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Transcript of Microsoft Word - Trans mgmt Study report out
Advancing the Science of Distribution 1 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Supply Chain Systems Laboratory
3367 TAMU, Texas A&M University,
College Station TX 77843-3367
Phone: 979-458-4389 Fax: 979-458-3597 http://supplychain.tamu.edu
Transportation Benchmarking Survey
A Study by: Sponsored by:
&
Advancing the Science of Distribution 2 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Transportation Benchmarking Survey
Overview
Companies in industrial supply share similar
goals related to transportation: manage
costs and improve customer service. They
do this efficiently and effectively.
Transportation has major implications to
industrial suppliers both as a cost and
service component of their business. As an
operating expense, transportation is
typically one of the largest expense items
on the income statement. As a part of the
business, transportation is the first and last
link in the supply chain ensuring that the
right product is received and then delivered
to the right place at the right time.
FedEx, the Industrial Supply Association, and
the Supply Chain Systems Laboratory at
Texas A&M University recently conducted a
transportation benchmarking survey
targeting companies that move product
through the industrial distribution supply
chain. The survey targeted companies that
had a definite understanding of the
transportation function. While the survey
was available to anyone willing to
participate, the first page of the survey
requested answers to technical questions
related to transportation, thereby
eliminating many without the data
necessary to analyze their transportation
function. The survey was taken from both
phone interviews and an online survey.
[Please note: The survey findings are not
statistically significant. Therefore, analysis
and comments implied in the report are for
the participating companies and not for
the industrial supply community as a whole.]
The survey goals were to:
• Understand current transportation
issues and concerns in industrial
supply
• Benchmark the transportation
performance of industrial suppliers
• Highlight key traits among leading
industrial suppliers
Executive Summary
This transportation report for industrial suppliers highlights the
key findings of the survey conducted for ISA by FedEx and
Texas A&M University. The study focused on cost, haul
characteristics and modes, metrics and concerns, and issues
facing transportation personnel in industrial suppliers.
There were four key findings from the study:
1) Transportation cost is of paramount importance.
Cost is the top concern of the transportation
function now and for the next three years,
superseding customer service and reliable delivery
times. Cost is also the most important factor in
choosing a transportation provider.
2) Outbound delivery haul characteristics will remain
comparable to today’s levels.
According to our survey participants, today short
deliveries (less than 50 miles) are the largest share of
outbound deliveries and are expected to be the
largest share in 2008.
3) Technology investment should be leveraged.
Technology has finally come to transportation as
many are now on some sort of shipping system.
However, the majority of respondents do little more
than process orders or pass along invoices and
MSDS sheets. Far fewer use IT for any other function
including tracking carrier performance.
4) Companies with a formal strategic plan for the
transportation function outperform.
The data from the survey was analyzed, and one
variable was a key indicator of both a low
transportation cost and a high customer service
level: a plan for the transportation function. Those
survey participants with a transportation plan
reported lower transportation costs as a percentage
of revenue and a higher on-time delivery rate than
those companies not having a plan. Compounding
these findings is the fact that companies with a
transportation plan had on average more
movements of product from supplier to customer
than those companies without a plan, which should
have resulted in higher transportation costs.
Advancing the Science of Distribution 3 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Transportation cost is the primary issue and concern
Figure 1 – Factors in Choosing a Carrier
0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16
Relative Rank
Cost
On-time Delivery
Damage Rate
Pick-up Times
Geographic Coverage
Carrier Flexibility
Shipment Tracking
Shipment Security
Invoice Processing
Financial Condition
Technical Capabilities
Factors in Choosing a Carrier
Figure 2 – Top Concerns over Next Three Years
0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16
Relative Rank
Cost
On-time Delivery
Damage Rate
Pick-up Times
Geographic Coverage
Carrier Flexibility
Shipment Tracking
Shipment Security
Invoice Processing
Financial Condition
Technical Capabilities
Factors in Choosing a Carrier
When participants in the survey were
asked to rank the importance of
factors used when choosing a
transportation provider, cost was the
highest ranking response. When
participants were asked to rank the
top concerns of the transportation
function over the next three years,
again cost was the top response.
