Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

This Week in Logistics News (October 15-19, 2012)

Mergers-Acquistions | By •

My wife is going away for a long weekend with her mom and sister. But I should be fine. She left me three detailed pages of where I need to be and what I need to do, hour by hour, for the next three days.

So, with no time to waste, here’s this week’s news:

Manhattan Associates reported record total revenue of $95.8 million in Q3 2012. License revenue was $16.2 million, up 12 percent from Q3 2011. The company closed two $1 million-plus deals in the quarter (one with a well-known retailer, the other with a well-known CPG company, both of them existing customers). Here are some highlights from the earnings call:

  • Year-to-date, about 65% of license revenue has come from existing customers and about 35% from new customers.
  • Year-to-date revenue has increased 14% to $281 million. Compared to Q3 2011, total revenue in the Americas grew 13%; EMEA, 5%; and APAC, 14%.
  • The company updated its full year revenue guidance to a range of $370 million to $375 million, which represents 12% to 14% growth over 2011.
  • Planning for 2013, Manhattan expects low double-digit year-over-year growth of about 10% to 12%.

As I’ve noted before, this has been a very positive year for most supply chain and logistics software vendors, and despite the ongoing uncertainty with the global economy, most software vendors are optimistic about the year ahead. The bet is that companies will continue to invest in technology to drive down costs, improve productivity, and enable new processes.

When a 3PL issues a press release, it’s usually about the introduction of a new service or about an acquisition that will expand their solution footprint. This week’s announcement by C.H. Robinson, however, is about a divestiture. The company has sold its payment services business, T-Chek Systems, Inc. to Electronic Funds Source, LLC for $302.5 million in cash. T-Chek had been a subsidiary of C.H. Robinson since 1984. Here is a quote by John P. Wiehoff, chief executive officer of C.H. Robinson, from the press release:

“We are proud of T-Chek’s success and of T-Chek’s employees, who built a very strong business with a long track record of growth. As the payment services industry continues to consolidate and evolve, scale and alignment with the financial services sector are becoming increasingly important. EFS is an excellent organization and we felt, for T-Chek’s long term success, that strategically it was the right time for T-Chek to join forces with EFS.”

In the immortal words of Kenny Rogers, “You got to know when to hold ‘em, know when to fold ‘em, know when to walk away, and know when to run.”

There’s been a lot of buzz this year about the rise of online education (see edX, launched by MIT and Harvard earlier this year, with Berkeley and The University of Texas also joining). This trend is now extending to software training programs, as evidenced by JDA’s announcement this week of JDA Minutes, “a cloud-based video training program, from JDA Education Services, that is available 24/7 via pc, tablet, or mobile device.” Here is an excerpt from the press release:

With JDA Minutes, users can expect flexible, timely and efficient learning – all in the cloud. Popular features include:  3-10 minute training videos on useful solution topics, expert presenters, video rating, “suggest a minute,” favorite’s folder, searchable video content, and more. JDA Minutes currently offers channels for JDA® Advanced Store Replenishment, JDA® Advanced Warehouse Replenishment, JDA® Fulfill, JDA® Demand, and JDA® Space & Category Management customers. Additional channels will be added in the future.

Like I said in my posting on Wednesday, when it comes to learning and talent development, we need to think beyond four year universities and traditional education programs. New paths to learning and training are being created every day.

Infor introduced new branding this week, complete with a special website outlining “The New Infor.” What’s noteworthy, in my opinion, is the emphasis the company is putting on “Social” and on “Beauty.” On the latter point, here is an excerpt from the website:

Business applications have traditionally been functional, but not much to look at. The new Infor changes that by making beauty a competence [emphasis mine].

It seems like Infor is taking a page from Apple’s playbook and bringing beauty to the enterprise software market. Steve Banker wrote about Infor’s new user interface back in April and he was impressed by it. The bottom line, as Steve pointed out, is that software usability is becoming a competitive differentiator, especially in market segments where there’s minimal difference in functionality between vendors.

And that’s a wrap. Now where did I put that list?

Song of the Week: “In the Meantime” by Spacehog.

