SCHNEIDER LOGISTICS BIDDING STRATEGIES: Balancing Market Forces & Operational Needs APRIL 12, 2012

Transcription

1 BIDDING STRATEGIES: Balancing Market Forces & Operational Needs APRIL 12, 2012

2 MEETING OBJECTIVES To provide a behind-the-scenes view into the factors that drive bidding strategies and network solutions Focus areas include: Determination of Bid Timing Engaging the Right People Goal Setting: How to Achieve Operational Success Actions that Drive Competitive Pricing Enabling Value-Driven Decisions Safeguarding Your Savings

3 DETERMINATION OF BID TIMING

4 WHEN SHOULD I INITIATE MY BID? Two Approaches: Market Timing Regular Bid Cycle

5 HONEYWELL S BID STRATEGY Benefits to Honeywell Top Notch On-Time Performance High Acceptance Rate Among Primary Providers Reduction in Rate Increase Requests, Cost Impact Analyses, Replacement Plans, Routing Guide Changes Domino Effect Efficient Process for Renewing/Confirming Capacity Commitments Flatter Price Increase Slope Benefits to Providers Consistency Builds Confidence in Providers Abilities to Restructure Pricing/Capacity Commitments Based on Network Changes Emphasizes Partnership Process is Focused on Value, not Just Price

6 ENGAGING THE RIGHT PEOPLE

7 CROSS-FUNCTIONAL PROJECT TEAM Honeywell Key stakeholder/decision maker Responsible for executing the results (plants) Customer Service/Operations Knowledge of freight characteristics/operational requirements Familiar with service provider performance (acceptance, on-time %) Purchasing Knowledge of transportation market conditions/trends Maintain relationships with multiple providers; skilled in negotiation Project Management Secure resources for supporting the project Responsible for project milestones, process integrity

8 CHOOSING THE RIGHT PROVIDERS Start with the core service provider group (partners) Review scorecards; eliminate providers with poor performance Acceptance rate On-time pick-up/delivery percentage Claims Qualify new providers Equipment/mode types Asset/non-asset mix Regional needs

9 GOAL SETTING: How to Achieve Operational Success

10 GOAL SETTING Discuss bid goals/objectives early Goals should not just be price-driven Solution must also be operational Network changes Capacity Service

11 HONEYWELL S 2012 GOALS Identify Mode Conversion Opportunities Maintain High Service Levels Award to providers with proven track record of service excellence No brokers on hazmat shipments Transparency in Comparing Provider Solutions Standardization of fuel surcharge program and accessorials Ability to optimize between OTR and IM solutions (linehaul + mode-specific fuel surcharge) Financial Results Favorable Relative to Market Conditions

12 RESULTING ACTION ITEMS Bid Package Construction Ensure structure supports mode conversion analysis (to include transit days comparison) Solicit feedback from CS/Operations to ensure accurate/complete descriptions of lane/freight characteristics, operating hours, appointment types, special requirements (hazmat, e-track trailers, locking bars/straps, driver PPE, etc.) Standardize Accessorial Charges Solicit input from 4-5 core service providers to ensure pre-set values are fair/aligned with the industry Discuss Transportation Market Conditions/Trends Discuss Baseline Calculation Methodology Ensure apples to apples comparison between historical costs and bid costs Review Lessons Learned (Previous Bids) Schedule Weekly Project Team Meetings

13 ACTIONS THAT DRIVE COMPETITIVE PRICING

14 BEST PRACTICES Give providers visibility to the full network This allows your providers to change with you Be diligent in describing the lane/freight characteristics Present multiple avenues for bidders to learn about your operations Providers will assume worst case scenario when information is not disclosed; this has a negative impact on pricing Provide feedback Honeywell shares real-time feedback (rank of top 3, 4, 5, 6, >6) Timely feedback gives providers an opportunity to improve their chances of winning key lanes while the bid remains open Follow through on commitments Number of rounds Implementation date

15 PROVIDER EDUCATION Overview of Honeywell Organization, Products Bid Scope, Objectives (e.g., Mode Conversion) General Operational Requirements Unique Lane/Location Requirements Provider Expectations (e.g., Insurance, Service) Bid Requirements, Timeline Factors that will Influence Honeywell s Award Decisions

16 ENABLING VALUE-DRIVEN DECISIONS

17 THE VALUE TRIANGLE Service Ability to meet operational requirements On-time pick-up, delivery % Safety (Responsible Care, Safety Measurement System BASIC scores) Claims history Transit time Capacity Market/lane commitments Acceptance % Flexibility/reliability Cost

18 SCENARIO-BASED DECISION MAKING Goal is to maximize value at the lowest possible cost Use different what if scenarios to understand trade-offs: Mode Conversion (Yes/No) Intermodal Advantage (Neutralize FSC Programs) Block Brokers on Hazmat Shipments Give Advantage/Disadvantage Based on Service Best in Class X% Advantage Poor Performers X% Disadvantage Apply Bidder-Defined Capacity Constraints (By Lane, Market) 1 Primary Provider per Lane/Mode Responsible Care Advantage Limit Provider s Award (No More than $X)

19 MARKET MAKING Purchasing Manager leads the market making process (one-on-one rate negotiation and validation) after each round of bidding CS/Operations team is involved in the validation process Focus areas: Discuss significant volume gains/losses Validate provider s ability to service lanes Discuss recent service trends (if concerns put business at risk) Selectively negotiate rates

20 SAFEGUARDING YOUR SAVINGS

21 ACHIEVING A SEAMLESS TRANSITION Implement according to your timeline Allow providers at least 2 weeks to load rates and reposition equipment If dates change, be proactive in communicating new expectations Involve plants in the implementation preparations Plant buy-in is important; the plants are ultimately responsible for executing the new lane assignments Host on boarding meetings with new providers

22 COMPLIANCE / COST IMPACT REPORTING Commonly reported metrics include: Bid savings realized ($) Routing guide compliance (%) Cost impact of non-compliance Non-compliant loads by service provider Variance between contracted rate and amount paid Non-contracted (spot quote) shipments Mode conversion opportunities Expected lane volume vs. actual lane volume

23 COMPLIANCE / COST IMPACT REPORTING Benefits: Quantify realized savings following a bid Understand compliance to primary lane awards Use provider scorecards to understand the root cause of non-compliance: Tendered to primary provider, but turned down Tendered to incorrect provider Unexpected surge in volume (volume exceeded primary provider s commitment) View month-over-month changes to key metrics Identify opportunities for cost reduction

24 Q&A

25 PRESENTER INFORMATION Schneider Logistics Honeywell Performance Materials & Technologies Julie Lambie BidSmart Project Manager (920) Greg Rudie Account Manager (920) Peter van den Akker Global Transportation & Logistics Manager (973)