ORIGIN CONSOLIDATION

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1 THE RIPPLING BENEFITS OF ORIGIN CONSOLIDATION We ve all heard the axiom about getting started on the right foot. When applied to your supply chain, purchase order fulfillment can inadvertently influence your entire supply chain, from the vendor s door to the final destination. Hard costs, such as freight, work force productivity and customer service all flow from the way purchase orders are handled at origin. Control product from its origin and you can realize costs savings. Gain visibility starting at the factory and you can enhance your ability to plan. Origin consolidation gives you this control and visibility, as well as rippling benefits throughout your supply chain. WHAT IS ORIGIN CONSOLIDATION? Origin consolidation is the coordination of purchase orders and vendors at the place of purchase. It includes: Managing the fulfillment of purchase orders Physically receiving products Consolidating shipments at a predetermined facility Forwarding those shipments using the most effective and efficient transportation modes Staying informed every step of the way. When the service performs to expectations, you, the purchaser, maintain control over the entire process. Key business rules, such as shipping-window parameters, and exception management practices are determined in advance, and then executed via a robust account management and customer service function. miq.com

2 WHAT ARE THE BENEFITS OF ORIGIN CONSOLIDATION? Typically, benefits are first seen in reduced ocean freight and airfreight transportation costs. By consolidating shipments from multiple vendors, you can maximize container utilization. Rather than moving less than container loads (LCL), you build full container loads (FCL) or use larger containers (i.e., move up from a 20-foot container to a 40-foot container, or from a 40-foot container to a 45-foot container).doing so usually results in a lower cost per piece. This volume or weight cost improvement also applies to airfreight. By increasing shipment sizes, you can achieve higher weight breaks, and incrementally lower transportation costs. With origin consolidation, you have the control and visibility to prepare shipments at origin for their final destination. This enables you to eliminate or reduce LCL destination delivery charges. Multiple shipments can move directly from the container yard (CY) to their destination, skipping the container freight station where LCL cargo is devanned, sorted and staged for pickup by multiple ground carriers. By consolidating shipments you also reduce the number of customs entries and all corresponding fees. Multiple FCL boxes can be included on a single ocean bill of lading. Also in a consolidation program, a forwarder s cargo receipt (FCR) can satisfy legal requirements for a letter of credit. The BOL travels outside of the international banking network and along with the other documents required for customs clearance. This minimizes delays in freight release and helps you to keep products moving on schedule. CARGO FLOW WITHOUT CONSOLIDATION Customer C F S Vendors LCL Shipments Deliveries Destination Shpt booking Shpt approved Cargo flow

3 CARGO FLOW WITH CONSOLIDATION Customer MIQ Consolidation Warehouse FCL Shipments Carrier CY Deliveries Destination Vendors Shpt booking Shpt approved Cargo flow Saving on transportation by consolidating shipments is certainly desirable. However, there is a wide range of benefits throughout the supply chain that can be derived by leveraging origin consolidation capabilities. With origin consolidation, you can view your complete supply chain in one place. Visibility to purchase orders before they are shipments makes it easier and more cost effective to plan the flow of product. For example, slow-moving items can be purchased in lower quantities without sacrificing transportation savings. Since cargo moves on purchaser-defined rules, delivery schedules attain greater consistency and reliability. This allows for greater control over inventory levels, with the potential to lower inventory-carrying costs and increase inventory turns, while virtually eliminating the risk of stock outs. This level of visibility and control lets you optimize personnel productivity, too. Dock staffing decisions are simplified when there are no surprises on shipment contents and delivery schedules. Administrative personnel have fewer shipments to track. And since containers are built at origin, there is less handling of shipments, which means less risk of pilfering and damage, and less burden on administrative personnel to file and manage claims. In addition, some warehouse locations perform value-added services in addition to freight consolidation. Kitting, palletizing, and custom labeling are examples of services which can be done cost-effectively before the shipments ever leave the country of origin.

4 WHAT DOES IT TAKE TO IMPLEMENT ORIGIN CONSOLIDATION? Origin consolidation requires a significant investment in computing technologies. For all but the very largest companies, this usually proves cost prohibitive. Fortunately, there are service providers that design, implement and execute successful origin consolidation programs. While every business is different, the implementation timeframe usually runs 60 to 90 days. When done properly, the process does not disrupt business operations, and the benefits are realized immediately. Similar to selecting other providers, it is important to start with a clear understanding of the capabilities the provider is technically able to offer. A robust and fully integrated service offering will deliver maximum benefits to your supply chain. Services to look for include: Purchase order management This suite of services gives you control of your inbound product flow. It allows you to validate order accuracy; create shipments based on purchase order dates, quantities or other criteria; and book transportation in accordance with predetermined shipping parameters. In addition, some purchase order management technologies can support a variety of data exchange formats (e.g., EDI, XML, Flat file) and integrate with multiple enterprise resource planning (ERP) systems. Achieve complete product visibility by event with the ability to manage the entire supply chain by exception Manage across time zones, languages, cultures and borders Find factory, product and production schedule information Access important order and fulfillment data before an order is shipped Increase control and lower costs due to early notifications. Vendor management The objective of vendor management services is to ensure your vendors remain compliant with your business rules. SOPs are created in collaboration with your vendors and then managed on a purchase order and/or SKU level. Scorecards are used to monitor and report compliance, including loadability, ship/cancel dates and carton dimensions. Manage shipment windows, documentation, container sizes and contain fill requirements to agreed upon terms Identify problems early in the supply chain, when adjustments are easier to implement View purchases by commodity, vendor, container size, etc. for enhanced decision making. Consolidation services Network optimization and distribution management can augment the benefits of shipment consolidation. Network optimization enables multi-origin to multi-destination routing, modal conversions and optimal route design. Distribution management supports consolidation activities, manages ground transportation, and provides resources for value-added services such as samples, kitting, garment-on-hanger packing, pick and pack, and labeling. Access local in-country expertise and knowledge Identify opportunities for network optimization Consolidate loads based on business rules to maximize container utilization Prepare shipment at origin for final destination Reduce overall costs without impacting service.

5 Account management Responsiveness, accountability and easy access are the hallmarks of a good business relationship and continual customer satisfaction. Operationally, this means a single point of contact, hands-on tracking of KPIs and SOP management, and rapid resolution of issues. Reports are generated for the timely monitoring of ship dates, transit times, inventory in transit and delivery dates. Mechanisms for continuous improvement, such as business review meetings and total-landed cost analysis, are considered standard procedures. Establish standard operating procedures based on solution design Share industry trends and best practices Make strategic supply chain decisions based on reports and tools Track and analyze key business metrics to improve processes Use milestone level performance management. Other services Other capabilities to look for in a consolidator, such as international freight forwarding, global trade management and customs brokerage services, can help streamline your operations and simplify your management of foreign shipments. Author and lecturer Stephen Covey is famous for promoting the concept of beginning with the end in mind. His advice is just as useful for highly effective supply chains as it is for people. Assert greater control over vendors and purchase order management and experience rippling benefits throughout your supply chain. NEED MORE INFORMATION? To learn more about the benefits of origin consolidation for your business, contact MIQ Logistics at one of the numbers below or us at Asia Europe +44 (0) North America Latin America +51 (0) ABOUT MIQ LOGISTICS MIQ Logistics is a global logistics company headquartered in Overland Park, Kan., and with offices in North America, Asia, Europe and Latin America. MIQ Logistics enables companies to improve their transportation network and overall supply chain efficiency by offering flexible logistics solutions supported by Web-native technology and global logistics management capabilities. Visit miq.com to learn more. miq.com Copyright 2012 MIQ Logistics

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