Monday, April 21, 2014

How to get top quality market research?

by Mathieu Ollier

Nowadays, every OEM has a ‘Market Intelligence’ division to gather and analyze data. But, obtaining “intelligent” data about the market – data that isn’t flawed, sloppy, or incomprehensible – isn’t easy.

Let’s start at the beginning. The role of the Market Intelligence division is usually to gather and analyze data such as sales, market share, spare parts prices, terms and conditions, etc. Obviously, access to sound, high quality data is paramount. While most of us have relationships with trusted and reliable research partners in familiar countries, eventually we have to carry out market research in places that are more ‘exotic’, and where concepts like ‘quality’ and ‘time’ are (much) more fluid than we would like them to be.

Since many of our projects require gathering data from outside sources, we have experience dealing with market researchers around the globe. We have had to deal with the whole spectrum of researchers, from ‘great’ to ‘awful’. In this article, we’ll focus on the ‘awful’ and discuss how to avoid massive train wrecks and get top quality market research.

Simply put, market researchers are usually better at executing than they are at thinking. That means you must do most of the thinking before the research begins. Shifting course while moving at full speed risks that train wreck. Think of a kindergartner crossing the street; you wouldn’t let him do it without supervision. No, you tell the child what to do, then you take his hand, look left, then right, then left again, and walk carefully, following the crosswalk markings. Now, how does this metaphor translate to the real world? Let’s see:
  • Research is a commodity. Few differences separate two market research agencies doing the same work. Granted, a company may have specific capabilities, but they are usually upstream (e.g. cross-referencing) or downstream (e.g. data validation), and not pertinent to the research itself. So, if you receive price offers for your research that are extremely different, think carefully. It means that one of the companies is not going to do what you want (a different methodology), or that it is cutting corners to appear attractive, or that it has never done this type of work before and does not have enough experience to determine the actual cost, or maybe that it plans on doing something illegal like not paying taxes... None of these scenarios is attractive; together they mean that someone may be taking you for a ride.
  • Market research companies have a different definition of ‘high quality’. As we have mentioned before, some companies focus on speedy execution, instead of looking up from the steering wheel in order to avoid oncoming traffic. Consequently, you can’t be suspicious enough. Until you know that a company is reliable, assume that everything they do is wrong and double-check all that you receive from them.
  • Do not let the researcher decide the format of the data they will return to you. While you know exactly how you want to use the research output, the researcher does not. He has no idea and no real incentive to put it into a format that will be easy-to-use and convenient for you. Make sure to provide a template, and to brief your research partner on how to use it. Ideally, you would do this during a formal kick-off, along with the explanation of your expectations, a reminder of the research timing, as well as the expected methodology. If you use different providers for different countries, chances are that the same team within your organization will use the data. Having the data in the same format will make their lives a lot easier. They’ll be able to focus on value-added tasks like analysis, not reformatting long Excel files.
  • Plan a soft launch rather than a full-steam-ahead launch. Nothing should prevent the researcher from carrying out a soft launch, (that is, research for only a small sample of the agreed scope), and provide you with that data. Look at it, check that it makes sense, and that there are no major flaws in the process you defined. If the sample looks good, you can give your researcher the go-ahead to get the rest of the data.
  • Ask for data extracts / work-in-progress files. Researchers are notoriously late. I always suspect that they don’t start when they say they do, but procrastinate for three weeks, like a high school student with a term paper. (I know: I have trust issues myself ... working on it). Asking for scheduled research updates and work-in-progress files will reduce your stress level. If they can’t provide the update to you three times in a row? Something is very wrong. Time to put on the brakes and figure out what’s happening.
  • There is no such thing as ‘we’ll do it later’. If a piece of the data is missing or is recorded incorrectly, the research agency may promise to fix it later. Don’t buy that; it most likely won’t. And when all is said and done, and nobody remembers why that data was not included in the research, guess who’ll look bad? Instead, insist on immediate corrections.
  • Data validation is a key step of the process. Researchers usually assume that they’re off the hook the moment they give you the data. Wrong! Until you are confident in the quality of what you received, the researchers should be responsible for it. Ideally, data validation should also happen on their end, but experience tells us that their “data validation” is not very thorough. There are always wrinkles (e.g. missing zeroes, typos, referencing errors, etc.) in the data you first receive. Make sure to have an explicit, written agreement about data validation responsibility, what validations rules will be applied to check its quality, as well as who will have to bear its cost. Save time to also perform it on your end, and force the researcher to re-collect or confirm the data points that look questionable. If a company refuses to do so, you are getting bad customer service. Nobody likes bad customer service.
Bottom Line: Everybody talks about ‘big data’, seemingly without worrying about the quality of that data. Of course, ‘big data’ typically refers to data sets much larger than what we discussed here, but we all know that without top-notch input, every analysis is meaningless. Even worse, it could lead you to take actions based on flawed or biased evidence and cost you a lot of money in the long run, which is the opposite of what high-quality research should allow you to do: make sound, logical, data-driven decisions that will increase your efficiency and strengthen your market position. The growth of some markets in foreign countries means that we have to go out of our comfort zone and create business relationships with local partners. While the learning curve to gain experience is steep, you can avoid the basic mistakes we just described. It also means that it is worth cultivating relationships with vendors that you know are reliable, timely, cost-effective, and with a proven track record within your organization. Then you can focus on what really brings value to your company.