(Note: CH Robinson, Infor, JDA Software, and Manhattan Associates are ARC clients and/or Logistics Viewpoints sponsors).

Guest Commentary: 5 Essential Technology Questions to Ask Any Logistics Service Provider

Guest Commentary | By •

You probably have a list of standard technology questions you ask potential logistics service providers. When you’re evaluating the technology of various LSPs, you can separate fact from fiction by asking a few simple questions. When pursuing a solution that obviously incorporates technology services it’s natural to investigate the provider’s technology. What surprises many companies is the importance of a provider’s technology even when the solution appears to not be technology-based. It’s an increasingly complex and interconnected world out there and an underperforming partner can significantly hamper your ability to take best advantage of it. Luckily, it’s easy to know whether a provider is well qualified.

When evaluating a provider’s technology, I recommend asking five essential questions. You will likely find additional value when you add these questions to your RFP — you’ll get better data to make a more informed decision.

  1. What does visibility really mean to the logistics service provider? Can you see your shipments’ status at any point in the process? Is transportation data integrated the next day, or can you get updates throughout the day? The answer could mean the difference between your ability to head problems off before they start, or the imperfect scenario of reacting to problems with day-old data. Also ask how easy is it to collect the data, interpret the findings, and analyze the metrics. Does the technology platform work the same way in every region where you do business? Do they offer global visibility, and can they demonstrate it? Visibility, especially global visibility, is essential to helping you proactively mitigate risk. With visibility, you can also track and trace worldwide without information gaps.
  2. Can they customize their tools to meet your needs? As you know, the ability to tailor a technology to suit your business is huge. Do you really have the time or resources to alter your business processes to fit your provider’s technology? The answer is probably no, and you shouldn’t have to. Make sure you ask detailed questions about the extent to which you can configure the technology to your specific needs. With a customized approach, you can increase your speed to market and easily clear barriers to progress.
  3. What process integration options do they offer? By all accounts, everybody does EDI. But in reality, not every shipper can do traditional EDI. More importantly, it’s unlikely that all of your supply chain partners can do EDI. Ask about the effort the technology provider makes to use all the tools you and your supply chain partners use—from XML files to smart phones to web tools, and more. It’s paramount that you can easily integrate the way you do business and gather data with the provider’s transportation technology. Also ask if the technology easily automates processes. Can their technology help you improve your data quality? It should be able to assist you with all these things.
  4. How many of your current service providers are already integrated with their technology? Last month, another Logistics Viewpoints guest commentator wrote about new carrier onboarding as a key criterion when selecting any shipping software. I couldn’t agree more. You probably have a broad (and changing) network of service providers. Make sure you ask about the ability to connect to and easily access your shippers, carriers, and anyone else in your network. If your provider has a large worldwide network of connected companies, you’ll likely discover that many of companies you work with are already on the platform, which makes the start-up process that much easier.
  5. How mature is their system availability process? Do they regularly test their availability and problem recovery process? Can they walk you through it? Do they maintain their own data center or have they outsourced that responsibility? Ask about their data security and inquire about their disaster recovery program. Do they have redundant systems that can prevent long outages? Data security and business continuity are crucial to any company that depends on technology (including yours).

Beyond these questions, you can also look into other aspects, such as knowing who controls your provider’s core software. A provider that owns its own technology and executes with it every day is going to update the technology more quickly to evolve at the pace of your business. That is part of the reason why we have a long history of investing in our own technology platform. As our CIO points out in a recent blog posting, what you’re really after is a solution that will grow with your company. If your LSP does not own its transportation technology and have in-house support personnel, it may not be able to evolve fast enough to accommodate your business. You need your technology to fit your business requirements both now and in the future. At the very least, expect your provider to have full control over the system’s core software so they can develop it as your needs evolve.

In summary, when you have a provider that can excel in the five core areas discussed above, and can articulate how they will continue to improve their capabilities, then you are ahead of the curve.

