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Case Study: Intermodal v. Boxcar

An Operations Manager’s Win

Meet Jerry

Our friend Jerry is the operations manager at a large beverage distribution company. He was frustrated and unsure of his department’s efficiency when we met. You see, the logistics behind the wine and spirits industry is nothing to sneeze at. Jerry was jumping through hoops (picture the kind with fire) to keep the beverages flowing, and to be honest, he didn’t know how long he could keep it up.

All Boxed In

Cash flow and inventory management. Those were Jerry’s biggest concerns. He was using a boxcar process that made Einstein’s Theory of Relativity seem like child’s play. Product was coming in from multiple suppliers, to be placed into a single boxcar, then being warehoused and loaded onto four different trucks for distribution. That’s a lot of loading and unloading — which meant a lot of unnecessary risk.

It also meant the challenge of ordering enough from suppliers to get that boxcar full, but not ordering so much that you can’t sell it, and Jerry’s company couldn’t sell that extra product. So, they did not meet this efficiency challenge and the costs were adding up.

That wasn’t the only expense. Low visibility of the supply chain and having to use a crystal ball to predict what might need to be ordered in 45 days meant Jerry’s availability was limited. His time was spent manually checking into the moving parts of the company’s sensitive supply chain. He couldn’t risk an unforeseen missed delivery appointment that could blow timelines. Both Jerry and his team were putting in unbudgeted overtime just to keep up.

Jerry knew if he didn’t get things on track fast, he and his team would burn out.

A Helping Hand

While Jerry was seeking solutions, he met Adam with Agforce. Jerry knew he wanted to partner with a company built on honesty that he could trust and, above all, they would meet his expectations (effectively lowering his stress level).

Before Jerry ever talked about his burdened supply chain, Adam asked him about what he found important. Jerry was tickled with the direct and forthright communication as their relationship developed. Confidence grew in Adam and the Agforce team. Commitment to truly serve him as a client was apparent in the knowledge Adam shared and interest he showed in Jerry’s personal success.

The Partnership and the Plan

Once Jerry and Adam finished their initial discovery, the Agforce team went to work designing a plan to simplify processes for Jerry. He was asking for the ability to feel good about the decisions he made so he could dive into other operational areas in need of attention.

To get him that level of confidence, we encouraged him to consider intermodal. With Jerry’s boxcar experience, it did not take long for him to be comfortable with the idea. The Agforce team proposed a new intermodal process that eliminated the need to fill an entire boxcar and nixed a warehouse stop. The plan also included broader cost savings than transportation alone. It would eliminate the need for excess inventory, in turn boosting cash flow and reducing the need to pay interest to the bank on net 30 terms.

Crisis Averted

Jerry took the proposed solution back to his team. With all stakeholders on board, he set to work with Adam to get the plan underway. He was pleased to find his new partners steadfast and true to their word. Implementation was an organized, smooth transition with world-class customer service supporting him through the entire process.

He was no longer frustrated and enjoyed compliments for seeking out a solution with a solid transport service.

Successful Partnership

The partnership between Jerry and Adam and the Agforce team freed up Jerry’s time:

  • Provided better visibility to freight
  • Allowed some inventory flexibility
  • Sured up capacity
  • Decreased lead time for ordering
  • Decreased transit time

It also eliminated long lead times and long transits. In time cash flow improved. The company’s overtime payout, to Jerry’s now incredibly efficient team, became almost non-existent. Jerry had saved his company’s bottom line and most days now resembled a walk in the park.

The Agforce team also celebrated the way they worked together. They had saved Jerry’s sanity, and did it in a manner that reminded them they work with the smartest people in the industry. Adam sure knows that without those hard working experts by his side every day, his friendship with Jerry may have faltered.

 

Curious where your company could you find efficiencies? Let’s partner and create your business’s solution. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

 

Cargo Theft: Is Your Freight at Risk?

