Freight Market Intelligence Consortium - · PDF fileFreight Market Intelligence Consortium...

Confidential

June 28, 2012

Using Freight Market Intelligence to Focus Your Ocean Freight Strategy

Freight Market Intelligence Consortium

Click to edit Master title style

2

Today’s Speakers

Kevin

Zweier

Principal,

Transportation Practice

CHAINalytics

Matthew Harding

Principal,

Transportation Practice

CHAINalytics

Rolando Portal

Director, Inbound Logistics

and Customs Compliance

Moderator: Mike Hane, Sr. Director, Business Development, Chainalytics


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Today’s Agenda

Who is Chainalytics?

Ocean Freight Market Intelligence

Chainalytics’ Benchmarking Reports and Deliverables

Ocean Sourcing Overview

Petco Strategy and Experiences

Q&A


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Today’s Agenda






Q&A


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More Than 80 FTEs Worldwide

Our Clients

180+ Unique Clients

14 of AMR’s Top 25 Supply Chains

57 Fortune 500 Companies

5 of Top 10 Retailers

7 of Top 10 Food & Beverage Manufacturers

5 of Top 10 CPG Companies

6 of Top 10 Forest, Paper and Packaging Companies

Our Experience

More Than 375 Engagements

TODAY

• 1st Named to “100 Great Supply Chain Partners” List by SupplyChainBrain; Recognized for 8 Years Running

• Launch of Freight Market Intelligence Consortium (FMIC)

2001

2002

2003

2004

2005

2006

2007

2009

2010

2011

2008

Our Genesis

• Market Lacked Proven, Focused Supply Chain Analytics Competence

• “Best Analytical Minds in Supply Chain”

Empowering Fact-Based Decisions

Across Your Supply Chain

• Launch of Sales & Operations Variability Consortium (S&OVC)

• Mike Kilgore named a “Pro to Know” by Supply & Demand Chain Executive; Steve Ellet, Gary Girotti, Irv Grossman, Jeff Metersky, Matt Harding, and Kevin Zweier also named Pros to Know

• Established Chainalytics India Private Limited in Bangalore

2012

• Strategic Growth via Mergers & Acquisitions

• Supply Chain Operations (Chainnovations)

• Packaging Optimization (Adalis Packaging Solutions Group)

• FMIC named “Top Supply Chain Innovation” by Supply & Demand Chain Executive

• Named to ARC Advisory’s “10 Coolest Supply Chain Boutiques”


Years

Quarters

Months

Weeks

Planning

Horizon

Value-Driven Supply Chain Decisions

At what service level can we

profitably satisfy demand?

How should we transport

product through the supply

chain?

How much and where should inventory be

positioned in the supply chain?

Can we reduce our transport and logistics costs by improving cube

utilization?

Should our warehousing and material

operations be insourced

or outsourced?

When should we buy or make product to make the best use of our capacity?

What is the best flowpath?

How well do our current operations

mitigate repair and warranty

costs?

How can we increase

visibility to stakeholders?

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Sales, Inventory & Operations Planning

Transportation Logistics Operations

Service Supply Chain

Packaging Optimization

Supply Chain Design


Where should we focus improvement efforts?

What is the best mix of carriers to service my

network?

Can I reduce costs or improve service using alternate shipping

strategies?

Are my processes and systems providing maximum benefit?

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Services We Provide: Transportation

Procurement Mode Analysis

vs.

Best Practice &

System Assessment

Business Intelligence

Deep Capabilities and Expertise in All These Areas

Am I paying a fair price for transportation?

Freight Market Intelligence

• Robust Technology Maximizes Transactional Data for Broad Market Intelligence

• Membership-Based Consortium including TL, LTL, Ocean, and Heavyweight Air

• Analyze $16B+ in Annual Freight Expense from 100+ Customers


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Today’s Agenda






Q&A


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What is the goal of benchmarking?

Provide Summary and Detailed Market Insights

Freight Rates

Business Practices

Identify Opportunities

Trades

Providers

Enhance Consortium Visibility to External Market



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Model Statistics of January 2012 Release

$300MM in Transportation Spend

100K Container Loads

14 Model Participants

Process Supports Import, Export, and Global Freight Flows

Freight Market Intelligence Consortium Ocean Shipper Member Demographics

17,454

22,204 60,810

Number of Shipments

$51

$62 $177

Reported Spend (MM)