Ryan Pettit directs C.H. Robinson’s technology strategies. He leads the Navisphere technology development platform and other product development initiatives. Ryan joined the company in 2000 and has over a decade of technology leadership experience in logistics and TMS. He enjoys working directly with industry stakeholders to collaborate on innovative transportation solutions and he is a frequent contributor on TMS strategies for Transportfolio® Blog and the TMC Blog.

This Week in Logistics News (October 1-5, 2012)

Chemical Industry | By •

As reported in the Wall Street Journal, a study conducted by the University of Pennsylvania’s Wharton School found that “men with shaved heads are perceived to be more masculine, dominant and, in some cases, to have greater leadership potential than those with longer locks or with thinning hair.” I was cheering the news, reading the article out loud to my wife in the next room, until I came to this disturbing section: men with shaved heads were also perceived to be “less attractive” than full-haired men. At that point, it was immediately clear to me that the study lacked any credibility, that the Wharton School is not what it used to be, and that even though no bald men were harmed in the research process, some were hurt afterwards.

In more important news…

A few years ago, I conducted a study of the third party logistics (3PL) market, and with the exception of a few niche providers, most 3PLs derived their revenue from only a handful of industries: Automotive, High Tech, Food & Beverage, Consumer Packaged Goods, and Retail. Near the bottom of the list was Chemical, due in large part to the specialized needs of the industry.

Today, however, as 3PLs seek new growth opportunities, they are starting to pay more attention to the chemical industry. Last year, for example, Transplace acquired SCO Logistics, a Philadelphia-based 3PL serving chemical companies (listen to my podcast interview with the CEOs of both companies). And this week, CH Robinson announced that it has formed a new division called ChemSolutions™ which will provide logistics services to chemical manufacturing and distribution customers globally. According to the press release:

ChemSolutions™ is capable of providing chemical bulk shipping, safety and sustainability, freight forwarding, customs brokerage, vendor and supplier compliance, global trade management, and multi-modal transportation to chemical shippers.

 

In order to serve the chemical market more broadly and effectively, ChemSolutions™ has earned RC14001™ certification, which combines Responsible Care and ISO 14001 certifications into a single process based on an international standard that is accepted by chemical manufacturers worldwide.

Also this week, ChemLogix — a provider of chemical industry consulting services, TMS technology, and transportation management services — introduced a new suite of logistics service brands to boost the visibility of its offerings. The new service brands, which include On-Demand Global TMS, RightSource LX, BULKTAINER, and RightRail LX, address the key areas “that support customer needs to Plan, Analyze, Control and Execute their supply chain operations.”

Simply put, and in the immortal words of The Jeffersons, the chemical industry is “moving on up” and “finally getting a piece of the [3PL] pie.”

In other 3PL news, Menlo Worldwide Logistics introduced CarbonNet™, “a carbon management program [that] combines custom-built software to capture, calculate and manage greenhouse gas emissions, with Lean processes and tools to uncover waste, design and implement reduction solutions.” CarbonNet is a cloud-based solution and was developed by Menlo’s IT team. The company has been piloting the program at 60 of its facilities in the United States this past year, and the goal is to offer this program to customers in the future. Here’s an excerpt from press release about how CarbonNet works:

The application is designed to be highly configurable, and can accept a wide variety of data inputs to catalog key emissions characteristics of a facility and the activities performed within, as well as the transport of products and materials between such locations. It can accept input as well from suppliers, vendors and other third parties whose activities could contribute to the makeup of a supply chain carbon footprint.

Although sustainability has dropped from the headlines here in the US since the economic downturn, it seems to me that 3PLs (especially those with global operations) continue to make investments in this area, such as investing in alternative fuel vehicles, participating in the Carbon Disclosure Project, and publishing sustainability reports. Why? A question I’ll address in a future posting.

