Know Your Transportation Terms

Transportation seems like a simple concept. It’s about moving products and supplies from Point A to Point B. But there many options to get the job done and knowing the key terms will help you better understand each offering and the industry as a whole.

Take for instance “Transportation Brokerage” and “Managed Transportation.” The two often are used interchangeably, but they are radically different services. Brokerage involves a third party acting as a conduit for a company and the motor carrier to move loads – a very tactical assignment.

Managed Transportation is far more strategic and involves a company outsourcing all transportation functions to a third party. The provider uses detailed analysis and technology to determine the most efficient way of meeting supply chain goals. Managed Transportation is much broader in its scope, looking at a variety of modes as well as warehouse locations.

Other important terms to know include:

• Freight Forwarder. An expert in supply chain management that moves cargo for companies, often utilizing multiple carrier types for a single shipment. Shipments typically travel internationally.

• OTR. Over The Road. Also referred to as TL (Truck Load), these shipments typically travel greater than 350 miles. 

• Shuttle. These are short runs (less than 100 miles) of raw material from a warehouse to a production facility, or finished goods to a warehouse. 

• Regional. Truck loads that travel less than 350 miles within a geographical region. 

• LTL. Less-Than-Truckload. Refers to a shipment that is less than a full truckload. 

• Intermodal. A method of moving freight through multiple modes of transportation, such as rail, ship, and truck. Freight itself is not handled; the shipping container is transferred between the modes. 

• CTB Certified. The Certified Transportation Broker (CTB) program was developed by the Transportation Intermediaries Association. A CTB designation signifies that the professional has undergone rigorous training and testing to ensure they are an expert in the transportation industry. 

Avoid These Costly Warehouse Construction Mistakes

Construction projects are all about decisions...lots of them. It doesn't matter if you're constructing a house or a warehouse, each choice can impact the "livability" of the structure as well as its resale value. 

Companies approaching a new warehouse or distribution center construction project should weigh their options and decisions carefully to avoid some of the common mistakes and consequences listed below. 

• Building too small. Companies not planning for future growth or expansion can end up running out of space sooner than expected. Careful study of current volumes as well as future projections will help avoid this mistake, ensuring a site plan that addresses storage, parking, and other future considerations.
• Building in the wrong locations. Minimizing transportation and handling of products is integral to efficient supply chain management. While a good price on available land or building on company owned property may appear to make sense, it actually may be more costly in the end. Inefficiencies of building in a poor location will quickly deteriorate any upfront savings. Performing a network analysis will help identify the best site for the facility, taking into account all business requirements, options, and constraints. 
• Building the height of the structure too low. Constructing a warehouse that's too low can negatively impact the flexibility of operations and storage space, as well as hurt its resale value. Building taller will reduce the facility's footprint and can accommodate taller racking, which can reduce travel time for Material Handling Equipment (MHE).
• Selecting the wrong racking and layout. Implementing a poor layout and storage system will directly impact your worker safety, labor efficiencies, asset utilization, and can even impact your product. For example, if you are constructing a cooler warehouse, choosing racking that is too tall could restrict airflow and create inconsistent product temperatures. Selecting the right layout will maximize the value per square within the facility. 

Partnering with a builder that has experience in warehouse operations will help companies avoid these mistakes, which can have long-lasting impacts on operational efficiency and flexibility. 

How Will FSMA Impact Carriers and Food Transportation?

While the Food Safety Modernization Act (FSMA) continues to be a work in progress, one thing is for certain – it will generate greater accountability. That accountability will extend through the supply chain to include carriers transporting food products for humans and animals.

The Food and Drug Administration’s (FDA) goal is to develop standards to ensure the safety and integrity of food products. Building off the Sanitary Food Transportation Act, FSMA will test carriers’ documentation skills. In addition, the new rules will bring equal accountability to shippers, carriers, and receivers of food products.

Setting standard operating procedures for tasks such as cleaning trailers, locking and sealing loads, and properly refrigerating products isn't particularly challenging. However, developing a process of collecting, organizing, and storing this information for easy retrieval at a later date is where carriers may face an obstacle.

New standards will make technology almost a prerequisite for carriers.

For instance, document management systems likely will be the norm for linking inspection paperwork to bills of lading. Likewise, the industry could see GPS systems in trucks become standard for carriers, as regulations demand tighter tracking and traceability of food products while they are on the road.

As FSMA approaches, it’s important that food manufacturers review the standard operating procedures of their logistics providers. Questions to ask are:

• Do they have established criteria for inspecting trailers before loading?
• How are these records maintained?
• How quickly can they be produced for review?
• Do they have standards for inspecting products upon arrival?
• How do they ensure trailers maintain the proper temperature for products?
• Do they have real time/GPS tracking and tracing capabilities with their equipment? 

What is a Network Analysis?

Supply chains aren’t just created in one day and then operate unchanged forever. Like all elements of a business, they grow organically, over time. Through the years, customers change, and along with them come new distribution needs. Those alterations no doubt impact delivery requirements…and this is just on the outbound (feeding customer demand) side of the equation. Inbound transportation (feeding production) adds further management complexity.

Along with this organic growth come additional expenses. So how do you know if your supply chain is efficient? Could costs be reduced? Could performance be improved? These are the questions that plague in-house transportation departments. Answers are difficult to arrive at.