Retail

Industrial / Other

Food and Consumer Goods


Asset Flows

Economic Environment

Ocean Carrier Leverage

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The Ocean Market

Market Price and Service

Niche Markets

New Vessels

Container Supply

Idling & Scrapping

Global Demand

Slow Steaming

GRIs

Anti-Trust Immunity

Changes in MQC

Accounting


Rate Trends

Company Reports

Market Insights

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Model-Based Benchmarking Approach

DATA CLEANING AND VALIDATION

Text Cross Reference

- Equipment Size

- Equipment Type

- Contract Type

- NVOCC vs. Common Carrier

Numeric Checks

- Seasonal Impacts

- Sea Freight Costs, BAF

- Dates, Transit Times

- Flag Nulls

- Flag Zeros

Geography Checks

- Geography Checks

- Determine Ports as needed

- Geocoding of City, State, Country

- Harmonize Port Names,

Locations

- Calculate Nautical Miles (Ocean

Distance)

- Calculate Domestic Miles (PCM)

- Calculate Non-Domestic Miles

(Latitude/Longitude)

ALL

MO

DE

S

ECONOMETRIC MODELING

1. Testing and Validation of Effects

- Regional Trade Lane Definition

- NVOCC vs. Common Carrier

- Equipment Size

- Equipment Type

- Contract Type

- Inland Moves

- Transit Times

- Nautical Miles

- Peak Season Surcharge

- Shipper Spend

- Product Value

2. Model Development

ALL

MO

DE

S

ALL

MO

DE

S

Dat

a V

alid

atio

n P

roce

ss

Raw Data 1...n

Port to Port Import/Export

Door to Port Import/Export

Port to Door Import/Export

Door to Door Import/Export

HIGHLY INTERATIVE


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Analyzing Beyond Trades

Equipment

Temp Control

Container Size (20,40,45)

High Cube?

Carrier Type

NVOCC

Spot

Shipper Attributes

Shipper Size

Product Value

Fees and Surcharges

Inland Costs

Peak Season Surcharge

Bunker Programs

Ocean Cost Drivers


$0

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South China to Long Beach

All South China to Long Beach

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20FT

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Demonstrating Complexity Benchmarking Rates

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20FT

40FT HC

45FT

Validation

Validation

Cost Drivers INLAND MOVES

CARRIER vs. NVOCC

SPOT vs. CONTRACT

TIME PERIOD

VOLUME DISCOUNTS

PRODUCT VALUE

PEAK SEASON ECONOMETRIC OUTPUT

40FT DRY CONTRACT CARRIER 2010Q3 3,033.00 $

TEMP CONTROL ($/CONTAINER) 1,127.84 $

20 FT ($/CONTAINER) (299.87) $

45 FT ($/CONTAINER) 378.38 $

HIGH CUBE ($/CONTAINER) 77.60 $

NVOCC ($/CONTAINER) 178.61 $

SPOT MARKET ($/CONTAINER) 396.38 $

VOLUME DISCOUNT ($/ANNUAL VOL) (0.34) $

2009 Q4 MARKET ADJUSTMENT ($/CONTAINER) (1,250.79) $

2010 Q1 MARKET ADJUSTMENT ($/CONTAINER) (935.79) $

2010 Q2 MARKET ADJUSTMENT ($/CONTAINER) (567.37) $

ORIGIN INLAND ($/MILE, >=250 MI) 0.99 $

ORIGIN INLAND ($/CONTAINER, <250 MI) 337.85 $

DEST INLAND LONG BEACH - CENTRAL US ($/MI) 0.74 $

DEST INLAND LONG BEACH - SOUTH EAST US ($/MI) 0.91 $

DEST INLAND LONG BEACH - NORTH EAST US ($/MI) 0.54 $

------- ADJUSTMENTS --------

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Today’s Agenda






Q&A


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Geography: Trade Summary to Lane Detail

Which lanes contribute most to above/below market position?

How is market position distributed across all lanes?

Trends over Time: Market Position by Company, Industry

How is market position changing over time?

How is my industry impacted?

Providers: Carriers/NVO Statistics

How are results aggregated at the SCAC level by mode?

Who contributes most to above/below market position?

ComPair Data: 14 Containership Supply and Transit Time Reports

Delivery Schedule: Twice Annually

Data Collection: January 1 – February 1 and July 1 – August 1

Reporting: September 1 and March 1

Ocean FMIC Deliverables


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Strategic Intelligence and Collective Knowledge

Definitions: BI vs. Market Intelligence

What is happening in the market?

How is my organization/industry impacted?

How should it be navigated in the future?

Impact

Credible Evidence for Better Insight

Focused Contracting and Negotiating Strategies

Improved Partnerships

Augmented Organizational Awareness

Ocean FMIC Opportunities

Freight market intelligence supports

business intelligence and drives strategy.