Mobile, Social, and Cloud were among the technology headlines this week. Manhattan Associates announced the creation of Manhattan Mobility Labs, “a development team with a specific focus on mobile applications and their ability to extend the Manhattan SCOPE® platform of supply chain optimization solutions.” Current Manhattan Associates mobile applications include Store Inventory Management, Distributed Selling, Supplier Enablement, and Mobile Supply Chain Intelligence. Here is a quote by David Landau, vice president, product management, at Manhattan Associates:

“The creation of Manhattan Mobility Labs is a result of the collaboration we have with our customers in creating solutions that enable the mobile workforce and increase employee productivity. In addition to our current mobile offerings, we have several exciting upcoming initiatives, built on a common mobile framework and available on popular mobile devices and tablets.”

Just three weeks ago, SAP announced the opening of its new SAP Mobility Design Center “to help customers meet the growing need for individualized mobile solutions.” Is opening up mobility labs and design centers the beginning of a new trend in the software industry? This reminds me a bit of the days when software vendors were launching similar efforts around RFID — although this time around, customer demand for mobile solutions actually exists.

Oracle held its annual user conference, Oracle OpenWorld, this week. Among the many press releases issued was one announcing Oracle Social Relationship Management Suite, “an integrated enterprise service that enables companies to listen, engage, create, market, and analyze interactions across multiple social platforms in real-time providing a holistic view of the consumer.” I believe it will take a while before we see “social” capabilities embedded in Oracle’s supply chain and logistics applications, but the ball is at least moving in that direction…and another reason why supply chain executives need to think beyond Facebook, LinkedIn, and Twitter when it comes to social business.

The other release that caught my attention was the announcement that Oracle has expanded its Oracle Cloud services portfolio. You can read the press release for all the details, but the company says it has more than 10,000 customers and more than 25 million users worldwide using the services each day. “The pricing model is simple, predictable and based on a monthly subscription model…Customers can choose to sign up for month-to-month subscriptions or longer term contracts.” With regards to Oracle Cloud Application Services, the portfolio includes ERP Services, HCM Services, Talent Management Services, Sales and Marketing Services, and Customer Service and Support Services. I haven’t spoken to anyone at the company, so I don’t know if and when supply chain applications will be added to the list.

And with that, I’m off to shave my head. Have a great weekend!

Song of the Week (inspired by my posting this week): “Maps” by the Yeah Yeah Yeahs. “Maps, wait, they don’t love you like I love you…”

(Note: CH Robinson, Manhattan Associates, Menlo Worldwide Logistics, Oracle, SAP, Transplace are ARC clients and/or Logistics Viewpoints sponsors).

This Week in Logistics News (September 24-28, 2012)

Logistics Service Providers | By •

The nation is breathing a huge sigh of relief today. No, the economy is still growing at a snail’s pace, and things in the Middle East aren’t getting better, but in what the White House called “a great day for America,” the regular refs are back in the NFL!

Classify that under “Things that Make You Go Hmmmm.”

In other news…

In my posting earlier this week, I commented on how many 3PLs are adding freight forwarding services to their portfolio. Well, CH Robinson announced this week that it is acquiring Chicago-based Phoenix International, a privately-held international freight forwarder, for $635 million in cash and stock. Phoenix generated gross revenues of about $807 million and net revenues of about $161 million in its most recently completed fiscal year. Phoenix primarily provides international freight forwarding services, including ocean, air, and customs brokerage, currently serving approximately 15,000 customers globally (the company has 76 offices in 15 countries).

“We see significant long-term opportunity in international forwarding as global trade expands, scale and technology continue to become more important, and shippers increasingly look to transportation providers to provide global services,” said John Wiehoff, C.H. Robinson chairman and chief executive officer.

In other 3PL news, Ryder published its third Corporate Sustainability Report since 2008. According to the press release, “The report discloses Ryder’s approach toward maintaining high standards for corporate governance, innovating for the environment, keeping cargo and supply chains safe and secure, and investing in people and communities.” Among the highlights: Ryder has deployed a fleet of 240 heavy-duty natural gas vehicles and has invested in natural gas vehicle maintenance infrastructure in California, Arizona, and Michigan, and the company has reduced electricity, gas, and water use at all Ryder-owned U.S. and Canada facilities for the third consecutive year.