Monday, April 14, 2014

2014 NASB – Spring Meeting Recap and Looking Ahead

We recently looked at how the North America Service Benchmark (NASB) data has evolved over the last five years. But the data is only half the story. NASB member OEMs meet twice a year for an interactive discussion of two core service-related topics that the participants choose. At our most recent Spring Meeting in Phoenix last month, “interactive” was an understatement. Watching participants exchange information, filling their notebooks with ideas for what they want to do next – that’s the greatest possible joy for a facilitator at one of these sessions.

NASB got its start back in 2008 when 11 automotive brands (with only two luxury brands) met for a one-day conference in Dallas. Today, NASB has grown to 17 automotive brands, with seven luxury brands, and they set the agenda for two face-to-face meetings a year.

The March meeting was all about how to manage Service Capacity – the tools, the metrics, how and which data we collect (and should collect), and how we can change dealer behavior. Some insights included:
  • OEMs agree that there is a need to accurately measure and forecast service capacity.
    • If you’re not getting down to the dealer level, you are missing pockets of under-capacity.
  • Customer retention is driven by service capacity.
    • Lack of service capacity can drive customers to the aftermarket prematurely.
    • There’s almost a need to get down to the individual customer level.
  • It can be difficult to persuade dealers to invest.
    • Business cases and forecasts tailored to specific dealers are critical to getting buy-in for investment.
    • Incentive plans can be effective, but beware of dependence.
  • Smaller OEMs and luxury brands can be impacted by service capacity constraints very quickly.
Some best practices include:
  • Higher frequency data collection captures variation in service capacity.
  • OEMs have experienced success with engaging their service field forces.
  • Web-based tools are the future.
We also talked in-depth about Express Service as a tool OEMs and dealers can use to manage service capacity and retain customers. Some insights included:
  • The “expressable” market is likely to stay constant in the near term. Most OEMs either have an Express Service program in place or are planning to launch one in the near future to compete with the IAM.
  • Since the last time we discussed this topic, most OEMs got more sophisticated around their reporting structures and are also able to report many success stories: Express Service dealers are outperforming Non-Express Service dealers on most dimensions that are being tracked.
  • Challenges are mostly related to sustainment and training – multiple OEMs have started tackling these issues.
  • Other highlights included OEM case studies on Express Service Reporting Dashboard and Sustainment Initiatives, Express Service staffing models of the future, and initiatives to improve service capacity.
If you did not attend the meeting, you might want to ask yourself some questions that were key discussion points for attendees:
  • Do you regularly share service capacity data with your dealers?
  • Have you created business cases for service capacity investment for all dealers?
  • How do you use your dealer operating standards to reinforce service capacity requirements?
  • Are you incorporating retention and other operational data at a dealer level to allow for capacity forecasting at differentiated retention levels?
  • What initiatives do you have in place to engage your Express Service Dealers?
  • How are you handling the career expectations of your Express Service team members? Link to Technician Survey Results
Needless to say, a single day never seems to be enough.