It’s been said that one cannot objectively examine a system they are a part of. That’s the reason many companies turn to a 3PL with expertise in transportation management to perform a network analysis. In this objective review, a 3PL company will look at:

• Customer requirements. How do you balance inventories against customer service needs and distribution costs?
• Shipping locations. Where should distribution centers (DC) be located? How many DCs should the company have? Which customers should be served by each DC?
• Storage needs. Are there gains from plant-direct shipping? Should the company contract for warehousing services or operate its own DCs?
• Volume. Which product lines should be produced at each plant and how much? Which suppliers should be used?
• Transportation Modes. Can intermodal or rail be used to reduce costs? Does a pool distribution model make sense? What combination of LTL and TL is most efficient while still meeting transit and volume requirements?
• Data and processes. Are you utilizing industry best practice? Do you have the right talent systems, and processes for performance? Do you have models? Should you be refreshing models with new data?

The goal of a network analysis is to eliminate unneeded movement, which will deliver long-term cost savings. This is done through reducing touches and paid transportation mileage. Uncovering these opportunities requires a 3PL that possesses not only many years of experience, but also the tools to compile and evaluate data.

However, by choosing an experienced 3PL to provide this service, companies can see significant benefits. Logistics savings often range from 8 to 12 percent.

To learn more about this topic and supply chain management, read a column written by WOW Logistics President and CEO Howard Kamerer for the April 18 issue of Cheese Market News. The column can be found here.

How Managed Logistics Can Improve Performance

Imagine if, when building a house, owners went out in search of each specialist alone – finding an electrician, plumber, painter, etc. The sheer time and effort required to do this would be astronomical and easily double the time necessary to complete a project. A general contractor makes much more sense.

Yet many companies choose to design and manage their logistics “house” internally. They pick this carrier for a specific line, another carrier for that line, and task an internal resource or department to manage it all.  Like the building example above, it accomplishes the same job, but not efficiently.

This is the thought behind why companies turn to managed logistics. One major advantage is a much more complete approach. Instead of parceling out tasks, businesses gain an expert who can simplify logistics by providing a total solution.

Other advantages include:

• One point of contact. Instead of managing multiple carriers, sources, and schedules, one company now takes care of all of logistics, and the substantial paperwork that comes with it.

• Improved efficiency. Often a logistics network develops organically through the years. As a result, nobody takes a wider view of the system as a whole. By outsourcing the function, an expert can provide an independent view.  Using their experience and network analysis tools, a logistics provider will develop an overall strategy, identifying efficiencies to yield the best performance. 

• Better allocation of resources. Companies no longer are tasked with recruiting and managing logistics staff. Time can be focused on managing talent in more key areas of the business. 

• Savings. Volume discounts a logistics provider can leverage from carriers, combined with better overall efficiency, should net a cost savings for companies.

No Substitute For Experience When Building A Warehouse

Building a warehouse seems like a pretty basic undertaking, right? At its core, a warehouse is four walls, a roof, and some dock doors. However, there are a variety of “little” things that can have a huge impact on how the facility operates.

That’s why choosing a designer/builder experienced in warehousing is so important when embarking on a new project. A builder with knowledge gained only by completing millions of square feet of work, will be best qualified to make recommendations on where to get the maximum benefit for dollars spent. There is no substitute for this experience.

A skilled builder of warehouses will discuss a variety of elements that can keep operating costs down, such as:

• Selection and placement of racking. This is the single biggest component governing the efficiency of a warehouse or distribution center. A company will never overcome an inefficient in-the-box design, which underlines the importance of selecting a builder/designer who can provide this valuable engineering support. Few builders can.
• Motion-sensor lighting. Reduces energy consumption by lighting only the spaces that are in use.
• HVLS fans. High Volume Low Speed (HVLS) fans move a great deal of air over a wide area, which helps reduce heating and cooling costs.
• Steel reinforced trailer pads. Constant dropping of trailers in the same spot tends to break up concrete over time. Steel reinforced pads help prevent such costly repairs.
• Super flat floors. This specialized concrete work is a prerequisite for taller racking. The benefit comes in being able to utilize the full cube space of the structure. 

There’s nothing basic about building a warehouse or distribution center. Since the efficiency of the facility is determined long before product arrives, it’s important to select a builder/designer who is highly experienced in such projects. They will be able to present further ideas to streamline operations, reduce overtime costs, and trim utility expenses.

What Is Contract Operations And What Value Does It Bring?

Business is all about focusing on your core competencies to deliver value to customers. Savvy owners know this, and can quickly determine what functions to keep in-house and which ones to outsource to an expert. This is why companies choose contract operations.

Contract operations basically means turning over warehouse or distribution center operations to a third party — someone skilled in such activities. This distribution expert will take on recruitment and management of staff; purchase of MHE and racking; implementing warehouse management systems; and is responsible for all storage, handling, and shipping. Contract operations could be provided at a company’s own facility or delivered at an off-site warehouse.

Advantages of such an arrangement include:

• A lower, more predictable cost structure. Capital expenditures (MHE, racking, etc.) are built into a fixed rate schedule that simplifies budgeting.
• Improved warehouse performance. An expert approach, well-defined and implemented SOPs, and advanced technology in warehouse management systems combine to yield better efficiency and greater productivity.
• Location assistance. Often, providers can assist in identifying the optimum location for a warehouse to help reduce transportation costs. Such a service is valuable as transportation is the biggest supply chain expense, at five times the cost of storage.
• Better allocation of resources. By not having to manage warehouse operations, companies are able to focus on their core competencies that deliver value to customers.

For many companies, contract operations is a good fit. However, they must select a service provider who understands their unique needs. This is particularly important if the stored items are food products, which require specialized knowledge and SOPs.