The economic downturn we are experiencing will no doubt result in some consolidation in the Logistics Service Provider (LSP) industry. For clients who are planning to change providers this is a good time to establish service standards that are relevant to their operations. For example, on time service standards are basic and common to all LSPs .
Most logistics service providers present clients with monthly reports touting their on time delivery percentage. It is easy to become complacent when LSPs routinely report 97-99% on time service after taking exceptions for weather and other factors.
Why not challenge them to measure absolute performance failures instead of percentages? In a high volume operation even a small percentage can mean a lot of late shipments and unhappy customers. In a smaller operation with fewer customers every shipment is critical. If LSPs can track and report percentages they should be able to do the same for absolute numbers of shipments. FedEx has measured absolute performance for years.
Finally, if you are an LSP, remember that you have a client on both ends of the shipment, so service failures have twice the impact. Different metrics are like fresh eyes on an operation.
Need help? Contact firstname.lastname@example.org
When updating clients’ inventory and parts lists questions about country of origin come up regularly. Country of origin, often abbreviated COO, is one of the elements, along with harmonized code and commodity valuation, in determining duty/tax rates. While trade agreements such as NAFTA (now USMCA) have specific and complex rules of origin, the basic COO elements are:
Country in which the commodity is made, mined, grown, manufactured, or underwent substantial transformation. The 3 way test for substantial transformation is new name, new character, new use.
Substantial Transformation Rule….used to determine country of origin if articles or components are not wholly obtained from one country…Does article have new name, character, or use?
- Change in character- altered physical characteristics of article or components. Were changes cosmetic? What was the process that resulted in change?
- Change in use- Is end use of article interchangeable with end use of components? Is end use of component predetermined at time of importation? What was the process that resulted in change of use? Predetermined end use generally precludes substantial transformation but subject to specifics of article/components in question.
- Change in name- this is the least compelling of the factors supporting substantial transformation. Do components retain original name after processing?
- Subsidiary/Additional Factors- extent and nature of operations (complex or simple); value added and/or cost incurred during transformation process; essential character of article (components transformed into finished product); change from producer to consumer good; tariff shift.
Ad Hoc Logistics can help with regulatory questions or your international logistics needs. Contact email@example.com
Zoom meetings are replacing face to face sales calls for LSP (Logistics Service Provider) representatives and I’m hearing a lot of frustration from former colleagues and clients. LSP reps are under pressure to conduct an aggressive number of zoom meetings or phone contacts per day. Indications are that this strategy will continue as it reduces costs and may increase sales productivity.
Clients are often working remotely and with reduced staffing so understandably want to avoid these calls. The discussion usually includes small talk, commiseration, service issues, and client complaints about rates or surcharges. Let me suggest an alternative approach that can be a big plus for small/medium shippers. Rather than avoid the calls why not look to set the agenda and add value while also reducing the number of routine calls? I guarantee that you will have your LSP representative’s attention.
A common mistake made by small and medium sized clients is failing to prepare before meeting with LSP representatives. Another mistake is focusing on price. A better strategy is to emphasize value in your discussions with providers. If you determine that they have the capabilities to provide quality services, then you can move the discussion to price. Consider: if simply asking for lower rates can result in transportation savings, how much better would the result be with a little preparation? Here are some suggestions from someone who has spent many years on the LSP side of the table.
Determine your specific transportation needs and goals ….for example
- Price- compare net rates (not % off because base rates differ), minimums
- Transit Times/Reliability- including pick up and delivery, terminal services, linehaul
- Inventory Costs- reduced transit time = reduced inventory costs… how transportation adds value
- Product Differentiation- faster, better service as a marketing tool
- Capability/Access- carrier has right equipment in right place at right time
- Security- carriers claim ratio and loss/damage experience
- Relationship- responsiveness and problem solving protocols
Analysis Prior to Negotiation
There is not much advantage to withholding your shipping profile from providers. Because the industry is so competitive you will get a better deal if LSPs know what volume they are bidding on and any specific service requirements. If this information is not available to them they will hedge their bets and be less aggressive in their offers. Gather some data and present it. This will give you professional status in the eyes of your providers. Here is some minimum information needed. Most of it can be found in bill of lading or invoice files.
- Volume/Frequency- # of shipments per day, week, or month
- Weight- average weight per shipment
- Dimensions- standard dimensions, if any… palletized or non palletized…pictures are helpful
- Heaviest Shipping lanes- domestic and international
- Services- priority or economy, express or deferred
- Density- pounds per cubic foot ( for motor carriers)
- Classification- NMFC item numbers (for motor carriers)
- Dimensional Weight or Dim Factor (for air freight forwarders)
- Packaging type- transportation only, display, labeling
- Freight Payment Terms- prepaid, collect, third party
- Control- Who has authority to sign an agreement? Who makes routing decisions?
Request for Proposal/Request for Quotation
A formal RFP or RFQ is an effective way to both reduce transportation costs and gain the value that you need from your carriers. Ad Hoc Logistics can prepare your RFP/ RFQ, get it to the appropriate transportation providers, and even negotiate on your behalf. Contact firstname.lastname@example.org
My background includes a number of years as a corporate trainer. So I understand that in an economic downturn one of the first cuts is to the training budget. This is problematic because staffing cuts are often made at the same time. Remaining staff will be taking on additional duties and performing out of their comfort zone with few opportunities for training.
This is not the time to risk logistics service failures or customs delays which can cost you business. Some basic training with practical “how to’s” is in order. We can help!
I have developed “A to Z of Managing Logistics”, a brief presentation designed for managers who wear several hats and need to oversee logistics without devoting too much time to it. The steps outlined in the presentation are also valuable in training new logistics employees.
If interested contact: