Thursday, August 2, 2012

Outbound Transport Flows and Measures

Despite countless efforts to have perfect outbound transportation systems, we still find room to make changes and improvements. After years of trials and errors, we begin to realize that there are so many correlated measurements within this “transportation Rubik’s cube” that improving one element tends to affect others. It’s easy to get one side of the cube complete, but once you move on to other sides you end up distorting everything (some of us can’t even do one side, but that is a different issue). So how do you solve this puzzle? You could certainly keep trying to rotate the cube and hope that it will miraculously match eventually, or you collaborate with others facing a similar situation. Sound familiar? From NAPB’s perspective, this is why we had a brilliant group of subject matter experts from 20 different OEMs identify and define transport benchmarks. Here are the takeaways from the discussion:
  • OEMs think cost and service-related metrics are most important measurements. Needless to say, Carlisle has benchmarked those metrics, such as on-time delivery percentages, freight rates, and carrier damage.
  • Although DDS service is a big cost driver for transportation, these trucks are not always cubed out efficiently, because there is no incentive to optimize the cube utilization. This could be a valuable measurement, but the “devil’s in the details” when measuring cube utilization.
  • Ten OEMs reported some sharing of DDS; many of them were satisfied, as it reduced cost and expanded their coverage, but also mentioned that it is harder within certain geographies (such as southern regions, where major cities are more dispersed).
  • Based on their business models and service priorities, companies’ DDS models ranged from fully dedicated, to OEM-manage shared DDS, to carrier-managed shared pseudo DDS.
  • OEMs spend a big chunk of their outbound dollars on air transport. However, some question whether the extra-large expense is fulfilling a real need, thus they are trying to figure out ways to avoid air volume and convert to cheaper modes.
  • There seem to be lots of uncertainties regarding transportation damage rates, which makes it harder to benchmark. Some OEMs think DDS damage is too small to measure while others think that LTL damage data is not reliable.
  • Many OEMs would like to see more benchmarks in order response times and freight rates, because they tend to show broad distributions in performance.
Bottom Line: Darwin once quoted, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Looking at the takeaways, there are some conflicting opinions and ideas among OEMs, which seems natural since not everyone’s business model is exactly the same. Nevertheless, in order to improve their transportation system, OEMs need to observe the issues and understand which methods work best for their business.

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