ltl industry pricing analysis

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  1. 1. LTL Industry Pricing Analysis Presented to By Tim Lerchbacker
  2. 2. Presentations Purpose Three Fold: Macro view of current industry and economic condition Capacity, Inflation, Historical review of rate adjustment activity since 1993 Six Sigma Project Define
  3. 3. Capacity 2006 GDP Range from 2.7% to 3.9%, 3.3% likely. Industrials projected to grow 7.6%. Inventories being rebuilt from start of the year lean levels. More product chasing few trucks. Current driver shortage - 20,000, by 2015 from 111,000 to 114,000 short.
  4. 4. Inflation Pressures Impacted by 9/11, War, Cost of Fuel, Insurance deductibles escalation, 1999 = $443,000 per incident, 2004 = $2.7 million, 2005 = $3.2 million,
  5. 5. Inflation Trends Since 1914
  6. 6. Cyclical Inflation
  7. 7. Moore Inflation Predictor
  8. 8. Industry Rate Increases Trucking Industry Rate Increases 1993 - 2006 -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 70 80 90 100 110 120 130 % rate chg Index (2001 = 100)
  9. 9. Truck Rates vs. Inflation vs. GDP Trucking Rates vs. Inflation vs. GDP 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 % Rate Chg. Inflation GDP % chg Prev. Year
  10. 10. Six Sigma - Define Problem Statement: 23 People making buying or routing decision, Potential impact to customers, Potential impact to shareholder value. Potential impact in inflating GEs transportation spend, Combined B/U LTL spend not leveraged,
  11. 11. Project Objective To leverage the Companies total LTL spend across all BUs to drive: Service Improvements KPIs, Improved SHV increased Profitability, Cost savings XX% across all customers and BUs.
  12. 12. Dependencies Determine what the external and internal customers want, Verify the ability of the TSS to meet with, interview, or request information from internal customers (sales, shipping, critical stakeholders etc.,) and potentially external customers, Verify the internal requirements to get copies of contracts and rate data back to 2001 or the most current, Establish what the mechanism is to review shipping data as to: Origin locations, Terms (FOB point,) Destination locations, Carriers used on a prepaid basis, Carriers used on a collect basis, Payment terms with the carriers, Systems capabilities to route when a sales order is created, Sales order mapping from order to shipped / delivered, Are sales / shipping orders routed to a carriers automated shipping system electronically, Which carriers have automated data entry systems on site, Analyze claims history, Document shipping hours of operation at the shipping locations, Verify when GE considers a sales order complete for revenue recognition, Ascertain how partial orders are handled, Review of shipping dock(s), number of doors, forklifts / pallet jacks, how non-palletized material is handled (carts, hit the floor, belt, etc.), If managed by a 3PL or contracted provider, review their SOP document(s) as approved by GE, Determine by carrier if GE is a daily stop, Determine which carriers GE must call for a pick up, Determine how GE measures service provided by its carriers (current KPIs), Determine what ready to ship product characteristics exist between shipping locations / business units, i.e., density, average shipment size, average number of pieces, any insured or declared valuation, etc., Establish if the contracted rates are FAK or class rates, Verify the expiration date for all existing contracts, Determine who, by location, is enabled to route shipments, Determine how proof of delivery is feed back to GE and if the POD is matched with the sales order, Determine the frequency with which GE formally meets with its carriers, Determine proximity of carrier to shipping locations, Visit carriers local terminals to ascertain probability for service interruptions due to congestion at the local terminal, Review carriers routings to determine how often shipments are likely to be routed through a break bulk terminal, and when a shipment is routed through a break-bulk terminal where the break bulk terminal is, then determine the likelihood that it will be loaded direct to the destination terminal or possibly transfer through another break bulk terminal, Determine in contracted carriers provide dedicated customer service for GE Is it local or via a 1-800 number? If so, how is this function handled during vacations and illness? Is it 24/7? Determine if contracted carriers have provided escalation charts with contact information beyond the local terminal, Determine internally, how customer shipping status inquiries are handled,