Figure 1 and Figure 2 illustrates the
responses of the survey. These are not
surprising results, especially in a time of
rising costs like fuel prices and
healthcare.
After cost, participants ranked the
importance of factors used when
choosing a transportation provider in
the following order: on-time delivery,
damage rate, pick-up times,
geographic coverage, carrier flexibility,
shipment tracking, shipment security,
invoice processing, carrier financial
condition, and carrier technical
capability.
After cost, participants ranked the top
concerns of the transportation function
over the next three years in the
following order: customer service,
reliable delivery times, information
technology, monitoring carrier
performance, shipment tracking, fleet
and driver management, and
automated invoicing.
Cost ranked the highest in the two sets
of responses, but customer service and
related issues were important as well.
In other words, in the struggle between
cost and service level, survey
participants believed their customer
service level is good, and they need to
focus on bringing costs down to either
increase their value proposition and
win new business or to increase their
own profitability.
Advancing the Science of Distribution 4 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Figure 3 – Haul Characteristics
Figure 4: Use of Information Technology
Haul Duration expected to stay constant
Some of the participants in the phone surveys
addressed a concern of a possible increase in
haul durations. Therefore, participants were
asked to indicate the percentage of current
outbound deliveries in three haul durations;
less than 50 miles, 50 to 200 miles, and greater
than 200 miles. Participants were then asked
to indicate how these percentages might be
different in two years. Although some
concern about increases in haul duration
were addressed, on average participants in
the survey believed virtually no change in
haul duration would take place over the next
two years. See Figure 3.
Technology in transportation is underutilized
Although many companies use information
technology in their transportation function,
many are using it for only basic
functionality. Seventy-one (71%) reported
the use of the internet to share documents,
this is little, if any more than email. Only 29%
of participants indicated the use of
information technology in load plan
optimization, 26% in routing and scheduling,
24% in in-transit tracking, 21% in use of EDI,
and 6% in fleet maintenance systems. See
Figure 4.
Another indication of a low use of
technology is the small use of various
metrics to track carrier performance.
Although 74% of participants use customer
complaints as a metric of performance,
only 65% use invoice accuracy, 47% use
late deliveries, 36% do not track
performance, 26% use pick-ups as
scheduled, and 18% use other metrics. See
Figure 5.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Internet to Share
Documents
Plan Optimization Routing Intransit Tracking EDI Fleet Maintenance
Use of Information Technology
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2006 2008
Haul Characteristics
Less than 50 Miles 50 to 200 Miles More than 200 Miles
Advancing the Science of Distribution 5 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Figure 5: Metrics Used to Track Carrier
Performance
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Customer
Complaints
Invoice Accuracy Late Deliveries Don’t Track Pick Ups As
Scheduled
Other
Metrics Used to Track Carrier Performance
Cost is a top factor in choosing a carrier, and
carrier costs are a large component of
transportation cost, but surprisingly, carrier
performance is not monitored or tracked.
According to the survey, 52% indicated costs
associated with carriers represented between
76% and 100% of the total transportation cost.
With technology, these metrics can be
automated, giving companies a better
picture of customer service delivered
compared to price paid. An increase in the
use of technology can increase efficiencies
throughout the transportation function.
A Formal Strategic transportation Plan is
associated with better performance
As noted cost is of paramount concern to
industrial supply companies, but all
companies have that concern and focus on
being as efficient as possible. However, one
objective of the survey was to find the one or
two things that industrial companies do to
give them a competitive advantage. The
answer was not a practice or policy, but a
plan. Those companies (82%) that had a
transportation plan reported lower cost as a
percent of revenues than those that did not
(62%). See figure 6. These costs included
carrier and all third-party logistics costs,
transportation labor costs, and other costs
related to the owned or leased fleet of the
surveyed companies. In addition, 82% of
participants with a transportation plan
reported on-time delivery service in the 76% to
100% range, versus 71% of those without a
plan. (see figure 8) Although not dramatic,
combined with the cost statistic above, it
does show that service is not sacrificed for
lower transportation cost in these companies.