In the trucking sector, the ATA reported that its seasonally adjusted For-Hire Truck Tonnage Index contracted 0.9 percent in August after increasing 0.4 percent in July. Here are some comments from ATA Chief Economist Bob Costello:

“While there has been acceleration in housing during the last few months, truck tonnage is being weighed down by a flattening in manufacturing output and an unintentional increase in inventories throughout the supply chain. While choppy, tonnage has essentially been flat this year with August being the second lowest month of the year.” Costello also noted that the SA index in August was 0.3% below January 2012 and 1.4% less than the high in March.

“Expect tough year-over-year comparisons to continue through the rest of the year as tonnage grew nicely during the last five months of 2011,” he said, adding the economy isn’t expected to grow much in the second half of the year as manufacturing decelerates and excess inventories are worked off. As a result, tonnage is expected to increase less than 3.5% in 2012.

Global trade is also slowing down, prompting WTO economists to downgrade their 2012 forecast for world trade expansion to 2.5 percent from 3.7 percent and to scale back their 2013 estimate to 4.5 percent from 5.6 percent.

If you subscribe to the “Dow Theory” — that the stock performance of transportation companies are an early indicator of what’s really happening in other industries and the economy  — then you’re probably a bit concerned at the moment. As the Wall Street Journal reported this week, “While the Dow has approached five-year highs, the 20-company Dow Jones Transportation Average has tumbled [emphasis mine]: Last week’s 5.9% drop was the biggest weekly decline since November 2011. The index is down 1.2% year to date. The gap in performance between the two indexes is unusually large, analysts say, a conundrum that has put many investors on watch.”

Did I mention that the regular NFL refs are back?

On the technology front, INTTRA announced enhancements to OceanSchedules, its multi-carrier ocean scheduling solution. According to the announcement, “With this release, customers can now access and evaluate over 7 million global vessel schedules from 31 carriers with a new option for integrating OceanSchedules within existing applications and support for additional data formats for customers who want to load data directly into their systems.”

Speaking of ocean shipments, SAP, The Hamburg Port Authority (HPA), and Deutsche Telekom are jointly creating a logistics IT solution called the “Smart Port Logistics” system that “incorporates mobile apps and makes it possible for traffic information and port-related services to be accessed from mobile devices such as tablets and smartphones. The objective of the project is to optimize both traffic and logistics operations in order to allow larger quantities of goods to be trans-shipped in the port area.” You can read the press release for more details, but considering that port operations are a big blind spot for shippers and a major source of lead time variability, it’s good to see that investments are being made to improve this part of the supply chain.

Finally, California passed a law that goes into effect next year allowing self-driving cars onto public roads. According to a Reuters report, the new law “establishes safety and performance regulations for testing driverless cars, provided an operator is ready to take control if necessary.” However, we won’t see many driverless cars on the road for many years, not because of technological limitations, but because of cultural and liability issues (see February 2012 Wired magazine cover story, “Let the Robot Drive: The Autonomous Car of the Future is Here”). But I’m betting that we’ll eventually overcome these issues, and sometime in the future we’ll be sharing the road will driverless cars…and driverless trucks too.

Have a great weekend!

Song of the Week: “Me in Honey” by REM. “Baby’s got some new rules, Baby says she’s had it with me.”

(Note: CH Robinson, Ryder, and SAP are Logistics Viewpoints sponsors)

This Week in Logistics News (September 3-7, 2012)

China | By •

Are you up yet?! What do you want for breakfast? Look in the other drawer. Don’t forget your lunch in the fridge. Why is this binder on the floor? I have no idea where your other sneaker is, just look for it! Did you brush your teeth? If we don’t leave in one minute we’re going to be late!

Yes, school is back in session, and so is the morning chaos of getting four kids out the door. But as strange as it might seem, I love every minute of it, especially the kisses and hugs, and the “I love you” and “Have a great day” as they race inside.

Now, this week’s news…

One of the primary ways 3PLs look to drive growth is by expanding their international presence, which is the main driving force behind CH Robinson’s acquisition of Apreo Logistics S.A., a leading freight forwarder based in Warsaw, Poland. Apreo provides truckload services, including dry van and temperature controlled and liquid and dry bulk capabilities, as well as warehouse, air and ocean services. Here are some excerpts from the press release:

Apreo has shown significant growth over the past several years, with current gross revenues over $100 million while servicing more than 2,000 customers. The company has over 300 employees in 21 offices in Poland and one office in Germany.

