The State of Inbound Freight

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1 C THE VALUE OF A TMS AND LOGISTIC SERVICES FOR EFFECTIVE 10/8/2014 The Value of a TMS and Logistic Services for Effective Inbound Freight Management The State of Inbound Freight HOW BIG IS THE PROBLEM OF? Inbound logistics is receiving a lot of attention as businesses continue to look for ways to manage shipping costs. If you re looking to save costs on shipping, take a look at inbound shipping. Depending on the industry and size of the company, a business can spend more than 40% of its annual freight budget on inbound shipping, according to the Aberdeen Group, a research firm in Boston. A more efficient inbound freight program can minimize delays, save money and even reduce confusion. 75% of companies surveyed by the Aberdeen Group report that inbound freight management is a key focus point & Total freight spend is between 3.6% and 5.2% of surveyed companies total sales, according to Aberdeen s results. IN THIS WHITEPAPER 3 Inbound Shipping Challenges Page 2 8 Objectives of Inbound Freight Management Page 4 4 Areas of Focus to Meet Inbound Freight Goals Page 6 TMS for Inbound Freight Automation Page 8 Technology + Expert Logistics = Success! Page 11 Cerasis: Your Inbound Freight Management Partner Page 12 Conclusion Page 15

2 2 3 Inbound Shipping Challenges In one example, just to show how complex and varying inbound freight management programs are, a company with over $18M per year in inbound freight costs reported paying invoices from over 100 carriers despite having negotiated preferred terms with five carriers and stipulating their use on each order. Unfortunately, 90% of shipping executives surveyed said that their current systems, including their Transportation Management Systems (TMS), are inadequate for addressing their inbound shipping needs. Shipping managers need a practical way to seize control of the inbound freight problem. One alternative, and the focus of this webinar, is to use new, specialized managed services, in combination with available technology, to specifically address the inbound freight challenge. THE MANUAL PROCESS OF INBOUND FREIGHT MANAGEMENT Piecing together information from internal paperwork to get info such as tracking, Bill of lading, etc. Going to multiple Carrier Websites to make phone calls Putting together comprehensive reports Logistics and Supply Chain Organizations face three primary challenges when it comes to gaining the upper hand on inbound logistics spend. Lack of Visibility Where is the freight? When will it arrive? How much will it cost? Logistics executives are constantly requested by operations, sales, planning, purchasing, and accounting groups more accurate and timely information on inbound shipments. Today, identifying what s in transit, where it is, when it will arrive, and how much it will cost, requires piecing together information from internal paperwork, carrier websites, and phone calls a time consuming, inefficient process. And that s for one shipment. A comprehensive report might take hours or days to prepare. In addition, transportation managers who must rely on predominately manual processes to track and trace freight, find themselves answering it gets here when it gets here. This lack of predictability has ripple effects throughout the company, leading to excess inventory, sales obstacles, and variances in the company s performance of their supply chain. In most organizations, the lack of reliable, easily accessible, real- time data means they must reach out to suppliers for shipment details (carrier name, carrier tracking number or bill of lading, etc). This is an inefficient and labor intensive process, and ultimately, a costly way of dealing with inbound shipping. It gets there when it gets there.

