don’t surprise your vendors. Discuss with internal stakeholders. Understand that terms can cause lengthy negotiations and potentially impact rates. Careful not to overbuy!
Understand Ocean Line vs. NVOCCWhat are the options?
Ocean: Line vs. NVOCCOcean Line (Direct BCO)NVOCCNon Vessel operating common carrier The Positive Direct relationship with Line Leverage MQC FEU volumes directly to secure terms/rate/service Assigned allocation can lead to consistent service string transit time Strong long term partnerships can assist during industry challenges The Challenge More complex i.e. FMC requirements Provide forecast of trade lane volumes Manage MQC volumes Resources and bench strength to manage multiple Ocean carriers Challenging to make changes The Positive Flexibility with little to no commitment Less complex to manage No FMC required for shipper No MQC requirement No long term commitment Ability to chase rate Much closer to the market rates The Challenge Subject to volatility of market Susceptible to surcharge GRI / RRI PSS No direct relationship with Ocean carrier Possible less predictable transit times
Selecting an International Partner …Vendor management
“Best Practice” to Manage InternationalDefine Supply Chain Strategy & NeedsRequest for Quote (RFQ) Know the MarketDocument shipper characteristics Identify and include StakeholdersDefine service expectations BoilerplateStakeholders provide suggested carrier RFQ pool Container Rate and Surcharge template Understand service string and transit offering Cost Analysis on 80%-95% volume lanes Selection On Boarding Performance Evaluation
“Best practice” on boardingOperational readiness Define “Who’s who”Detailed Standard Operating Procedure (SOP)Escalation pathLimited volume at startup Slowly turn on the Valve!Deming Wheel approachPlan, Do, Check, Act
Shipper needs to be a partner Shipper provided FEU forecast by laneBest practice: 3 month rolling forecastKeep it simple!Communicate Origin PerformanceIs cargo getting booked and COB as expected?Any rolls, delays, etc.?Be engaged and ask for feedback
“Best practice” business reviewKPI agreementReporting requirementsQuarterly or Bi-annual business reviewMeasure transit expect vs. actualCargo ClaimsBilling Issues Service ReviewBooking performance Space guarantees Transit time metrics
Ocean KPI’s Relevant field definitions:Target Transit Time: transit time expectation per lane from contract negotiations.Transit Time for 95% Of Shipments: Denotes the transit time by lane (or carrier) for which 95% of shipments were equal to or less than.On-Time %: Percentage of shipments per lane (or carrier) that were equal to or less than the target transit time.% Within +/- 1 Day of Target: Percentage of shipments per lane (or carrier) that were within one day of targeted transit time. The higher the percentage, the more consistent the transit times are. Transit Time Range (Days): This the range in days between shortest transit time and longest transit time per lane or carrier. Avg Variance (Actual vs Target): Per lane or carrier, this is the average variance in days between actual transit time and target transit time. The lower the number, the more consistent the transit times are.
CARRIEROrigin - Destination Total Shipments Per Carrier Target Transit Time Transit Time for 95% Of Shipments On-Time % % Within +/- 1 Day of Target Transit Time Range (Days) Avg Variance: Target vs Actual AA Ships HAIPHONG – LOS ANGELES, CA 219 16 22 77% 69% 20 3 HAIPHONG - Zeebruggee 181 29 34 36% 31% 30 4 HO CHI MINH CITY – LOS ANGELES, CA 720 20 19 100% 18% 19 3 Ocean KPI’s – Quick example
International Air Freight ForwardingImportant terms and strategy
Contracting for Air Freight: What is important?Rates by routePort-Door, Port-Port, etc. Recommend add gateway to door as option Add Service levels that fit your need – Exp, Std, DefAdd tier level weight break Know your sweet spots!!Include transit days by service by lane Define service commitments Define Fuel surcharge Peak Season ?? Liability and cargo claims
Forwarder differentialsFull service forwarder vs. niche regional forwarderCarrier service area Forwarders usually handle all major lanesA full service forwarder may compliment a Shippers needs as supply chain becomes more complexDon’t underestimate the value of regional niche forwardersExperts in specific geographies Forwarders seek different freight mixes to support trade laneRates and very drastically between competing forwarders Shop around for best rate
International – Its an adventure