 

“This acquisition expands C.H. Robinson’s presence in Europe and supports our goals to strengthen our capabilities in our core business and further diversify our modal offering, both of which benefit our European and global customer base,” said Bryan Foe, president of C.H. Robinson Europe.

Earlier this week I asked how 3PLs can enhance their value proposition to clients beyond meeting their cost and service level commitments. Being able to serve the needs of their clients across multiple geographic regions is certainly on the list.

Descartes reported strong Q2FY13 results this week. Revenues increased 6 percent compared to a year ago to $30.5 million, and net income was $2.5 million, slightly down from Q1FY13 and Q2FY12. For the first six months of the fiscal year, revenues are up 8 percent and net income is up 6 percent.

Overall, the supply chain and logistics software industry has performed very well this year despite the choppy economic waters we’re in. On the other hand, FedEx and UPS continue to raise warning flags. FedEx lowered its outlook for the rest of the year, citing concerns about declining manufacturing activity, particularly in China. The HSBC China Manufacturing Purchasing Managers Index dropped to 47.6 in August, the lowest level since March 2009. Here are some excerpts from the WSJ article about FedEx:

The International Air Transport Association last week said members saw no signs of improvement in the global air freight market.

 

Global air freight volume fell 3.2% in July from a year earlier, and was up just 0.1% from the prior month in what the industry trade group said was a sign that the minor recovery in cargo seen earlier in the year had “stagnated.”

 

FedEx said a weak global economy constrained growth at its Express business—the company’s largest division and the one that handles international parcels—more than it had anticipated.

I don’t know about you, but the global economy has gotten so complex, with so many mixed signals, I have a hard time determining which direction the wind is really blowing.

As the clock ticks toward September 30th, when port workers have threatened to strike, the ILA and USMX are back at the negotiation table, this time joined by the United States Federal Mediation and Conciliation Service (FMCS). I’m not sure why they’re waiting until September 17 to resume talks instead of starting next week, but let’s hope the FMCS can work some magic and help the two sides reach an agreement.

Finally, the Wall Street Journal reports that Apple “has recently shifted some memory-chip orders for its coming iPhone from Samsung Electronics to other Asian chip makers, people familiar with the matter said Friday, suggesting that the U.S. company is diversifying its component suppliers as patent disputes between the two technology giants escalate.” While I’m sure the patent battle is a contributing factor in this decision, diversifying your supply base is also a basic supply chain risk management strategy. You never want to put all of your chips (pun intended) in one place, especially when those chips are critical components of your most profitable products.

That’s all for this week. And now I have to put on some music — it’s too darn quiet in this house!

Have a great weekend!

Song of the Week: “Too Fake” by Hockey.

(Note: CH Robinson and Descartes are ARC clients and Logistics Viewpoints sponsors)

Guest Commentary: 4 Essentials of Total Transportation Cost (One Piece of Total Landed Cost)

Guest Commentary | By •

As I noted in a recent blog posting, it’s not easy to accurately calculate total landed costs (TLC). But it’s the best way to understand your business at the subatomic level, find process gaps, and optimize your supply chain in every way. Here are the 4 things you must have to calculate total transportation costs—one piece of TLC—and what you can do with the results.