3 3 Lack of Control Most companies have developed carefully optimized plans and routing guides that specify how users and suppliers should ship material. However, they have little control over whether these guides are followed, even though they are paying the freight charges. They must rely on their suppliers and employees to execute on routing instructions and guidelines, without any means to enforce these optimized plans. This is less of a problem with outbound shipping spend, since companies typically have direct control over their outbound freight. But most purchase order terms are Ex Works (EXW), where the buyer pays the inbound shipping costs and assumes the risk for the delivery of the goods. The buyer, in this scenario, is dependent upon the supplier to follow the supplied routing instructions. Unfortunately, suppliers do not consistently follow routing instructions, due to their focus on shipping product to hundreds of customers on a daily basis. The bottom line is that when a supplier fails to adhere to the shipping request (e.g., carrier selection, service level selection, account number identification, special instructions, notifications, etc.), the buying company bears the additional freight expenses, as well as the costs resulting from delays in receiving purchased items, supply chain disruptions, and a lack of visibility into the shipment. Costs that usually cannot be tracked back to the product level for accurate Cost of Goods (COGS) calculations. In addition, once items are en route, the buyer has no means to make changes, whether reacting to external events such as a weather event, or the need to split a shipment for separate delivery destinations. It may be weeks or months before the increased costs are visible because the invoices for the inbound shipping must be entered and paid before finance can generate a spend report. Even then, all one knows is the total cost. To break down the data in more detail requires going through paperwork manually, logging into multiple carrier shipping portals, and compiling the information various ways to analyze the problem. So, unless a specific question arises or someone makes a project of analyzing the inbound shipping spend, the true costs of inbound shipping remains unknown. - Companies develop routing guides and plans for suppliers but have little control if they are followed and no way to enforce efficiently - Most POs are Ex Works (EXW) & buyer pays inbound freight costs & takes on risk of delivery - Focus is on Outbound for customer service, meaning resources for inbound are limited.

4 4 Rising Freight Costs According to the Aberdeen Research Group, on average, surveyed businesses experienced an increase of 14.5% in truckload rates, an 11.5% increase in LTL and ship rates, and a 15.1 % increase in international air rates over the last two years. Clearly, external shipping rates are outside the logistics manager s control. But that means that careful management of the inbound shipping ecosystem is of greater importance. In addition to increasing visibility and control as discussed earlier, logistics managers are forced to look to other areas of savings: - Reductions in staff size - Smaller IT services budget - Increase centralization of shipping However, such changes may only exacerbate the problem. So how do shipping managers control outside costs with fewer internal resources? 8 Objectives for Inbound Freight Programs Inbound Freight Management is an Area Each Shipper Can Improve After each fiscal year, many companies task their operations to figure out new ways to reduce costs for the upcoming year. Every aspect of the company s factors which impact the bottom line should and does come under review. However, not every area of the business is given equal scrutiny. One of those areas that shippers traditionally do not give the attention deserved is inbound freight management. Often more than not, savings in inbound freight costs can go directly to the bottom line. Most successful companies who have paid attention to inbound freight view inbound freight management as controlling inventory in transit. Since inventory is, in many cases, a company s largest asset, the management of inventory is critical to business success. The proper management of this function plays a key role in achieving inventory, productivity, and service goals. Inbound freight involves the management and control of freight from: - Domestic and offshore vendors, - Consolidation of vendor shipments, - Direct shipments to Retail sites and customers at home, multiple shipping points, and - Warehouse cross dock opportunities for Retail replenishment and backorder processing. The variety of processes supported by the inbound freight process make its management a complex undertaking.

5 5 Effective Inbound Freight Management Effectively managing the inbound flow of product to your business is a complex process which is only getting more complex as customer demands increase in terms of their expectations of service levels. Increasing the difficulty is the shipper s desire to effect cost reduction while maintaining reliable service. In addition to the more obvious and visible impact of inbound freight costs to overall profitability, the management of this area also affects inventory control, overall warehouse productivity, and customer service. Making matters even more difficult are issues such as rising fuel charges, the increase in offshore product sourcing, and the ever changing array of carriers and their service offerings. Furthermore still is the increasing trend of multi- channel businesses operating out of multiple warehouse facilities. In addition, direct shipments to Retail locations and Direct customers make controlling inbound activities in a cost effective manner much more complex. Increased customer demand requires better inbound flow of product for improved customer service! 8 Inbound Freight Objectives As you begin to analyze your inbound freight practices, you should establish objectives that will help guide your decision making process. Objectives can be established in the following areas; among others: 1. Reduced freight costs and improved bottom line 2. Improvement in on- time deliveries 3. Reduction in purchasing lead times 4. Less handlings and damage 5. Lower inventory levels and reduced carrying costs 6. Providing maximum visibility into the process 7. Improvement in warehouse productivity 8. Increased customer service