So what’s next? At the fall meeting, we will be discussing Second Owner Retention and we’ll come up with industry standards for Express Service Metrics. We are already looking forward to another great, in-depth discussion!

On a related note, we are excited to announce a Focus Day on the Connected Dealership and Service Lane Technology, which will address key topics such as telematics, service scheduling, RO write-up, service marketing, parts planning, and integrated service lane technologies which have been top-of-mind for OEMs, dealers, and 3rd party technology providers. In 2012, Carlisle conducted a consumer-facing technology roundtable at NASB. Last year, we took a deep dive into the topic and published the Market Assessment of Extended Service Technologies Report [LINK]. Our goal for the focus day will be to update and expand on this report:
Bottom Line: NASB’s mission is to promote continuous improvement in Service Operations. Our participants live and breathe this mission, and continuously push themselves to serve their customers and dealers even better. If you’d like to learn more about our upcoming meetings or Focus Days, please contact Karin Kliger at or 978.318.0500 ext. 103.

Friday, April 4, 2014

Service Retention in the Age of Telematics

By Eliza Johnson
As most of us are aware, service retention is one of our top challenges. To put it simply, we need to keep customers coming back to the dealer. Unfortunately, customers have reason to turn to the aftermarket; they say that they trust independents to charge them fairly.

But once those customers enter the aftermarket, they typically don’t come back. It’s a service black hole. And it only gets tougher as vehicles age; consumers are less likely to return to the dealer as they fall out of warranty and their vehicles get older.

How to win back these customers? That’s a subject for another blog, but the best way to break this cycle is to retain customers in the first place. We have to keep new vehicle owners at the dealership.

With advances in telematics, a lot of our new vehicles are becoming “connected”. This means that, increasingly, the vehicle owns the relationship with the customer; it talks to the customer and provides the information and feedback. Often, these systems provide diagnostic information, system status, and even the ability to schedule appointments.

Without a doubt, these changes will impact how a customer makes his or her service decisions. The customer can get more information from the vehicle than from a dealer, and since the customer trusts the “smart” car, maybe he feels he no longer “needs” the dealer.

That’s why, as the car becomes increasingly connected with the customer, it is critical for OEMs and dealers to stay connected to that customer, too. The advances in telematics systems provide an advantage. OEMs have access to the customer through the vehicle and access to more and more data, but there is a lot at stake and we have to get it right.

While there is power in the back end of the systems, let’s not forget the system's’ effectiveness is largely dictated by whether or not customers use them. We need to encourage customers to share vehicle and service information; once that communication channel is open, dealers can use it to communicate with owners, market services, and schedule maintenance. But how?

We’ve done a lot of research, including some recent focus groups and here’s what we know:
  1. Drivers trust their cars and telematics reports, often more than they trust their dealer. However, reports without digestible details and specific numbers are useless, such as the “Check Engine” light.
  2. Owners become skeptical of their car's messages when they think that they are being given limited information or channeled to an incomplete set of vendors or shops.
  3. Customer preferences on service scheduling are still scattered across multiple channels, including in-vehicle, but all want it to be quick and easy.
  4. Customers expect their service provider to know their vehicle history and status, and to provide them with customized service offerings.
  5. Customers want access to their RO and service history.
  6. Customizable privacy settings must be available to mitigate customer feelings of intrusiveness.
  7. Customers are willing to pay for valuable services, but currently do not place value on their vehicle systems beyond infotainment (e.g. XM and internet radio, concierge services, etc.).
Dealer salespeople need to understand and explain the value of telematics systems, and embed them into the new maintenance and service process.

