Case Study #2 : Outbound Transportation Management and Reverse Logistics
In order to meet client objectives, Land-Link implemented a number of processes through the provision of technologies and operational and managerial support designed to operate in unison and provide the client with the intended benefits.
The client was not interested in full outsourcing relative to the current logistics process, but felt that their current internal processes were inadequate in order to ensure that cost effective routing was taking place in a consistent manner. In addition, the client recognized that current technologies, in the area of freight management, were under-developed, and that the process flow and method was not being inconsistently applied. Land-Link recommended that it provide the client with the technology necessary to ensure cost optimization on a per shipment basis and the selective outsourcing of certain internal activities where determined necessary or desirable to do so. All transactional settlement was to take place within the context of a gain-sharing program whereby both the client and Land-Link would share in the benefits derived from the initiative.
Carrier recruitment and pricing negotiations
The first step in the process was to effectively recruit additional asset based carriers and to negotiate more effective pricing by utilizing the various carrier relationships and pooled volume leverage provided by Land-Link. In addition, it was anticipated that incumbent carriers would respond, in kind, by offering reactionary rate reductions in order to protect shipping volumes within a least cost environment.
Establishment of benchmarking and introduction of carrier tariff agreements into the least cost routing system
Once carrier recruitment and pricing negotiation was completed, all tariff agreements for both incumbent and newly recruited carriers were integrated into the least cost routing system. Subject to customer issued routing guides and other formal routing guidelines established by the client, all carriers are subject to least cost determination without bias in order to ensure cost optimization on a per shipment basis. Savings is calculated and shared on a per transaction basis.
ACCESS based routing screen
Land-Link has provided the client with real-time least cost routing for use by each of its remote warehouse locations. As customer orders are downloaded into the system, the system determines the optimal carrier for each shipment subject to customer issued routing guides and other appropriate constraints. The selected routing is communicated to shipping personal so that freight can be routed in the prescribed manner. For like consignee consolidations, the system also provides individual routing for each order in the event that one or more orders are not going to be shipped as part of the consolidated shipment.
Load tendering
As mentioned, the client has decided to outsource certain specific activities while at the same time continues to execute various processes internally. In the case of standard LTL and small parcel shipments the client tenders the shipments directly to the various carriers based on the least cost technology provided by Land-Link. Where certain shipments exceed standard LTL limitations in terms of weight, cube, # of pallet positions, and linear footage, those shipments are referred to the Land-Link operations department for management. Shipments that exceed standard LTL limitations require carrier assignment and rate negotiation on a per shipment basis. The client and Land-Link both agreed that it would be most effective for Land-Link to manage these types of transactions. Where Land-Link is managing the transaction it tracks each shipment from pickup to final delivery.
Transactional Visibility and Metrics Reporting
For this program, all reporting is facilitated via the provision of an ACCESS based reporting mechanism. All fully audited transactional information is downloaded on a daily basis into an ACCESS database and accompanying program. The client is able to run a limitless number of ad-hoc reports and analyses based on their needs. Daily transactional activity is communicated via the web based routing screen that has been provided to all shipping locations.
Reverse Logistics
In addition to supporting outbound operations, the client also asked that Land-Link provide it with an effective returns program. Land-Link was once again able to rely upon its least cost technologies and experience to drive the process.
Issuance of routing guide
Land-Link authored and issued a client routing guide to all client customers, which outlined the new process and communicated the new routing requirements for return goods.
Freight Management and load tendering
Essentially, customers who are planning on returning goods to the client are required to contact Land-Link for routing instructions. Land-Link will provide the shipper / customer with a pickup appointment, carrier assignment, and system generated Bill of Lading for their use providing the customer has been issued a return authorization (RA) by the client. A download of the RA file is received on a daily basis from the client.
Compliance
Customer compliance relative to returns is also measured and reported. In addition, excess freight charges are also calculated when a customer fails to call Land-Link for routing instructions and chooses to tender the return goods shipment to a non-participating carrier.
Results
By providing a unique solution for the client, Land-Link was able to assist the client with the realization of its goals and objectives in the areas of outbound freight management and reverse logistics. As a result, the client has been the recipient of the benefits associated with reduced transportation costs, enhanced customer routing guide compliance, process standardization, increased operational support and efficiency, greater transactional visibility, and an efficient reverse logistics process.
Objectives / Challenges
- Reduce the cost of freight associated with outbound shipments of finished product
- Improve organizational compliance with customer issued routing guides while at the same time minimizing the negative cost impact of such compliance
- Provide the client with a standardized and formal process application and procedure relative to outbound logistics
- Establish operational support for the client
- Enhance transactional visibility and managerial reporting
- Initiate and implement an effective reverse logistics process intended to improve customer compliance, reduce the costs associated with returns, and provide meaningful data for purposes of policy and customer pricing decisions.
