International Shipping Air Ocean

Report
2013 TLC CONFERENCE:
IMPORT/EXPORT BEST PRACTICES
APRIL 22, 2013
SAN DIEGO CA
by Jerrod Slaughter, Corporate Transportation Manager
INTERNATIONAL: WHAT’S THE BIG DEAL?
What does a shipper really want?
Simple …
1. Reliability
2. Flexibility
3. Market competitive rate
SHIPPER PERSPECTIVE - PLAN A STRATEGY!!
Know the Mode
•Ocean service contracts and service agreements
•What is important?
Have a Strategy for alignment
•Get Stakeholders involved to help a line with needs Supply Chain
•Line vs. NVOCC
•Request for Quotation
“Best Practices”
•On Boarding
•KPI / Evaluation
Understanding Ocean …
WHAT ARE THE BASICS?
OCEAN: IMPORTANT FOR A SHIPPER

Container Rates



Rates

Essential Accessorial Terms


Surcharges


Bunker
(Fuel)
CY, IPI,
Door?

Peak
Season
(PSS)

Detention
Demurrage

MQC
Volume
KPI and
Space
Guarantees


Surcharges
Bunker (Fuel)
Peak Season Surcharge (PSS)
General Rate Increase (GRI)
Essential Service Terms

General
Rate
Increase
(GRI)
Type of delivery is needed
Container Size
Container Routing
Space Guarantees
Minimum Quantity Commitment
(MQC)
Detention & Demurrage
Delay In Transit (DIT)
Performance levels / KPI


Bookings
Transit times
RATES: DEFINE SERVICES NEEDED
Rates

What type of delivery is needed?




Container Size


Container Yard (CY)
Inland Port Intact (IPI)
Store Door Delivery (SDD)
20 FT (TEU), 40 FT (FEU), 40 FT High Cube and 45 FT
Routing


All Water Service (AWS)
Landbridge (Not through Panama Canal)
ESSENTIAL ACCESSORIAL TERMS

Surcharges







Bunker (Fuel)


Floating schedule
Peak Season (PSS)


Advance Manifest Fee (AMS)
Chassis Usage Surcharge (CUS)
Document Fee (DOC)
Terminal Handling Fee (THC)
War Risk Surcharge (WRS)
Etc. (See 40+ other terms)
Typically June 1st through October 31st
General Rate Increase (GRI) / Rate
Restoration (RRI)

Any time based on Carrier / Alliance
ESSENTIAL SERVICE TERMS

Space Guarantees


Minimum Quantity Commitment (MQC)





How many FEU’s a year?
What is the right number?
Detention (out gate)& Demurrage (in gate at Port)


Hong Kong to Los Angeles – X FEU?
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 …
Add
terms to
RFQ’s

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!
Understand Ocean Line vs. NVOCC
WHAT ARE THE OPTIONS?
OCEAN LINE (DIRECT BCO)
NVOCC
NON 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 Positive
 Flexibility with little to no commitment
 Less complex to manage
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 Challenge
 Subject to volatility of market
 Susceptible to surcharge




Ability to chase rate





No FMC required for shipper
No MQC requirement
No long term commitment
Much closer to the market rates
GRI / RRI
PSS
No direct relationship with Ocean carrier
Possible less predictable transit times
OCEAN: LINE VS. NVOCC
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.
OCEAN KPI’S – QUICK EXAMPLE
Transit
Transit Time
% Within Time
for 95% Of
On+/- 1 Day Range
Shipments Time % of Target (Days)
Total
Target
Shipments Transit
CARRIER Origin - Destination Per Carrier Time
HAIPHONG –
AA Ships LOS ANGELES, CA
Avg
Variance:
Target vs
Actual
219
16
22 77%
69%
20
3
Zeebruggee
181
29
34 36%
31%
30
4
HO CHI MINH
CITY –
LOS ANGELES, CA
720
20
19 100%
18%
19
3
HAIPHONG -
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




A full service forwarder may compliment a Shippers
needs as supply chain becomes more complex
Don’t underestimate the value of regional niche
forwarders


Carrier service area
Forwarders usually handle all major lanes
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

similar documents