Bottom Line: As we launch into the age of the connected car, we must pay attention to what customers are thinking, feeling, and saying about their connected car. Without customer buy-in, the potential of telematics systems is very limited. If customers don’t trust telematics, they won’t use it. We must help the customer understand the value of vehicle connectivity throughout all aspects of services and repairs: vehicle health monitoring, diagnostics, shop locating and scheduling, and maintaining service records. This connected strategy must be carried throughout the entire value chain; it can’t be piecemeal. So, what do we do, short term and long term?
  1. In-vehicle: In the short term, we need to connect the vehicle and the customer, and implement technology that the customer can use: diagnostics, appointment scheduling, and ongoing vehicle health monitoring.
  2. At the dealership: Next, we need to connect the dealer and the customer/vehicle. This includes CRM programs, automatic vehicle detection, and personalized service offerings.
  3. At the OEM: Long term, we must continue to be perceptive of customer usage and sentiments in order to design system interfaces that drive connectivity. The ultimate goal is to improve OEM strategy and supply chain performance, including using in-vehicle data for predictive analysis, parts deployment, and tailored service.
  4. Currently, no OEM has a holistic connected solution that spans the entire service cycle, and this is the golden ticket for leveraging telematics toward maximum retention.

Sunday, March 30, 2014

Two Strategies to Improve Customer Convenience: Be Faster and Be Easier

By Brian Crounse
Two events got me thinking about customer retention and mobile service this week. The first occurred when I dropped our home printer while trying to clear a paper jam.

I went to Staples and bought a new printer, brought it home, and set it up. I ended up on the HP website to configure the scan-to-email function, and that’s where HP pitched its Instant Ink Replacement Service to me. The basic idea is this: when your ink gets low, the printer phones home to HP, which ships new ink cartridges to you. You can sign up for one of three levels, based on the number of pages you typically print. HP bills you monthly at a lower rate than you would pay to purchase new cartridges.

For me, the benefit here is convenience. I don't like schlepping to Staples on a Sunday night when the ink gets low, while trying to finish a school project with the kids. I also don't like paying full price for OEM ink, but I also don't trust aftermarket ink, and won’t risk it to save a few dollars. Having the OEM ink arrive ahead of time at a discount, and paying for it in smaller increments is attractive to me. Plus, the final cost of HP’s program (3-6 cents per page, depending on your printing volume) is competitive. So, I signed up, and have received the first batch of ink.

Can you see the parallels to car repair yet? The potential benefit of integrating telematics into the vehicle maintenance/ repair part of our business? I really wish that our vehicle telematics systems enabled a level of service comparable to HP’s. Wouldn't it be nice to have a day or two of lead-time? That way the dealer could get the right parts in order to complete a repair in record time.

The other event: I recently discovered the another local mobile maintenance/repair service, Driveway Doctors. Now, I like visiting my dealer, Acton Toyota of Littleton, as much as one could; they have Wi-Fi, a cool solar installation, a cafeteria where they give you free breakfast, and decent work areas. But, as much as I like the home fries (they may be the best dealership home fries in the country), I'd still rather not have to drive to the dealership if I can avoid it. This is where mobile service would come in. Sure, a mobile van can't perform every repair, but it can do enough scheduled maintenance and light repair to make the numbers work, especially when there’s an opportunity to do a vehicle inspection.

After the inconvenience, the next most troubling aspect of vehicle maintenance is the surprise repair. Even a service advisor’s smoothest approach doesn't soften the "Did-you-know-you-need-a-$2,000- exhaust-repair?" moment. You know the feeling – thoughts race though your head, "How can I free up the cash? How long do I have to rent a car? Am I going to make my 10 a.m. call?"