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Today’s Agenda






Q&A

Click to edit Master title style Life Cycle of Transportation Sourcing Event

These areas get all the focus…

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Post-Awarding

Scenario Analysis DATA

…but these areas have the biggest impact on actual savings realized.

Rate Collection & Communication

Getting Ready

Click to edit Master title style Typical Sourcing Process

GETTING READY

1 – Project Documents: Project Plan and Task List

2 – Network Summary: Summary of Flows, Lanes, Problem Areas, and Historical

Cost

3 – Carrier Summary: Summary of Geographic Coverage by Carrier / Carrier Size

4 – Negotiation Package: Text Document and Data File of Service and Volume

Requirements, Carrier Questionnaire

RATE COLLECTION

5 – Collect Carrier Quotes: Leverage Web Technology to Distribute Bid Packages,

Support Carrier and Collect Carrier Proposed Rates

SCENARIO ANALYSIS

6 – Response Analysis: Review Carrier Responses and Run Scenario Analysis

7 – Subsequent Round Response Package: Notification of Target Rates and

Current Competitive Position in the Process

8 – Awarding Results: Summary of Awarding Volumes and Cost by Carrier and

Lane Details, Final Negotiations and Adjustments of Lane Assignments

POST AWARDING

9 – Award and Contract Communication: Finalize Routing Guide, Execute

Contracting Process with Carriers

10 – Update Systems: Import Rate Files into TMS and/or Freight Payment System,

Initiate Compliance Tracking, Audit Results

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CHAIN & CLIENT CLIENT ONLY

Steps that Leverage Freight Market Intelligence


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“Perishable” Capacity

Complex Pricing Structures and Surcharges

AMS, BAF, CHS, CAF, DDC, DDF, FAF, HAZ, IFD, DOC, THC, PAN, SEA, SEC, CWO, WCO, SUZ, …etc.

Numerous Routing Options

All Water, Mini-Landbridge, Alternate Ports

Door, Container Yard, Port on Either End

NVOCC Dynamic

Minimum Quantity Commitments and Dead Freight Penalties

Carrier Alliances and Discussion Forums among a Small Number of Providers

The Challenges of Ocean Sourcing


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Guiding Principles to Transportation Procurement

Transportation is not a commodity; it’s a service. 1

A transportation sourcing event is as much a relationship management process as a pricing event. 2

Going to market on a regular basis should be a healthy part of the relationship management process. 3

Market intelligence is a necessity in today’s volatile transportation markets. 4


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Today’s Agenda






Q&A

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Confidential

Overview

Petco… where the healthy pets go

Petco is a leading pet specialty

retailer that provides the products,

services and advice that make it easier for our

customers to be great pet parents.

Everything we do is guided by our vision:

Healthier Pets.

Happier People.

Better World.

History • Founded in 1965

• 1,100+ stores serving all 50 U.S.

states

Physical Network Flow • 10 Distribution Centers: 4 MDCs, 6

RDCs

• e-Commerce fulfillment

• Import ~1800 FEUs, both EC & WC

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Confidential

Challenges for the import supply chain

1. Cost reduction without compromising service or increasing variability

2. Be able to quantify the cost/service trade-offs

3. Support the corporate objective to reduce inventory

4. Continue to expand Direct Import program

5. Maintain high visibility on orders and proactively manage shipment

events

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Confidential

Ocean freight sourcing & optimization

Consortium bid process

• 5 participating Shippers, 15 carriers received the RFQ for 12,500 FEU’s across 6,000 + lanes

• Operate as BCO shippers with direct carrier contracts

Utilize a third party consultant (Chainalytics)

• Utilization of leading bid optimization technology and solid ocean sourcing experience

• Well organized and professional approach established high credibility with carrier community

• Ran approximately 78 “What If” scenarios to optimize carrier award allocations by rates and

service

Use of Benchmark data

• Being a smart buyer means going beyond a stack of industry trade articles and dinner with sales

reps

• First time we had actual market data for comparison against current baseline rates and spend

• Ability to have high quality, reliable data as we determined aggressive, but fair ‘target’ pricing

• Focused our effort on top volume lanes where bid rates were relatively far off the market

• High confidence in our negotiating position with carriers

Results

• Savings on all top priority lanes across all participating Shippers

• Ability to report out the savings opportunity cost vs. selection of reliable service


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Today’s Agenda






Q&A

Confidential

Thank you!

For more information, please contact:

Mike Hane Sr. Director, Business Development (678) 384-3581 [email protected]

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