Sharing best practices

by Carolyn Gruske

With the vast majority of supply chains reaching across international borders, moving raw materials and finished goods from one national jurisdiction to another is a constant challenge. It’s one of the issues chief supply chain officers frequently find top of mind.

Aberdeen Group, a Boston, Massachusetts-based research company, surveyed senior business, supply chain and logistics executives in over 160 companies around the world to discover some of their best practices for dealing with the issues involved in cross-border shipping.

When asked about the key pressures they’re facing when looking at international goods movement, the majority of respondents, 70 percent, said the volatility of fuel costs and surcharges is their most pressing concern. As well, 54 percent said there’s an increasing awareness in their organizations about the cost and service impact transportation can have.

They told Aberdeen that they’re confronted with a number of transportation service pressures, including customers demanding faster and more frequent deliveries (33 percent), increased sourcing complexity due to globalization (33 percent), and carrier service and related challenges (31 percent).

Metrics

Aberdeen has concluded that the strongest and best-performing supply chains are paying more attention to five important key performance indicators (KPIs) which are helping them achieve better service while balancing costs.

According to the report’s findings, the best-in-class organizations do a better job in reducing their baseline freight spend year over year, getting their carriers compliant with contract requirements on total cost, and helping their carriers meet service level agreements (SLAs) and routing compliance requirements.

They also take a shorter time to process and pay freight invoices (6.1 days on average for top-performing companies, compared to an industry average of 9.8 days and the 14.3 days taken by the organizations with the worst performing supply chains).

As well, the best supply chains perform more audits of their transportation invoices, with the top firms scrutinizing 77.4 percent versus the industry average of 51 percent.

Automation

One of the trends the study noted was the move toward improving efficiencies through automation. Forty-eight percent of respondents said they’re working to “optimize or automate their ability to source and negotiate freight rates and award contracts to the optimal carrier”. Forty-five percent said they’re trying to “automate data collection and analysis on freight spend and/or updates to rate tables”. Other efforts are underway to “collaborate and synchronize data with carriers, suppliers, and trading partners” (40 percent), “tie transportation, carrier selection, audit and payment together in a single process” (34 percent) and improve the “internal ability to mange contract compliance after the bid process” (26 percent).

Collaboration

Three-quarters of the survey’s respondents told Aberdeen collaboration with internal and external partners was “integral to optimizing their supply chain strategy”. Through collaboration, especially when paired with near real-time monitoring, they say it is easier to obtain and track true costs of all items, including variances in fuel surcharges.

Top supply chain leaders also said they engage in collaborative multi-round bidding, which leads to securing best overall rates and bundling low volume lanes, which can result in additional cost savings. These types of companies are also more likely to use electronic bid assistance.

Additional approaches

Aberdeen found having a centralized spend platform to collect and share data across the entire enterprise was one of the most important things a business can to do save money. According to the study, “some companies uncovered as much as 36 percent in cost savings directly applicable to cross-region optimization initiatives.”

Other efficiencies and performance gains came from improving processes such as automating pooling and hub-based routing, planning of backhauls for delivery, and utilizing multi-origin to multi-destination routing and consolidation.

FROM THE SEPTEMBER 2013 MM&D PRINT EDITION