Selecting the Right Transportation Broker for Your Business

Enlisting the help of a broker can be an efficient way to alleviate one of the most time-consuming transportation tasks – finding carriers to cover your lanes. However, not all brokers are created equal. Each has their own network of carriers with unique specialties, their own approach to customer service, and varying lane coverage. 

It’s important to select a broker who truly understands your business and aligns with your needs.

Quality carrier network. The most significant aspect of a quality carrier is their commitment to safety. Talk to potential brokers to better understand how they select their carriers. The best brokers will only work with companies who have a Federal Motor Carrier Safety Administration (FMCSA) rating of satisfactory or better. It’s essential to make sure your broker’s carriers meet the minimum liability insurance requirements – some brokers even require carriers to exceed these amounts.

Customer service. If something goes wrong with one of your shipments, or a change needs to be made in the 11th hour, it’s important to work with a broker you can count on. Look for companies that offer 24/7/365 on-call support to ensure safe, on-time arrival of loads.

Diverse solutions. Whether your company needs interstate, intrastate, or international lanes, it’s key to work with a broker who can offer diverse options. So, as your business needs change, you can be confident your coverage requirements are being met.

Brokers who offer access to a variety of modes and specialized equipment can provide you with superior solutions for your specific product and shipment needs. Some of these include:

Modes	Specialized Equipment
Rail/Intermodal	Flatbed
Less-than-Truckload (LTL)	Heavy Haul
LTL Pools	Curtain Side
Truckload (Dry Van and Refrigerated)	Conestoga
Multi-Stop Truckload

Do you know the true cost of your asset-based loan?

Asset-based lines of credit are a popular finance tool most businesses use to unlock capital held in inventory. Wide utilization, however, does not imply that everyone understands their true cost. When figuring the total cost of money, there is way more to consider than just the upfront interest rate for your loan. Below are just a few items to consider when comparing financing options.

• Advance Rate. Not all lines of credit are equal and certainly not when it comes to advance rates – the percent of inventory value the bank will loan on. Low advance rates prevent you from realizing the full potential of the inventory value, meaning a sizable amount of cash is still tied up in the product. Any way you look at it, that’s a cost – and quite often, a major one. Obviously, the closer you can get to a 100 percent advance rate, the better.

• Focus on fees.  Doing business with banks brings a variety of fees, such as loan origination fees, unused line of credit fees, service fees, fees applied for flexing the line up or down, and termination fees. When all those charges are added up, a 3.00 percent rate can quickly rise by ¾ of a percent or higher.

• The value of equity. If companies are going to fall down anywhere in the finance process, it is in undervaluing their equity. In order to accurately compare finance packages, companies cannot discount this cash outlay. They must determine an ROI that they could expect had those dollars been used for additional production or investment. After all, nobody hands out cash without an expectation of a return. This number absolutely must be figured into that total cost of money. And once it is tallied, that initial upfront interest rate undoubtedly will rise.

So as you shop for asset-based financing, the goal should be to maximize the advance rate, reduce or eliminate fees, and minimize the cost of equity through a low or no down payment.

So what does all this mean? Just how much do these costs impact the interest rate

Consider a $15 million line at 2.75 percent. We’ve already established that fees, alone, can drive costs up by $317,953.

If you look at the equity required to support the difference between the advance rate and the value of the product, you will be required to come up with roughly $4.3 million in cash. If you assess a value of 10 percent to the cost of this required equity, that adds an additional $431,250 to the cost of the line of credit.

That brings the total cost of debt and equity to $749,203 and shifts the previously low 2.75 percent interest rate to 4.99 percent.

Protecting Your Inventory from Unwanted “Consumers”

Pest control. It’s a topic you simply can’t ignore when selecting a warehouse or 3PL partner. Whether it flies, crawls, or burrows, pests are a constant threat, especially to facilities storing food-grade products. Without the proper procedures in place, this can mean big problems for your stored product.

Before trusting your inventory to a warehousing provider, ask the questions below to ensure that your products are in good hands.

• What inspections take place around pest control? It is important to work with a facility that goes beyond regular checks on interior and exterior traps. Make sure the actual product is being examined, as well as the tops and sides of pallets, for any pest activity. Some facilities will take extra measures, such as using pheromone traps, to make sure nothing was missed during regular inspections.
• How often are the inspections conducted? A reputable warehouse will have a pest control professional visit at least once a week. Additionally, the warehouse itself should have staff perform detailed inspections during inbound, outbound, and storage processes to ensure product is pest-free at all stages.
• What is the audit process to ensure their pest control vendor is doing their job? Make sure that your warehousing provider does random checks on traps, pallets, etc. directly following an inspection by their vendor. This will reveal if the vendor is doing a thorough job.
• What is the corrective action when pests or pest evidence is found?  Corrective actions are all dependent on the situation. Give a potential warehousing provider a pest related scenario and confirm they can provide a suitable plan of action. 
• How are live insects handled when found? In the event that live insects are found, your warehousing provider should have their pest management company come in to do fumigation or fogging upon your approval. 

Time is Now to Check FSMA Readiness

We know the Food Safety Modernization Act (FSMA) will produce a significant impact within not only the food processing industry, but also all who provide services to processors. While FSMA will change how many do business, there are questions left unanswered.

Knowing non-compliance is not an option, perhaps it’s time to turn a few of those questions into action. Companies that store product or ingredients off-site with third-party warehouses can gauge the safety of their product by posing a few simple questions to their warehouse provider.