Here's the hidden genius of mobile scheduled maintenance: dealers can't force the issue of surprise repairs, because a mobile van can't do the big, expensive repairs on your site. I know how much dealer service managers dread seeing a car leave the shop without every needed repair performed, but it’s often the trauma of the surprise repair that drives the customer away permanently. With mobile service, the most that the mechanic can do for a complex repair is give the customer a warning about the problem, a quote for the job, and an offer to set up an appointment. This gives the customer time to get over the surprise, feel grateful for the warning, and be relieved by the scheduled appointment.

I know that mobile service hasn't really taken off. A west coast company I liked in 2012, Your Mechanic, was supposed to be the Uber of car repair; yet, it hasn't moved that fast. Mobile service does have traction in niche markets such as glass repair, which has the advantage of being well defined in terms of parts and work, with no need to get beneath the vehicle. But I do wonder why mobile maintenance isn't more widespread. The economics can be challenging, but there's a real opportunity for improved customer loyalty.

Bottom Line: There are obvious perils to sample size=1 market research. I realize that not all customers are like me. But thoughtful n=1 research can still yield some insights.

In the near term, I'd really like it if my dealer would give me the option of mobile maintenance and light repair. Sell me a mobile service contract when I buy the car. I know I'll pay a premium (repair trucks and travel time aren't free, and the F&I guys need their cut), but the convenience of mobile service is obvious and would be valuable to me. I am a member of the “set it and forget it” customer segment. Plus, I like the fact that it would limit the mechanic’s options for up-selling. In the longer term, I'd like to sign up for a service in which my car tells my dealer when to fix my brakes, or replace my battery, or fix my sliding door, with me as the gatekeeper. If telematics could accurately diagnose more problems, mobile service might be able to perform more repairs. This is something – the connected car – that's been talked about a lot, but only a few leading manufacturers are beginning to implement it. Watch this space for more.

Friday, March 21, 2014

Work Assignment Methods & Truck Technician Retention

by Mike Chen

With the current shortage of technicians facing the truck industry, dealerships need to be more focused than ever on retaining their existing pool of qualified technicians. While there are many factors that impact retention rates, one element that should not be overlooked is a technician’s perception of workplace processes.

In 2013, Carlisle & Company conducted the inaugural Heavy Truck Technician Survey, which provided us the opportunity to dive into the issue of retention. One surprising insight that came out of our research was the importance of how work is assigned at dealerships. The survey results showed that technicians who perceive their dealerships’ work assignment methods as “fair” were 27% more likely to stay with their respective dealerships.

Upon investigating the issue, we found that most truck dealerships use one of the following two methods to assign work:
  1. Work assignment by specialty
  2. Work assignment to next available technician
Technicians surveyed were 8% more likely to find “assignment by specialty” to be fair vs. “assignment to the next available tech”. Many provided comments to give us context on their perspective:
  • “Technicians with improper training are assigned to jobs.”
  • “Jobs are often assigned to under-qualified technicians.”
  • “Give the work to the tech that is qualified to do the work.”
When we look even closer, we see that after technicians have five years of experience they become twice as likely to perceive “assignment to the next available tech” as an unfair assignment method.

Further down the line, technicians with more than 15 years of experience are three times more likely to perceive this work assignment method as unfair.

What does this mean for dealers? It means that by choosing to assign work to the next available technician, dealerships are increasing the risk that their more experienced technicians will leave. Dealerships don’t need to make technician experience-level or training the sole consideration when assigning work, but they should try to recognize a tech’s specialty and give preference to those who are the most appropriately skilled for the job.

