Logistics in 2016: The Year for Online Supply Chain Optimization

We’re barely halfway through the year and there’s already a couple hot topics circulating around the logistics industry. 

For starters, there’s the uberization of freight. An idea that stemmed from the founding father of disruptive technology: Uber. Before we delve deeper into what a mobile app has to do with freight, I first want to introduce one more trending topic. That’s ecommerce giant, Amazon. 

Amazon is slowly joining the logistics party by creating the most powerful in-house supply chain management out there. Amazon just signed a contract with Atlas Air Worldwide which will allow the company to try its hand in air freight delivery. It’s also requiring seller-fulfilled Prime shipments to be shipped using only Amazon Logistics, further solidifying internal control over its supply chain. And, we can’t forget to mention the effect Amazon Prime has had on the logistics industry. 

There’s few ecommerce companies that have the resources it takes to manage their supply chain using in-house logistics as efficiently as Amazon. You would need a whole fleet of planes, trains and automobiles to get even close. So, how do online retailers optimize their supply chains when they don’t have the resources to do it in house? They turn to third-party logistics companies (3PLs). 

This year, 3PLs are paying closer attention to the needs of online retailers. Which is a smart move considering the fact that ecommerce sales made up 7.5% of retail sales in 2015 and are continually rising. 

3PLs offer many benefits: access to more carrier resources, and therefore better negotiated rates due to purchasing power; experts that understand the ebb and flow of the industry; logistics technology or transportation management software (TMS), and much more. But, most logistics providers, especially those who have been around for decades, are used to providing services for more “traditional” shippers like manufacturers and brick-and-mortar stores. That’s why many 3PLs are improving and expanding their services. 

For example, this year FreightCenter made several changes to its business strategy that would improve an area where they were previously lacking: repeatability. Up until recently, the business of outsourcing logistics has traditionally been transactional in nature. FreightCenter realized, like many other 3PLs, that transactional services aren’t enough to optimize the supply chains of ecommerce retailers. 

“As a logistics company, we must act like change agents within our customer’s business, whether it be a brick-and-mortar store or an online shop. We must be able to flex with the changing demands and challenges they have,” explains FreightCenter CEO, Matthew Brosious. 

That’s why ideas, such as the uberization of freight and the Amazon Prime effect on logistics are such hot topics. 

The uberization of freight would connect supply and demand in trucking with just a few taps on a mobile device. This concept is motivating logistics and trucking companies to explore mobile service options. 

FreightCenter, for example, is in the midst of testing a new mobile-friendly website and quote system that will allow customers to access FreightCenter.com and all of its features on their phones and tablets. This move brings the company one-step closer to creating a mobile app that could do the same. 

An Uber-like app might not be the answer for FreightCenter or other similar companies, though. Logistics companies and larger carriers develop established relationships that a mobile app can’t replace. This means the key audience for mobile trucking apps are more likely to be smaller carriers that lack the means to find freight and smaller businesses who don’t need long-term relationships to meet their shipping needs. 

Online retailers usually spend somewhere between 6-10% of their operating costs on logistics, and logistics has a direct impact on a customer’s experience. This means it’s important for online retailers to optimize their supply chains. With the direction logistics is headed this year, they’ll have more options than ever to make that happen. 

Do you think the uberization of freight is the answer to optimizing the supply chain? If not, what other types of disruptive technology options do you think would benefit the industry? Leave a comment below with your thoughts.

11 KPIs to Measure your 2016 Carrier Performance

When working with a 3PL measure carrier performance in order to identify opportunities for improvement.

To combat lingering effects of the recession still felt by many companies in 2015, supply chains turned to third party logistics (3PL) providers. Keep these 11 key performance indicators (KPIs) in mind to ensure your 2016 logistics operations are successful.

1. Routing Guide Compliance

Routing guide compliance increases productivity by eliminating time-consuming or financially costly mistakes in the supply chain. Make sure your vendors have easy access to clear and concise routing instructions to reduce service delays and unnecessary expenses. Measure your expected savings against the actual savings to gauge the effectiveness of your routing guide.

2. Accessorials as a Percent of Freight

Divide any accessorial charges, like fuel, permits, or charges by the total freight expenditures for a period. If you notice an increase in any these costs, you may want to re-evaluate your processes to eliminate inefficiencies.

3. Transportation Utilization

Remember that empty space is wasted space.You can increase the value of your transportation spend by switching from less-than-truckload (LTL) to full-truckload (FTL), raising the minimum quantity for orders, or combining multiple shipments into one.

4. Monitor Tenders Accepted versus Tenders Declined

This will tell you if your carriers are meeting their contractual obligations. When a first choice carrier declines a substantial amount of tenders, the cost for the shipper will increase to the point where it might exceed budget. Carriers will reject tenders for different reasons so it is important to meet regularly so you can discuss ways to improve this measurement as partners.

5. On-Time Performance

A carriers ability to meet On Time Pickup, On Time Departure, and On Time Delivery will directly affect the shippers overall performance. Measure the percentage of shipments that are picked up, departed, and delivered on time. A rate of 90% or higher is generally considered acceptable. 

6. Capacity Issues

If a carrier does not have the capacity to handle your shipments, several problems such as late pickups, late deliveries, and unattended customer needs can occur. To measure performance in this area, use specific KPIs such as cost per item, cost per order, percentage of perfect shipments, dock utilization, and time from picking to departure.

7. Detention

It is also a good idea to track detention times as these charges can quickly eat into shipper margins. Often, if detention times are excessive, this indicates inefficient operations that need to be examined more closely.

8. Number of Damage Claims

The number of freight claims is an important factor to consider as it can have a big impact on the bottom line. You can calculate the impact by dividing the total cost of loss and damage claims by the total freight costs. The higher the number, the higher the likelihood that packaging or processing problems will occur on the carrier’s end.

9. Invoice Accuracy

It is important for shippers to measure the number of accurate invoices and categorize the inaccurate invoices by carrier and reason. Invoices should match the price that was quoted, unless there was an error on the shipper’s part such as incorrect weight, freight class, etc.   

10. Number of EDI or API Invoices

Moving from paper-based invoices to EDI or API can bring several advantages to your business such as increased savings, accuracy, and efficiency. EDI and API invoices are about 35 percent less expensive to process and reduce the amount of time spent and inaccuracies that occur when processing invoices manually.

11. On-Time Payment

Cash flow is a good indicator of many different business factors. This can be measured by dividing the number of on-time payments by the number of total payments. Anything below 90 percent should not be acceptable.

There are hundreds of metrics you can use to measure your supply chain performance. These are just a few examples of KPIs that can give any company a head start toward streamlining their supply chain. Whether your logistics operation is outsourced or in-house, measuring performance with the right metrics can ensure that you are getting the best value for your spend.