This article is an excerpt from the report: Part Three: Analytics for Improving Carrier Performance and Leveraging Trade Data
A copy of the full report can be downloaded here.
In Part 3A, we discussed how analytics can help improve carrier performance. Here in the final installment of this series, we look at the use of analytics for shippers to improve their own performance and some creative uses of trade data.
A shipper’s own actions can dramatically impact their carriers’ performance, whether it is unreasonably short lead times when tendering, long turn-around times at the shipper’s facilities, or other factors. Smart shippers track and improve what they are doing to impact their logistics performance and relationship with the carrier. Below we discuss in more detail turn-around times and detention metrics, dock door scheduling, load tender timing, and volume commitments.
Turn-around times and Detention Metrics
Detention charges are perhaps the most obvious negative consequence of excessively long turn-around times. Less obvious, but potentially bigger is the fact that sites gain a reputation with carriers based on how quickly or slowly drivers and their trucks can get in and out. Carriers will often turn down tenders for extra-slow sites and or raise their rates when bidding to deliver to those sites, in order to compensate for the expected wait times.1
Reliable and accurate arrival- and departure-time data2 will be needed in order to measure and analyze turn-around times. Armed with that data, analytics can help ensure detention charges are fair and justified. More importantly, they can help identify problem sites and zero in on the issues. Perhaps the problem is with particular shifts or employees, or maybe it is a systemic problem with the site. Collecting data on the reason for any delays at the time it occurs is hard to do, but that data is valuable in diagnosing issues as well as assigning liability. In any case, analytics can help in understanding and ultimately fixing those problems, reduce detention charges and improve the relationship with carriers.
Dock Door Scheduling
Dock scheduling practices have an impact on how long trucks wait. More fluid and dynamic dock door scheduling can help deal with early and late trucks. A carrier may feel it is unreasonable if their truck was five minutes late and as a result, the driver had to wait four hours. If early/late penalties are excessive, that risk will typically get priced into the carrier’s pricing.
In addition, a company may want to measure how quickly they respond to dock door reservation requests and what percent of reservations are granted for the requested time/day. If carriers are late because they are unable to get a dock door reservation, it may be a problem with your system and processes, rather than the carrier’s performance.
Load Tender Timing
The timing of tendering a load makes a big difference in availability and rates. Shippers that can forward-plan and tender loads several days in advance will have much better results than those that wait until the last minute. Shippers can measure the timing of all their load tenders, for example, what percentage were tendered A) three days before, B) two days before, C) the day before by noon, and D) the day-before afternoon. Then they can make efforts to improve those, increasing early tenders and decreasing the last-minute requests.
Tracking actual shipping volumes versus the volume commitments made to that carrier can help prevent unexpected rate increases and maintain better relations with each carrier. TMS systems can be configured to help ensure that each carrier is getting its promised share, but those decisions can be overridden by planners. It is important that override decisions by planners are done with an understanding of the impact on volume commitments and longer-term prices. Analytics can provide a second line of defense to ensure that you are meeting volume commitments, or that decisions not to meet volume commitments are done deliberately and rationally.
Elements of supplier scorecards that can be derived from transportation data include on-time in-full delivery (early/late delivery rates) and routing guide adherence. These may be used to levy fines for non-compliance as well as discuss improvement opportunities with suppliers.
Trade Data Analytics
Using internal and external trade data (e.g. import/export filings), companies can use analytics to improve supply chain risk management, do supplier and price discovery, sourcing optimization, competitive intelligence, and more.
Ensuring compliance with trade regulations has become a significant expense for companies that import and export goods. Trade regulations have mushroomed, enforcement is more robust, trade agreements are proliferating, and trade wars have greatly increased the volatility and consequences of duties, tariffs, and quotas. Ensuring compliance requires access to a wide variety of trade data such as: duties and tariffs with the associated harmonization codes for countries across the world; an increasing variety of denied parties’ lists; trade data on imports and exports by country pair (from/to), commodity, and buyer/seller; and results of various rulemaking and legal cases.
