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 Simple ID: 289056
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2013 TLC Conference:Import/Export Best practices April 22, 2013San Diego CA
by Jerrod Slaughter, Corporate Transportation ManagerSlide2
International: What’s the big deal?What does a shipper really want?Simple …
ReliabilityFlexibility
Market competitive rateSlide3
Shipper Perspective - Plan a strategy!!Slide4
Understanding Ocean …What are the basics?Slide5
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 timesSlide6
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)
RatesSlide7
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 / AllianceSlide8
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-TimeSlide9
“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!Slide10
Understand Ocean Line vs. NVOCCWhat are the options?Slide11
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 Slide12
Selecting an International Partner …Vendor managementSlide13
“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 EvaluationSlide14
“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, ActSlide15
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 feedbackSlide16
“Best practice” business reviewKPI agreementReporting requirementsQuarterly or Bi-annual business reviewMeasure transit expect vs. actualCargo ClaimsBilling Issues
Service ReviewBooking performance Space guarantees
Transit time metricsSlide17
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.Slide18
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 Slide19
International Air Freight ForwardingImportant terms and strategySlide20
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 claimsSlide21
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 rateSlide22
International – Its an adventureSlide23