In order to simultaneously 1) recognize experienced technicians, and 2) give younger technicians a chance at developing a specialty, dealerships could institute mentorship/shadow programs. Many technicians surveyed either requested such programs or commented that such programs were working well at their dealerships:
  • “Oftentimes jobs will be handed to a tech that does not have the skill level to handle it. They should be given to an experienced tech to shadow them and give advice.”
  • "Our system could be improved with experienced team members teaching substantial and complex repairs to less experienced team members”
  • “As a whole I believe we function very well. Mentoring of young techs is done on complex tasks as work load allows.”
  • “Everyone I work with is very willing to teach & explain their strong areas to others”
Bottom Line: Work assignment methods have an impact on a technician’s satisfaction level and their likelihood to stay with a dealership. If dealers want to avoid the time and cost involved in replacing experience technicians, they need to account for technician specialties when assigning work. Establishing a mentorship program in which experienced techs can mentor younger techs would be an effective way to accomplish this task, while giving opportunities to younger technicians who want to develop a specialty.

Friday, March 14, 2014

2014 NASB Trends – Looking Back to See How Far We’ve Come

By Charlotte Williamson

The North America Service Benchmark (NASB) got its start back in 2008 when 11 automotive brands (with only two luxury brands) met for a one-day conference in Dallas. Today, NASB has grown to 17 automotive brands, with seven luxury brands, and two face-to-face meetings a year. With the Spring NASB Meeting (on Service Capacity Management and Express Service) coming up fast, we thought we’d review the last five years of data.

The main objective we set for this benchmarking back in 2008 was to provide action-oriented metrics and insights into leading industry practices, in order for companies to use the data to learn and improve. As 2008 was in the middle of a large and steep decline in industry sales, brought upon by the “great recession”, we basically started benchmarking this data at the bottom, in a very challenging marketplace, and have been digging ourselves out ever since.

So how are we doing? The news, we’re happy to announce, is great. Our research found that several key metrics have improved substantially for OEMs that participated in all five years (in aggregate), since 2010 NASB.
  • The percent of 1 to 7 year old units-in-operation (UIO) with at least one customer pay visit increased 27%.
  • The percent of 1 to 20 year old units-in-operation (UIO) with at least one customer pay visit increased 49%.
  • The customer pay sales per 1 to 7 year old UIO increased 21%, despite a 5% decrease in sales per 1 to 7 year old retained UIO.
  • Sales per repair order are steady.
  • Most brands saw increases in customer pay and warranty customer satisfaction.
  • Almost all brands saw a significant decrease in the internal measurement of the percent of vehicles that were not fixed right the first time.

Coming out of the recession, we have fewer vehicles on the road in the core 1 to 7 year range, but have reduced our dealer bodies and adjusted service capacity to accommodate them. Customers are more satisfied and our quality of work is increasing. Vehicle sales are quickly approaching 16 million again and, at least at a national aggregate level, it appears our dealers have the capacity to accommodate them.

Bottom Line: Nationwide, we seem to be doing fine on capacity. But what about individual markets and brands? We know customers don’t like to travel for service if they can avoid it. Do we have the right capacity in the right places? What about our sales growth objectives? Can we meet the service needs of our new customers? How will the current trend in vehicle sales affect our ability to take care of these customers? We’ll explore these questions and more at the Spring meeting session on Service Capacity Management.

Thursday, February 27, 2014

Outbound Transportation Costs: Why Are My Bills So High?

Outbound Transportation Costs: Why Are My Bills So High?

Our Carlisle supply chain benchmarks tell us, among other things, that for most OEMs, transportation accounts for roughly half of total supply chain costs, and that those costs keep rising every year. It’s impossible to be in the motor vehicle business without delivering parts to your customers quickly and reliably. In fact, transportation is a key enabler to customer satisfaction.

If transportation is essential to our business, it’s essential that you closely monitor transportation costs. There may be very valid strategic reasons to spend a significant amount on transportation, but managers should always be on the lookout for wasteful spending. Our experience working on transportation-related projects, as well as feedback from our OEM clients during conferences and roundtables, shows that there is often plenty of waste to cut out. That’s why you might want to ask yourself the following questions.