Ask to see their Hazard Analysis & Critical Control Points (HACCP) plan. The cornerstone of FSMA is identification of possible hazards to the safety of food products, and creation of controls/procedures to significantly minimize or prevent their occurrence. For facilities storing food products, a robust, written HACCP plan is a must-have for every product type. Absent this document, the facility will be at a severe disadvantage in terms of meeting FSMA standards for protecting your product.

What is their recall/traceability plan? Another of FSMA’s cornerstones is the ability to track and trace food products to prevent a widespread outbreak. Does the warehouse facility have a detailed plan? How often do they perform recall/traceability drills? If recalls and traceability exercises utilize paper instead of computers, it’s probably a red flag of their readiness for FSMA.

How is the facility audited? There are a variety of auditors and levels that facilities can be reviewed at – warehouse, food processor, etc. If the facility is not going through an audit process, it may be another FSMA readiness red flag. Regular audits are a key component of FSMA.

Gone are the days of selecting warehousing based solely on lowest price. With the introduction of FSMA, and its increased level of accountability, food processors must now choose a “partner” rather than a “service provider.” A partner will ensure the quality of the product as if it was their own, as well as comply with FSMA standards.

What Is The Value Of In-The-Box Engineering?

A successful building project goes way beyond just creating a structure. Many decisions must be made throughout the process – some of which could make or break the overall efficiency of an operation.

The weight of these decisions can be eased by enlisting the help of an engineer who truly understands warehousing. An engineer can ensure your new facility operates at maximum efficiency by offering insight on the subjects listed below. 

• Warehouse design. Design is the single most important phase of any construction project. Engineers can focus on long-term efficiency to produce a warehouse design that meets your current needs, while planning for future growth.
• Defining operational needs.  An engineer can start by identifying your most basic requirements, such as ideal pallet sizes, and assist you in identifying issues with your current facility. They can then gain an understanding of how your product moves throughout your facility, and determine where specific items should be placed to deliver the highest level of productivity.
• Selecting the right racking. Every operation has unique requirements, and making the wrong racking decisions can hinder efficiency. An engineer can help you choose the right rack height and layout to optimize your warehouse flow and safety – while maximizing storage capacity. 
• Choosing MHE. Choosing material handling equipment may seem like a simple task; however, it is just the opposite. An engineer will understand the importance of this and will guide you in selecting the proper number and type of equipment, as well as the correct attachments for your facility and products.

Five Mistakes to Avoid When Selecting Material Handling Equipment

Selecting the right material handling equipment (MHE) is often overshadowed by the hundreds of other decisions that come with opening a new warehousing facility. However, selecting the wrong number or type of equipment for the operation can be costly for companies.

Before selecting MHE, companies should do a thorough investigation of their current and future business needs, while avoiding the five mistakes outlined below.

1. Not properly thinking through specs. Do a deep dive of your operational requirements to ensure you are covered for all handling types, especially the infrequent ones. For example, you might miss the fact that a small portion of loads come in shipping containers, and require MHE with a shorter mast to safely enter and exit the container. 
2. Not foreseeing business changes. Study possible developments in your company’s future to ensure proper MHE selection. You might choose to structure a 60-month lease for 20 pieces of equipment, and then find out the next year that volumes are dropping and you only need 15 pieces of equipment.
3. Not building flexibility into a fleet. MHE selections sometimes are based on a company’s current handling needs, but what if next year you take on new business or add new products that the MHE you selected can’t handle? Now you are stuck buying more equipment, resulting in a fleet of underutilized equipment.
4. Not planning properly for battery charging. Companies often focus on the trucks themselves and overlook other requirements to support MHE. For example, companies that select electric equipment must think about proper sizing and setup of a battery charging area. They also need a water source nearby for eye wash and battery watering needs, and it’s imperative that the building has adequate electrical service to handle the quantity and type of battery chargers. 
5. Not negotiating a preventative maintenance agreement. Understanding what is and isn’t included in your maintenance agreement is essential. Companies opting for a fixed maintenance package may overlook expenses that go beyond the fixed monthly rates, such as tires and other wearable items. Having a good understanding of all maintenance expenses enables managers to better predict total operating costs.

Not All Warehouse Management Systems Are Equal

The best third-party logistics (3PL) providers have standardized, repeatable processes that can deliver consistent reliability and efficiency. However, supply chain management is an ever-changing landscape. Only through advanced technology can you get the flexibility to efficiently meet new requirements.

This is why choosing a logistics partner with a tier 1 Warehouse Management System (WMS) is essential. Such systems bring a variety of advantages, such as:

• Flexibility. A tier 1 WMS is versatile enough to meet almost any request a customer has.
• Better labor management. On the surface, this doesn't seem like a customer advantage. However, when a 3PL has access to greater detail on operations, it can allocate staff time more efficiently. As a result, it is able to price its services more competitively. 
• Real-time visibility. This feature simplifies management. Tier 1 systems often have an online portal, where clients can view inventory levels/reports, and schedule receipts and shipments.
• Service reliability and accuracy. A tier 1 WMS enables a 3PL to more consistently and reliably deliver services customers need every day.
• Product safety. Advanced systems not only allow 3PLs to mitigate the occurrence of lost inventory, but they enhance traceability. This is especially important with food and/or serial number tracked products. 

Partnering with a 3PL that has a tier 1 WMS ensures the flexibility to manage your supply chain's constant evolution. It also brings access to features that aid safety and efficiency, while helping to reduce expenses.