04/08/20232
Agenda
• LPP Introduction
• LPP Services Overview
• Parcel Contract Negotiations
Parcel Shipping Overview
Primary Objectives/LPP Approach
Methodology
• Key Deliverables/Timing
• Data Requirements
• Additional Considerations
• OPTICS Demonstration
• Wrap-Up/Q&A
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LPP Introduction
• Industry Expertise
20+ years of supply chain operations experience
Proven P&L, consulting and operations success
• Process Expertise
“You can’t fix what you can’t see” Leverage expertise each stage of ‘The
Decision Cycle’
• Technology Expertise
Advanced data manipulation and performance analysis technology
Web-based business intelligence framework
See
Understand
DecideAct
Measure
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Proven logistics cost management services, including carrier and 3PL support
Carrier/3PL audit/payment services
Contract Negotiation services
Supply Chain data quality management
Consultative services to identify logistics opportunities and implement sustainable results
Fulfillment Network Strategy
Order/Carton Optimization
Parcel Zone-skipping
True continuous improvement and profitability analysis via OPTICS – our cloud-based BI platform configured uniquely for operations environments
Multi-source data integration
Cloud-based analytics
KPI monitoring and reporting
LPP Services Overview
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OPTICS enables Performance Strategy success at all framework levels
LPP Services Overview
Item-level data integration; multi-channel specific and customized logic/algorithms
Cloud-based analytics and consulting support
Performance Strategy Framework LPP OPTICS Service
Actionable Information/
Universal Access
Continuous Improvement
Profitable Growth & Service Value
Organizational Alignment
Report & Monitor
KPI
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G
U
LargerZone Bands
SmallerZone Bands
F
Parcel Contract Negotiations: Parcel Shipping Overview
Note: ‘reach’ of ground network is directly linked to the geographic location of the air hubs (minimize air volume actually flown).
Key Parcel Locations
UPS Primary Air Hub – Louisville, KY
FedEx Primary Air Hub – Memphis, TN
UPS Primary Ground Hub – Chicago, IL CACH
Optimal Area – Single US Distribution Point
G
U
F
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Key pricing factors:
• Volume (V): total packages shipped• Package Density (PD): weight per cubic foot of carton capacity• Delivery Density (DD): number of packages per shipment (unique origin to unique destination)
Cost Structure:
• Comprised of distinct operating elements:
Pick-up cost:10-20% of total cost (Key Factors: V, PD; also # of p/u locations) Line-haul cost: 20-60% of total cost (Key Factors: PD, V) Delivery cost: 20-40% of total cost (Key Factors: DD, V)
Key discounting factors:
• Volume: Important early; drives relevance within UPS in the form of ‘revenue’ Less important as you approach high volumes - reach ‘discount’ (profitability) ceiling
• Package Density: Somewhat important early, but rises in importance as volumes grow Drives highest cost segment: Line-haul; Key ‘Package Density’ threshold is 9.8 pounds/cubic foot
• Delivery Density: Moderately important at all volume levels Reduced delivery expense; increases profitability of accessorials/adjustments
Parcel Contract Negotiations: Parcel Shipping Overview
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Shipment Profitability
• Minimum charges can dramatically impact true/net discount or zone rate differences
• General speaking, carrier profitability increases ‘top left’ to ‘bottom right’ of rate chart
Zone
Rate
2 8 Zone
Rate
2 8
X
Zone
Wei
ght
$
$$$$
Non-linear Operating Ratio (OR)
• Carrier fees are not ‘linear’ relative to weight and zone• Increasing cost of line-haul drives greater relative increases at higher zones
Parcel Contract Negotiations: Parcel Shipping Overview
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Primary Objective:
• Provide maximum negotiation leverage through:
Detailed understanding of carrier objectives and negotiation approach Thorough analysis of current client volumes and future business needs Consideration for a positive post-negotiation shipper-carrier relationship
LPP Approach:
• Client maintains all direct carrier dialogue/negotiations
• LPP supports each of the following key components:
Negotiation strategy development, including ‘Key Terms’ sheet Overall project management Historical analysis and reporting requirements Cost/Benefit models (projected and final terms) Post-agreement impact monitoring (via OPTICS service if requested)
Parcel Contract Negotiations
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I. Key Deliverables/Timing (Calendar Weeks)
Initial Data Assimilation (Weeks 1-2) Shipping History Analysis (Weeks 3-6) Cost-Benefit and Operational Forecast Modeling (Weeks 6-8) Negotiation Strategy Workshop (Week 9) Negotiation Status Updates (TBD; typically 8-16 weeks) Final Negotiation Assessment (Upon agreed-upon contract)
II. Data Requirements
2 years of transactional data; prefer actual carrier invoice detail Relevant support data: order detail, sales forecasts, current/projected item profiles,
carton/packaging data, vendor/customer profiles Existing contract information
III. Additional Considerations
Single or multi-carrier negotiation? Impact of timing: can we get savings sooner if we negotiation sooner? Length of contract: what works best for client? For carrier?
Parcel Contract Negotiations: Methodology
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1. UPS “Base” Sample:
Constructed directly from UPS e-package transmissions Consolidated to package-level Customized components include:
• Origin Type/Name cleansing/coding• Accessorial cost visibility• Destination geo-coding
2. E-commerce ‘Order Performance’ Sample:
Existing LPP e-commerce client with full-scale “Order Performance” solution Complete integration of sales, promotion and shipping activity Category/Item-level product, shipping and total margin visibility
3. Benefits:
Shared visibility to key performance metrics and trends Opportunity identification: cost savings, service improvements, etc. Vendor compliance and project/implementation performance monitoring Improved negotiations leverage; understand cost drivers as well as the carrier does LPP consultative support:
• Multi-channel/e-commerce logistics operations experts• Virtual “performance analysis team”• Optional gain-shared based opportunity identification and implementation support
OPTICS Demonstration
Beyond transactions, we help drive your business
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Parcel Negotiation Summary
• Parcel shipping requires specific/unique expertise vs. other modes• It’s a large spend – on both a ‘net’ and ‘rate’ basis - that directly impacts the bottom-line• Negotiation Imperative: Know as much – or more – than the other party• Understand the carriers’ key financial/operational motivations• Make sure you’re left with a positive working relationship – you’ll need your carriers’
partnerships to drive continuous improvements that impact both the top and bottom line
So “Why LPP?”
• We have the talent, tools and experience to drive carrier contract negotiations• We specialize in small-pick, high-volume parcel shipping business environments• We’re not a transaction processing company… we’re a true ‘continuous improvement partner’
Thank you!
Wrap-Up/Q&A
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