Many if not most companies strive for ‘compliance at the lowest cost’; minimizing the time, energy, and money spent dealing with trade data and contents. Far fewer enterprises fully appreciate how trade data and content can be a source of competitive advantage, well beyond compliance. Global trade data can drive analytics for many potential uses, such as:
- Supply Chain Risk Management — Trade data can be used to increase the percentage of shipments that clear customs quickly, and without issues. They can also help avoid major fines due to non-compliance. Analytics can be used to measure and highlight exchange rate risks. With access to both international purchase and sales data, the degree of natural hedging3 and the need for additional hedges can be calculated. Trade data for suppliers can be used to alert sudden drops in business for them. This could be part of a more comprehensive set of data to give an advanced warning when suppliers may be experiencing issues.
- Supplier Discovery — Public trade data from import and export filings can be used to discover new suppliers that sell a particular commodity. This can help a sourcing group find suppliers they were unaware of and understand what kind of volumes those suppliers are exporting and to whom. Note that the raw public trade filings data is notoriously difficult to deal with and requires a lot of cleansing and normalization, as described in Leveraging Global Trade Data-as-a-Service. It is strongly recommended to use a service that has done all the cleansing and normalizing for you, such as Descartes Datamyne.
- Price Discovery — Public trade data can also be used to discover market pricing, but only within certain geographies and commodities (for more see Part Two-Applications of Trade DaaS).
- Total Landed Cost Optimization — Trade data can help provide a clear understanding of total landed cost and the options for minimizing it. This has become even more important in the dynamic times we live in, with trade wars and dramatically fluctuating duties and tariffs. Beyond duties and tariffs, other aspects of total land cost (end-to-end transportation costs, customs clearance fees, taxes, brokerage fees, insurance, inspection fees, inventory holding costs, currency conversion, etc.) can be brought into an analytics model to get a clearer picture of where there are opportunities for reduction.
- Lead Generation and Competitive Intelligence — Trade data also enables seeing who competitors are selling to and the products they are selling. The size of various international markets can be estimated.4
Unlocking the Analytics Advantage
The process of digitizing a company’s supply chain and logistics processes and systems is a journey. Even early steps on that journey start to generate valuable data that can be mined. In fact, many companies are sitting on a goldmine of largely untapped transportation and logistics data. Part of the reason the value remains locked up is the scarcity of data science talent and the time and resources to wrangle data. These challenges can be overcome by choosing a full-suite transportation solution provider that has invested the time and resources to acquire the necessary data science talent and has done the heavy lifting involved in wrangling data across their suite, as well as their customer’s systems.
Applying analytics can be like a near-sighted person putting on a pair of glasses for the first time. All of a sudden everything that was blurry comes into focus. As the use of analytics matures in a company, it can become an ‘insights engine’ for them, highlighting not just where problems are, but the ‘why,’ what is causing those problems, what are the potential solutions, and the tradeoffs between those potential solutions. As a company becomes more adept at leveraging these insights, a true ‘analytics advantage’ is realized.
1 Detention charges do not necessarily fully compensate the carrier for losses/expenses incurred. In any case, most carriers would rather be making money delivering more services with their drivers and vehicles, rather than fighting with their customers over detention charges because their assets sat idle. Excessive detention is also bad for driver morale. — Return to article text above
2 Arrival- and departure-time data may be gleaned from a variety of sources, depending on what is available. The most common sources are either check-in/check-out at the gate (electronic or paper logs) or geofence-crossing (vehicle entering/leaving property) using GPS data from an ELD device or driver’s app, provided the carrier shares that data with you. — Return to article text above
3 A natural hedge occurs when an exchange rate risk is canceled out by an opposite risk. For example, if a company buys and sells an equal amount into a foreign currency, then even though they will make less revenue if the foreign currency’s value falls, the expenses for the goods they procure from that country will fall by a similar amount. By netting this out across a company’s entire operations, the true exchange rate exposures can be understood. The finance group can then decide whether any additional FOREX hedge is needed. — Return to article text above
4 Trade data provides data about goods being imported and exported to/from a country. It does not provide direct data about the size of domestic markets within each country — i.e. the goods that are bought and sold within the same country — though trade data may be used to make some partial inferences. — Return to article text above
To view other articles from this issue of the brief, click here.