Source: CH Robinson Worldwide
  1. Executive buy-in. Where do costs lie, and what internal profit and loss areas exist that keep you from understanding TLC? TLC can’t be a minor project conducted within a single group (e.g., sales, operations, transportation, procurement, etc.). If you’re going to calculate TLC, there’s got to be a major enterprise commitment to change management—a commitment that can only come from the very top and include a number of people from throughout the organization.
  1. Your best minds, dedicated to determining TLC. Do you have an end-to-end TLC discipline? Since most people don’t, this often takes a big, full time project for some of your best people. It’s not easy. They’ll discover gaps in data, processes, and technology. Empower them to collect data from all silos, pulling all the costs from multiple budgets and business lines, and identifying a better way to measure TLC.
  1. SKU-level data. If you’re focused exclusively on getting the lowest freight costs per mile or per pound, you’re sort of missing the point. Of course, you should try to keep costs low. But with TLC, there’s more at stake. Because you’re not shipping truckloads. You’re not shipping LTL. You’re shipping product. That’s what you really want to measure. So, get SKU-level data—down to volume and dimensions—for every product you ship. With that information, you can build better pallets. You can analyze the data that you measure to make better freight and cost allocations. You can gain better analytics on what each specific SKU is costing you, anywhere in the world that you ship it. Of course, the TLCs for each product are a moving target; they will have to be recalculated as SKUs, locations, suppliers, and other variables change.
  1. TMS Technology. There really is no way around it: gathering and analyzing the level of information you will need requires a transportation management system (TMS) or managed service that utilizes TMS technology. The TMS must capture company-wide supply chain data in a single system. You must be able to pull specific costs out of the system to support TLC calculations. Technology helps facilitate that. With the right technology, you can gather meaningful information, measure against a baseline, and initiate changes and improvements for quicker and longer supply chain management performance improvement.

It’s a major commitment to track all the related costs, but when it comes to TLC, it’s not just about what you measure, but what you expect to get out of those measurements that counts.

Total landed costs help you understand your business. They also help you identify areas where your supply chain can give you an advantage over your competitors. It’s all about optimizing:

  • Your network. Once you know all of your costs—truck, ocean, inbound, handling, customs clearance, operations, returns, and so on—you can use your analysis to set up the optimal network. This refers to where locations are and how close they are to the customer. With a holistic view, you can optimize the entire supply chain.
  • Sourcing locations. Best-in-class companies collaborate with vendors, sharing data and discussing where they can invest that would be the best place for them to source or manufacture the product for you. Making these mutual decisions make it a win-win for the company and its vendors.
  • Freight transportation. Forget the cyclical benefits—trying to time the market or running bids. These don’t set you apart from your competitors. The real opportunity for improvement appears when you make your freight more attractive to carriers than anyone else’s freight. How easy do you make it for the carrier to accept tenders and interact? Can you help bundle volumes in the lanes where they need it most? Is your freight dock friendly to the driver? How quickly can the driver get in and out of your facilities? Do you give the carrier enough lead time so they have time for strategic planning? With transportation spend—just one of the components of total landed cost—what can you do as a shipper that will lead to long-term savings? TLC also reveals the conversion opportunities you have at your disposal. Convert small parcel to LTL, LTL to truckload, truckload to intermodal, etc. All of these are great ways to improve your transportation costs—a contributor to total landed cost. Until you can look at the whole system holistically, you will sub-optimize orders.
  • Global trade. Do you aggressively understand and work with international trade agreements? Do you look for opportunities in terms of sale and international finance and trade? All of these, managed well, can lead to opportunities; managed poorly, they can exert a drain on your free cash flow. Make sure you’re capturing both the domestic and international distribution in the overall cost to deliver. Besides being an area of big opportunity, it’s increasingly becoming an area of risk from a regulatory standpoint. The risks are misclassifications, poor notifications, delays in shipment, and fines. Not having a good regulatory compliance plan can impact total landed cost and decrease free cash flow. Having a TLC discipline in your organization will lead almost to a culture of estimated landed cost in your planning cycles. So when you analyze whether to change supplier locations from China to Vietnam, you’ll have great baseline comparisons. You can run simulation on the effective duty and tax rates of exporting and importing into countries.

Most of all, you can continually improve your operations. You can look at your network monthly and quarterly to review activities and find opportunities to improve total landed cost.

How does your organization approach total landed cost analysis?

Chris O’Brien joined C.H. Robinson Worldwide, Inc. in 1993 and became senior vice president in May 2012. Previous positions with the company include vice president, manager of the Raleigh, North Carolina branch as well as the general manager and later president of the company’s European division.

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