What Are Your Transportation Costs Compared to the Industry? Carlisle Supply Chain benchmarks collect and report transportation costs (without attribution, of course), providing an easy way to compare your own costs to those of your industry peers. By showing costs across the industry, benchmarks also provide you with a way to judge how much money you could be saving. Even if you’re on the good side of the cost spectrum, there are still ways to perform better. Keep in mind that Carlisle’s Focus Days provide a forum for learning how to do just that.

Are Your Transportation Modes Aligned With Your Terms & Conditions (T&Cs)? T&Cs should be the main driver in your choice of transportation mode. A stock order rarely requires air transportation, but you’d be surprised how often an ashtray is sent by air freight. At the very least, the people who choose how to send parts should follow a clear decision matrix. Ideally, they should have an automated tool that makes the choice for them. That would ensure consistency across orders. OEMs must also consider how critical the part is. I mean, who really needs an ashtray overnight? We hear folklore of ashtrays being critical to smokers and kingdoms being lost for want of a horseshoe. Are we questioning this folklore about criticality? Hmm… a lot of that sounds like excuses not to dig deep and understand what’s really going on.

What About Consolidation? What happens when a customer places two orders on the same day? Do you send these orders separately or consolidate them? The latter avoids superfluous costs. What about sharing freight between stock orders and emergency orders? You might even discover opportunities to share trucks with another OEM and switch from LTL to TL (or DDS). And if you are already using TL most of the time, do you know if your trucks are full? Are you only footing out or also cubing out? If your trucks are ‘full’ but transporting a lot of air, it could be worth investigating how stacking can be improved. In that case, does the ease of transporting stackable cages make up for their cost? Or maybe your trucks are too big. Or maybe there are simply too many routes.

Are You Checking Your Freight Bills? Don’t you hate it when you have to dispute bogus charges on your cell phone bill? Well, guess what: it also happens with your carrier invoices! For instance, we see too often that the pay weight of the parcel is determined by the driver when the truck is loaded (even if the OEM is weighing and providing weight data). Surprise: that often means the weight will be overestimated, and the OEM will pay more than it should. Every transportation department should perform this recurring analysis: review the past data on the cost of every parcel, and compare it to the actual rate you negotiated with the carrier.

Compare your own costs to the above charts. If yours are close to the graph on the left, then you’re in good shape. If you find out that the cost of each parcel is above the rates negotiated with the carrier, you should pay more attention to how each parcel’s pay weight is determined, and find ways to lower the costs (e.g. re-negotiate the pay weight conversion factors). Additionally, our project work has shown that the shape of the curve itself can vary significantly across different OEMs for the exact same level of service. What this means is that transportation management and negotiation skills are essential in this area; release your vigilance and you may be invoiced more than you should.

Are You Seeking Regular Bids for Your Most Important or Costly Transportation Routes? Every year or two, you should assess what carriers can offer you on select transportation routes. If nothing else, it will provide you with meaningful information about where your existing arrangement currently stands. And don’t forget to track the performance of your carriers (e.g., on-time delivery); that will help you come negotiation time. It is also worth considering that the lowest cost carrier is not always the best provider, just like potential quality and supply chain issues can offset the financial benefit of outsourcing your production to a low-cost country. Capabilities, performance, and stability of the service level also have a value. Moreover, providers can usually smell that you are seeking bids out of interest (as opposed to genuinely looking for a new provider) and will submit a low bid on purpose: they don’t really expect you to accept it. If you do, they may come knocking at your door in a few months requesting a contract renegotiation.

Bottom Line: Transportation is essential to our business, but it’s also a significant cost bucket and will likely remain so until this ‘teleportation’ thing becomes real or 3D printing takes off. However, there are many opportunities to cut waste and reduce the total amount of the envelope; better transportation management essentially pays for itself. As much as we would like, there are no silver bullets here. Most actions involve blocking and tackling; no magic required. Unfortunately, not all OEMs do it properly. If you feel like we could help or care to have a deeper discussion on the topic, feel free to contact us.