A suspected crew of cargo thieves followed a truck from a local warehouse. The truck didn’t go far, parking just a couple of miles away. Detective Gerardo A. Pachuca of Los Angeles County Sheriff’s Department’s Cargo Criminal Apprehension Team (Cargo CATs) had the crew under surveillance. He reached out to the driver to let him know the thieves were tracking him — that shipment remained safe. The following week on the same route, and same parking lot, the trailer was left unattended. The thieves had their window. They took the entire trailer.

In the same article by Transport Topics, Pachuca warned about the sophistication level of cargo thieves. They are organized often working as a crew, where they stake out specific goods and their corresponding warehouses. Here’s what you should know.

Food and Beverage Freight is at the Highest Risk of Theft

The joint 2018 Semi-Annual Global Cargo Theft Intelligence and Advisory Report published by the TT Club, leading provider of insurance and related risk management services for the logistics industry, and BSI Supply Chain Services, leading global provider of supply chain intelligence, auditing services, audit and risk management compliance solutions and advisory services, revealed large growth in cargo theft and crime, reporting 24 percent of global cargo theft resulted from violent truck hijackings, with 27 percent of those incidents targeting food and beverage.

North American Cargo Theft Statistics

North America Cargo Theft
Credit: 2018 Semi-Annual Global Cargo Theft Intelligence and Advisory Report

  • 38 percent of thefts are by hijacking with theft of vehicle 25 percent
  • 82 percent of theft occurs in the truck modality compared to less than 7 percent by rail
  • Food and beverage are 34 percent of the stolen commodities, consumer products 18 percent
  • 66 percent of theft happens while cargo is in-transit and 11 percent while in warehouse
  • Mexico is top North American country for theft at 69 percent of all incidents, U.S. 22 percent

Cargo Theft Sophistication is Evolving

Scott Cornell leads Travelers Insurance transportation business and helped create its cargo theft investigation unit more than a decade ago. In this recent article, he talked through strategic cargo theft, which employs deceit and results in carriers and shippers unknowingly handing over their loads.

These thieves may pose as a carrier or broker, finding their target commodities and companies by matching them with the location of available cargo on public load boards. To steal the identity of legitimate carriers or brokers and bid on these loads, they may have posted fictitious loads where they can capture legitimate credentials during the bid process.

Friday afternoons, when companies are most pressured to get freight off the dock, may present the highest risk of falling victim to this strategy. The thieves hope the stress of getting the freight moving may lead to less scrutiny of credentials at pickup.

From double-brokering scams to all-out deception, shippers need to be cautious and aware. Cornell provided practices for shippers to help protect against strategic cargo theft including, “Work only with legitimate and licensed brokers that have strong controls in place for vetting carriers, ensuring their legitimacy and protecting cargo security.”

Are there additional safety procedures you should consider for your freight? Give us a call at 877.367.2324 or email us at inquiry@agforcets.com. We can talk about your current processes and identify risk. Let’s prevent cargo theft, together.

Prepare for an RFP in 4 Steps

As a large-scale shipper, you use a request for proposal (RFP) to put freight out for bid, typically on an annual basis, correct? You are smart. This process helps keep your current freight providers on their game and gives you the opportunity to evaluate the capability of newcomers. Here are four steps that will have you well-prepared for your RFP process:

1. Get Organized

Details. And lots of them. That is the basis of a good RFP. The homework you need to do is not only for the sake of line items in the RFP but also for the alignment of your internal team. You need to work together to define the ideal outcome of the process. Once you are in lockstep regarding what a successful RFP looks like, there will be numerous facts to gather and decisions to make. You should get a jump start on these:

  • Know your annual freight spend and volume
    • When you can, break your spend out by mode. This will help pinpoint your savings potential and give you data to measure against.
  • Profile your freight in detail
    • The particulars will help freight providers create tailored solutions for you. Document your freight’s handling requirements, load time, standard weights, pickup and delivery times. Providers will also want to know if you have driver-friendly facilities and how quickly you pay. It is also beneficial to document the efficiency of your check-in and check-out process.
  • Outline the full objectives of your RFP in your clear and concise bid package
    • This is where you define your expectations for the RFP. What do you hope to achieve? Freight services want to provide the information you are looking for. This will help both your organization and those invited to bid to act with intention throughout the process.  
  • Set the number of bid rounds
    • The number of rounds in the RFP process helps those bidding understand your communication cadence and informs their own strategy in regard to winning your business.