Cost as a Percent of Revenue Without a Transportation Plan
62%
25%
13%
1 - 5% 6 - 10% 11%+
Cost as a Percent of Revenue With a Transportation Plan
82%
9%
9%
1 - 5% 6 - 10% 11%+
Figure 6: Cost as percent of Revenue
Advancing the Science of Distribution 6 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Figure 8: Percentage of On-time Delivery
Figure 9: Carrier Performance Tracking
Figure 10: Number of Carrier Meetings
Please note, the survey only indicates a
correlation between low cost/high service
level and a plan. The data is not
conclusive on a cause-and-effect
relationship. The survey results do not
determine if having a plan leads to lower
cost and higher service levels or if having
low costs and high service levels leads
companies to create a plan as they try to
look for that next level of improvement.
Some other attributes of companies with
a plan versus those without were that
they tracked carrier performance (See
figure 9), they held more meetings with
their carriers (see figure 10), they used IT
more (see figure 11), and the
transportation function managers had
more input into other areas in the
organization (see figure 12).
The conclusion is that more transportation
personnel in companies with a plan are
becoming more involved than “just
shipping”. They are being tasked with
strategic issues as it relates to the supply
chain, monitoring and getting results,
which are lowered costs and increased
service levels.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Yes No
Carrier Performance Tracking
With a Plan Without a Plan
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1 - 25% 26 - 50% 51 - 75% 76 - 100%
Percentage of On-time Delivery
With Plan Without Plan
0%
10%
20%
30%
40%
50%
60%
70%
80%
1- 5 6 - 10 11 - 20 20+
Number of Carrier Meetings
With a Transportation Plan Without a Transportation Plan
Advancing the Science of Distribution 7 Visit: http://supplychain.tamu.edu
Supply Chain Systems Laboratory, Industrial Distribution Program, Texas A&M University, College Station, TX
Figure 11: Use of Information Technology
0% 10% 20% 30% 40% 50% 60% 70% 80%
Internet to share documents
Plan Optimization
Routing
Intransit Tracking
EDI
Fleet Maintenance
Use of Information Technology
With a Transportation Plan Without a Transportation Plan
Figure 12: Transportation Management involvement in
Other Functions
0% 10% 20% 30% 40% 50% 60% 70% 80%
Warehouse Management
Inventory Management
Purchasing Initiative
Manager Design Packaging
Manager Design Transportability
Transportation Manager Involvement in Other Functions
With a Transportation Plan Without a Transportation Plan
© 2006, Supply Chain Systems Laboratory
For more information please contact:
Dr. F. Barry Lawrence Drew Satherlie
Harvey Hubbell Professor in Industrial Distribution, Durable Distribution Industry
Director, Supply Chain Systems Laboratory, FedEx
Program Coordinator, Industrial Distribution Program. 30 FedEx Parkway,
2nd Floor Vertical
Phone : 979-845-1463 Collierville, TN 38017
Mobile : 979-574-4178 Work: 901-263-8403
Fax : 979-845-4980 Fax: 901-263-6740
Email : [email protected] E-mail: [email protected]
Conclusion
The survey reported some interesting facts
about transportation management in the
industrial supply chain. All of the
companies participating in the survey are
leaders in their field, some are world class.
No matter how you slice the data,
companies share similar concerns and
issues about the transportation function.
Cost is the top concern, followed by
customer service issues, then by
additional value added aspects of the
transportation function. Haul
characteristics are expected to stay the
same on average over the next two
years. The majority of the companies in
the survey are not using technology to
the extent possible. Some distinctions can
be drawn between companies in the
industrial supply chain as related to
transportation. Companies indicating the
existence of a transportation plan for the
transportation function have a better cost
structure, have better customer service,
and participate in more value added
aspects related to the transportation
function as well as other facets of the
organization. A formal transportation
strategy should be a part of the business
strategy for any company in this channel.