2013 TLC CONFERENCE:IMPORT/EXPORT BEST PRACTICES

APRIL 22, 2013SAN DIEGO CA

by Jerrod Slaughter, Corporate Transportation Manager

INTERNATIONAL: WHAT’S THE BIG DEAL?

What does a shipper really want?

Simple …1.Reliability2.Flexibility3.Market competitive

rate

SHIPPER PERSPECTIVE - PLAN A STRATEGY!!

“Best Practices” • O

n Boarding

• KPI / Evaluation

Understanding Ocean …

WHAT ARE THE BASICS?

OCEAN: IMPORTANT FOR A SHIPPER

Rates

CY, IPI,

Door?

Surcharges

Bunker (Fuel)

Peak Season (PSS)

General Rate

Increase (GRI)

MQC Volum

e

Detention

Demurrage

KPI and Space Guaran

tees

Container Rates Type of delivery is needed Container Size Container Routing

Essential Accessorial Terms Surcharges 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 times

RATES: DEFINE SERVICES NEEDED

What 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

Routing All Water Service (AWS) Landbridge (Not through Panama Canal)

Rates

ESSENTIAL ACCESSORIAL TERMS Surcharges

Advance 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 1st through October 31st

General Rate Increase (GRI) / Rate Restoration (RRI) Any time based on Carrier / Alliance

ESSENTIAL SERVICE TERMS Space Guarantees

Hong 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-Time

“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 Counsel Seek help on “boilerplate” by mode Include 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!

Best Practice

!

Add terms

to RFQ’s

Understand Ocean Line vs. NVOCC

WHAT ARE THE OPTIONS?

OCEAN: LINE VS. NVOCC

OCEAN 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

Selecting an International Partner …

VENDOR MANAGEMENT

“BEST PRACTICE” TO MANAGE INTERNATIONAL

Define Supply Chain Strategy & Needs Request for Quote (RFQ)

Know the Market Document shipper characteristics Identify and include Stakeholders Define service expectations Boilerplate Stakeholders 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 Evaluation

“BEST PRACTICE” ON BOARDING Operational readiness

Define “Who’s who” Detailed Standard Operating Procedure

(SOP) Escalation path

Limited volume at startup Slowly turn on the Valve!

Deming Wheel approach Plan, Do, Check, Act

SHIPPER NEEDS TO BE A PARTNER Shipper provided FEU forecast by lane

Best practice: 3 month rolling forecast Keep it simple!

Communicate Origin Performance Is cargo getting booked and COB as

expected? Any rolls, delays, etc.? Be engaged and ask for feedback

“BEST PRACTICE” BUSINESS REVIEW KPI agreement Reporting requirements Quarterly or Bi-annual business review Measure transit expect vs. actual Cargo Claims Billing Issues Service Review

Booking performance Space guarantees Transit time metrics

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.

CARRIER Origin - 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 ShipsHAIPHONG – 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

International Air Freight Forwarding

IMPORTANT TERMS AND STRATEGY

CONTRACTING FOR AIR FREIGHT: WHAT IS IMPORTANT?

Rates by route Port-Door, Port-Port, etc.

Recommend add gateway to door as option Add Service levels that fit your need – Exp, Std, Def Add 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 claims

FORWARDER DIFFERENTIALS Full service forwarder vs. niche regional forwarder

Carrier service area Forwarders usually handle all major lanes

A full service forwarder may compliment a Shippers needs as supply chain becomes more complex

Don’t underestimate the value of regional niche forwarders Experts in specific geographies

Forwarders seek different freight mixes to support trade lane Rates and very drastically between competing forwarders Shop around for best rate

INTERNATIONAL – ITS AN ADVENTURE