Pro tip! Gather visuals of the products you ship. Part of your job is to make your freight attractive to the service provider. They need to want to move your freight.

2. Determine the Participants

Your carrier strategy likely includes a mix of carriers and third-party logistics companies (3PLs) — small, large, national, regional. The tender percentage awarded to each is deliberate and likely based on the requirements of your freight. Bring this same thought process as you determine the invite list of your RFP. You want a good mix to help you thrive in a changing logistics landscape. Balance this group based on fit with your supply chain operations.

The RFP process is the perfect opportunity to evaluate your incumbent shipping services against potential new providers — how they compare on rates as well as overall fit in your strategy. Remember, these partners can make a large impact on how customers view your reliability. So, once you have your carrier mix determined, go ahead and prepare your list of hard-hitting questions:

  • How does our freight fit into your network?
  • Where will we rank among your clients in freight spend?
  • Are we aligned on KPIs?
  • Have you done X before?
    • Whatever your freight requires, make sure they have handled that situation in the past.

3. Establish a Benchmark

To determine your RFPs success, you have to know if it helped you hit your established goals. So, you need a baseline for comparison. There are a few ways you can accomplish this:

  • Gather historical data from your company
  • Reach out to industry trade associations that may share their knowledge
  • Work with an outside consultant

As you are compiling this data, be on the lookout for opportunities to optimize your transportation program. Maybe your RFP should consider modal conversion or the opportunities for lane aggregation.  

After a set time, once your new RFP is in place, look at the numbers in comparison to your baseline. Are they trending in the manner you had hoped? Preparing for measurement and analysis is a plan for success.

4. Outline RFP Administration

You will need to create a system of checks and balances for the RFP process to help secure the best outcome for your business. Define the communication pattern so you have a game plan to reach out to the participants after each round. We also advise an open line of communication with carriers and providers throughout the course of the RFP.

Pro tip! Do not provide target rates in your initial RFP. It could adversely impact the results and cause you to overlook providers that are a great fit with your operations.

After the RFP Process

You prepared and administered your RFP. Now what? Once your freight has been awarded, there is still more to do to get the trucks rolling. Onboarding calls are very important to make sure you are on the same page with each provider regarding service levels and volume commitments. You put a significant amount of your time and energy into the RFP, work to make sure it was worth the investment.

3PLs are a vital part of success in most supply chains. Your carrier strategy likely endorses a mix of 3PLs and asset-based carriers. We provide the value of strategy and solution that only a 3PL can. If our networks compliment one another, we will be a trusted resource to help your company succeed in hitting the goals of your RFP and beyond.

Submit your RFP to inquiry@agforcets.com.

What’s Driving the Trucker Shortage?

The U.S. trucking industry is short of drivers—about 50,000 short, according to an October 2017 estimate from the American Trucking Associations (ATA). The developing driver drought is a critical issue that has captured the attention of the trucking world: In an annual survey conducted by the American Transportation Research Institute, driver shortage ranked first among industry concerns.

A number of factors are contributing to the shortage, ranging from economic trends to demographic and regulatory shifts to the rigors of the job:

  • Freight volumes are on the rise, thanks to healthy commerce and a strengthening economy.
  • The average driver age for commercial truck drivers in the U.S. is 55, and 25 percent of current drivers near retirement age.
  • The trucking industry is having trouble attracting younger people to the profession. One issue is that prospective drivers must be 21 years old to hold an interstate commercial driver’s license. That typically means three years after high school, by which point many potential candidates have pursued jobs in other sectors.
  • A range of federal regulations—most recently the Elog mandate put in place in April—require truckers to track the time they work, which can impact productivity, and thus pay.
  • The long hours and requirements of the job can limit its appeal. Most drivers—especially newer ones—are on the road for extended periods of time, returning home only a few times a month. Adapting to life on the road (showering at rest stops, limited dietary choices, safety issues, and more) can make the job less appealing to some.
  • Drivers must pass a DOT (Department of Transportation) physical at least every two years. Some with specific health issues must do this annually. A lot of times the driver must pay for the physical out of their own pocket.
  • Sleep apnea and diabetes can disqualify a driver if certain criteria are not met.
  • Carriers cannot find drivers that can pass the required drug test at hire and then randomly throughout their employment.

The ATA estimates that because of industry growth and retirements, the trucking sector will need to recruit nearly 100,000 new drivers every year to keep up with the demand for drivers. The shortage is particularly acute in the long-haul, over-the-road truckload segment.

There are steps the trucking industry can take to help address the need for drivers:

  • Try to expand the demographic. For example, women currently make up only 6 percent of the truck drivers. Some observers see veterans seeking career transition after military service as another good potential source of prospective truckers.
  • Continue to boost driver wages. The national median for truck driver pay is $53,000, which represents a $7,000 increase from the previous year. For private fleet drivers, the pay increase is up $13,000.
  • Decrease time on the road. Trucking companies can address lifestyle issues of the profession by offering route options that are closer to drivers’ homes, reducing the long-haul lifestyle aspects of the job.

The truck driver shortage affects the entire economy and could have a significant impact on supplier costs and shipping delays. Agforce Transport Services monitors and tracks trucking industry developments like the driver shortage to provide informed consultation to customers.

Agforce specializes in customized transportation solutions for our customers’ specific business requirements. To learn more about how we can help address your company’s needs, contact us today for a free consultation. Give us a call at 844-713-6723 or email us at inquiry@agforcets.com.

Rail Price Spike: What You Need to Know

A capacity crunch in rail shipping is occurring earlier in the year than anticipated has the industry bolstering for substantial and sustained price hikes. Shippers should be aware of this trend. Rail prices are expected to continue to rise over the course of the year.

Market observers are pointing to fully booked rail lines on freight routes out of Southern California as an anomaly that indicates the trend, since the current level of demand typically doesn’t take hold until later in the year. Experts are anticipating unprecedented pricing peaks in rail prices in late summer and into the fall as many factors push more freight to railroads, including overall strong economic growth, a shortage of truck capacity, rising diesel prices, and reduced driver productivity attributed to the electronic logging device (Elog) mandate.

These factors, along with the capacity availability and reliability of intermodal shipping, are shifting the market:

  • Total domestic intermodal traffic expanded 7.4 percent year-over-year in the first quarter of 2018 (the strongest gain since the second quarter of 2014), according to the Intermodal Association of North America, as shippers that could not find truckload capacity turned to the rails.
  • The four-week moving average on U.S. intermodal is up 7.9 percent, according to the Association of American Railroads.
  • The Cass Intermodal Price Index rose 6.6 percent year over year in April to 141.9, close to the all-time record of 143.2 established the month before. The three-month moving average is up 5.9 percent.

With capacity so tight, shippers will need to be more proactive and flexible than ever, and look to lock up capacity as soon as it is available—especially smaller shippers that don’t have predictable volume and weren’t able to lock in capacity contracts earlier on. Those shippers will need to rely on the spot market to find capacity at a time when prices are at record highs.

All of that means shippers are likely to face a difficult year of negotiations and decisions. And in unpredictable markets like the current one, experienced partners and advisors are more important than ever. Agforce Transport Services monitors shipping markets closely and advises our customers how best to navigate the volatility that typically characterizes the market. We can help shippers navigate market fluctuations and better manage rate volatility by leveraging a wide variety of carriers.

Agforce specializes in customized transportation solutions for our customer’s specific business needs. To learn more, contact Agforce today for a free consultation. Give us a call at 844-713-6723 or email us at inquiry@agforcets.com.