Chapter 13

1. Chapter 13 Shipper Process

2. INTRODUCTION • The focus of this chapter is on implementation and execution of this transportation management strategy • the day-to-day shipper activities required to manage the domestic and global transportation process

3. DOMESTIC TRANSPORTATION MANAGEMENT PROCESS • Figure13.1 provides an overview of the domestic transportation management process that shippers utilize.

5. Shipment Source • The starting point in the transportation management process is either the customer order or purchase order – inbound or outbound. • The customer service, sales, or marketing departments are charged with the responsibility of receiving and processing the customer’s order. • via mail, phone, fax, EDT, or the Internet.

6. Shipment Source • Associated with the customer order and purchase order are the underlying terms of sale agreed to between the buyer and seller. • The terms of sale indicate who has control over the selection of the carrier, who pays the transportation freight bill, and where title to the goods pass from the seller to the buyer. • Essentially, the terms of sale define the buyer and seller transportation role in the sales transaction.

7. Shipment Source Figure 13.2 shows some typical domestic terms of sale. The free on board (FOB) domestic terms of sale have a: • named point that determines where title passes to the buyer, • where responsibility for selecting and routing the shipment passes to the buyer, and • where the buyer begins paying for the transportation charges.

8. Shipment Source • For example, the FOB-delivered term of sale states the seller pays the freight charges to the buyer’s door, the seller selects the carrier and routes the shipment, and title passes to the buyer upon delivery to the buyer. • The latter point means the seller has title to the goods during transit and bears the responsibility for filing claims for transportation loss and damage.

10. Shipment Source • The FOB-origin term of sale means the buyer incurs all transportation responsibility, cost, and claim responsibility. • The seller is responsible for making the shipment available at the seller’s door for the carrier that the buyer selects. • The buyer selects the carrier, routes the shipment, pays the carrier, and assumes the responsibility for claims. • The FOB-origin term of sale is used in purchasing of materials to enable the buyer to gain control over the cost and service of inbound transportation.

12. Shipment Source • The FOB-Port of Entry term means the seller incurs all transportation responsibility up to the port of entry and the buyer assumes the responsibility from the Port of Entry to destination.

14. Shipment Source • the terms of sale used to sell and buy products determines the level of transportation control exercised by the buyer and the seller. • If a firm buys all raw materials on an FOB-delivered basis and sells on an FOB-origin basis, the firm would have minimal transportation management responsibility.

15. Shipment Source • Today, many firms attempt to increase the amount of transportation management control by buying FOB-Origin and selling FOB-delivered. • By using these two terms of sale, the firm can maximize its control over the cost of its products.

16. Shipment Analysis • The shipment analysis function examines the specifics of the shipment, service levels required, packaging, rates, and consolidation. • The shipment specifics come directly from the customer and purchase order, and define the product to be shipped, the quantity, the origin, the destination, the consignee, pickup and delivery dates, routing instructions, and delivery requirements.

17. Shipment Analysis • Figure 13.3 provides an example of the shipment specifics needed to effect the transportation of a customer or purchase order • The information in Figure 13.3 provides all the information needed for the scheduling of a carrier.

19. Shipment Analysis • The service level requirement is often the company’s stated delivery policy. • EG: 5 business days; 3 business days; expedited delivery – next day; 99 percent of the shipments will be delivered within 3 days

20. Rate Analysis • The transportation manager examines the cost of alternative shipment methods to accomplish the move with the desired service level. • In this section the freight cost is analyzed for alternative transportation methods and the accompanying rates.

21. Rate Analysis • It is often cheaper to use an express carrier rather than an LTL carrier for shipments weighing less than 400 pounds (200 kg). • The carrier selection decision will be based on the level of service required and the consistency of the carrier’s service.

22. Rate Analysis • Another rate analysis that considers the size of the shipment examines the cost of shipping the product via LTL or using a TL carrier. Figure 13.5

24. Rate Analysis • With zone skipping, the shipper, using a consolidator, bundles numerous shipments destined for a city, moves the bundled quantity to the postal system near the destination city, and the postal service delivers the packages to the respective consignees.

25. Carrier Scheduling • The objective of carrier scheduling is to arrange for a carrier to meet the shipper’s transportation cost and service goals contained in the carrier selection decision. • As indicated in Figure 13.1, the carrier scheduling techniques include core carriers, routing guides, approved carrier list, and intermediaries.

26. Carrier Scheduling • The core carrier concept is based on the principle of leveraging business volume to obtain desired cost and service. • Shippers develop a number of core carriers, anywhere from 3 to 20 carriers, that are the prime providers of transportation service. • These core carriers typically realize over 90 percent of the shipper’s annual freight expenditure and are the first carriers the shipper contacts when there is a load to be moved.

27. Carrier Scheduling • Both the core carrier and the shipper are dependent on the other: the shipper relies on the core carrier to move the loads and the core carrier relies on the shipper for a major source of its revenue. • Depending on the number of core carriers a shipper is using, the loss of one core carrier may result in a significant disruption of service to customers, plants, and warehouses. • The greater the portion of revenue coming from one shipper, the more dependent the carrier is on the shipper.

28. Carrier Scheduling • To attain this carrier leverage across a large vendor base, companies utilize a routing guide that tells the vendor to use a carrier from a list of specified carriers. • The routing guide is a matrix that tells the shipper which carrier to use for a given transportation link and focuses the inbound freight on a limited number of carriers.

29. Carrier Scheduling • Figure 13.7 is an example of an LTL routing guide. • The routing guide is a quick reference to which carrier should be used for inbound and outbound moves between particular states. • The carriers identified in the cell are the least-cost, best-service core carriers to use over the transportation link.

31. Carrier Scheduling • Figure 13.7 shows that for a movement from Ohio to New York the carrier of choice is Yellow Freight (YL). • If Yellow Freight cannot make the move, the next favourable carriers are Roadway Express ERD), Con-Way (CW) and Arkansas Best Freight (AB).

32. Carrier Scheduling • Another carrier scheduling activity is the use of intermediaries. • Intermediaries are non-carriers that are used by shippers to locate carriers to physically move the shipper’s products. • The classic intermediaries are the motor carrier freight broker and the railroad intermodal marketing company (IMC).

33. Carrier Scheduling • Shippers experiencing wide swings in demand for transportation find it difficult to establish long-term arrangements with carriers because there are periods throughout the year where there may be no demand for the carrier’s service. • The intermediary maintains contact with hundreds of carriers who have varying amounts of excess capacity and will bring together the shipper and a carrier that is available to haul the loads.

34. The final carrier scheduling activity is securing the type of equipment needed for the move. • The type of equipment needed depends on the product’s weight, length, width, height, temperature-control requirements, and customer service requirements. • Heavy products requiring overhead cranes to load and unload, products such as the cement highway barriers, may dictate the use of flatbed or open top trailers or rail cars.

35. For low-density products, shippers request high cube equipment to maximize the amount of product the vehicle can transport. • Finally, the customer may request a particular type of equipment because of physical or operational needs and the seller must comply. • END

36. Load Tendering • Load tendering is the transportation management process that involves the offer and acceptance of the load, loading of the vehicle, and the attendant documentation. • Figure 13.8 presents the different steps included in the load-tendering process.

38. Load Tendering • The carrier accepting the offer will provide a formal acceptance via the transmission methods noted above. • Declining a load offer is no positive response; that is, if the carrier does not accept the load within a preset time limit the assumption is the carrier declines the load.

39. Load Tendering • Once the carrier accepts the load, the shipper arranges a pickup appointment • Today, consignees are requiring the carrier to make a delivery appointment.

40. Load Tendering • The next step in the process is picking, packing, and staging the order. • The order is picked from existing inventory or the items are produced for the order. In the Dell model, a product is produced after the customer places the order. When the order is picked, it is packed for shipment.

41. Load Tendering • In most operations, the items in an order are placed in a box or on a pallet along with packaging material to protect the shipment while in transit. • The final step is to stage the load near the loading dock for quick loading when the truck arrives.  • After the vehicle is loaded and the documentation is prepared, the vehicle moves to the consignee’s location for delivery.

42. Documentation • The most common domestic shipping document is the bill of lading. • The bill of lading is the beginning of a transportation shipment • It is the document that provides the carrier with the information necessary for the carrier to complete the move, and it governs the move.

43. Documentation The bill of lading serves the following purposes: • Receipt for the goods tendered to the carrier • Provides shipment information • Contract of carriage • In the case of an order, bill of lading acts as certificate of title to the goods.

44. Documentation • When the carrier’s agent (driver) signs the bill of lading, the carrier has agreed that it has received the items itemized on the document. • The signed bill of lading is the shipper’s receipt that the carrier has taken possession of the goods named on it. • If damage occurs to the shipment, the bill of lading provides proof of what was given to the carrier and the condition of the goods (assumed to be in good condition unless specified otherwise).

45. STRAIGHT BILL OF LADING vs ORDER BILL OF LADING • The straight bill of lading is a nonnegotiable instrument, which means title cannot be transferred by endorsement. • The order bill of lading is a negotiable instrument and acts as a certificate of title to the goods named on it.

47. Shipment Monitoring • As noted in Figure 13.1 the shipment-monitoring function involves tracing/expediting, customer communication, and vendor communication. • In essence, shipment monitoring is watching the progress of the shipment through the transportation system and communicating the status or problems to the customer or vendor.

48. Shipment Monitoring • The widespread adoption of the Internet and GPS (Global Positioning System) has greatly enhanced the performance capabilities of carriers with regard to shipment monitoring.

49. Shipment Monitoring • Tracing involves determining where the shipment is at a given moment in time. • With GPS, a carrier can determine within a few yards the exact location of a vehicle and the corresponding shipment.

50. Shipment Monitoring • Once the shipment is traced and its location is noted, the expediting function attempts to hurry the shipment along to delivery.