6 6 4 Areas of Focus to Meet Inbound Freight Goals Key Issues or Areas that Warrant Attention in Inbound Freight Management In order to meet your objectives, there are a few key areas of attention that can provide the focus for the analysis. Four key issues or areas that warrant your attention are: - Vendor Compliance - Freight Paid vs. Freight Collect - Visibility and System Control - Vendor Relationships Let s cover each in more detail. MISSION CRITICAL: PROVIDE & CONTROL THE ROUTING GUIDE 1. Vendor Compliance Having a current and complete Vendor Compliance program is the central area of focus for effective inbound freight management. The program should, most importantly, define vendor expectations and provide for a method of measuring and reporting on performance against those expectations. It is one of the most effective ways to insure consistency and reliability in the management of the inbound freight process. Basic measures such as on- time delivery, meeting damage and accuracy expectations, and providing the proper paperwork are among the key metrics to monitor. With the increase in imported product and the diversity of domestic vendors and an increasing use of consolidators, providing a routing guide is a critical piece of any Vendor Compliance program. By controlling the routing and timing of deliveries from your vendors, efficiencies throughout the supply chain are possible. 2. Freight Paid vs. Freight Collect A growing trend in the industry is the ability to convert from the prepaid freight concept to a freight collect policy. Those who have performed the due diligence of the comparison of these two concepts are realizing significant cost reductions and overall control. They have realized the words Free Freight should raise a red flag and precipitate further discussion. Although it is sometimes very difficult to gather the required information to make an informed decision, the effort can be well worth your time. Even if there are no changes made, the discussions you have with your vendors and carriers often prove beneficial in other areas. Shippers have realized the words Free Freight Raises a RED FLAG!

7 7 3. Visibility and System Control One of the key elements in an effective inbound freight management program is the ability to have visibility into the supply chain to track and control inventory movements, as well as visibility into your freight activity and data. This control has to be supported by an information system that helps manage this complex process, such as a robust Transportation Management System. Many software vendors offer products that help manage the process in a variety of ways. You should always develop a set of functional and process requirements that you expect the software to meet before you begin the search. During the search, an evaluation of their responses to these requirements and a combination of reference calls, site visits, and system demos should be completed. Making sure you know what you want is the first step in obtaining a system that meets your needs and expectations. 4. Vendor Relationships One of the most overlooked factors in a successful inbound freight program is the relationship you have with your vendors and carriers. Those companies who have taken the time to foster a productive and collaborative relationship consistently reap the benefits. As in any relationship, having a feeling of trust and the ability to have an honest and meaningful dialogue are the keys to success. Many companies try to manage the relationship through rigid contracts and performance measures. While these are important, having the ability to deal with someone you trust supersedes any legal restrictions you can place on the process. Many ideas for improving the process come through this dialogue and collaboration, rather than through the strict enforcement of an agreement. In addition, with the speed at which the total supply chain is evolving, having a good relationship is a real asset in keeping up. Those companies who have paid attention to the management of the inbound freight process have seen reductions in overall freight costs, reduced inventories and safety stock, improved warehouse operating costs, and enhanced overall customer service. It is worth the time and energy to investigate this often overlooked area in your supply chain.

8 8 TMS for Inbound Freight Automation Transportation Management System Automation of the routing guide, shipping processes, and reporting are important to effective outsourcing of logistics to a managed services provider. One which all participants of the ecosystem can access with appropriate permissions simplifies and accelerates logistics execution thus, an on- demand web- based TMS is important to achieving the cost savings and decrease inefficiencies (and costly errors). The managed services providers should be using a system that is: - Carrier neutral allowing buyer to choose the most costeffective shipping method, such as Full Truckload, Less- Than- Truckload (LTL), or small package (FedEx or UPS) - Has a Web- services architecture allows for integration with partners and internal systems - Is permission based Allow real- time, anytime anywhere visibility into all shipments. - Has a powerful, flexible rules engine Companies can globally enforce and update routing instructions, carrier selection and special shipping requirements in a flexible, user- friendly environment. - Encompasses the entire shipping ecosystem suppliers, carriers, transport modes and employees.

9 9 Must Have Automation Features in a TMS As with any best- of- breed application, an automated inbound shipping management solution must have "five 9s (or %) availability, a market- leading feature set, and a reasonable cost of ownership. To overcome the obstacles facing logistics organizations, however, the inbound shipping management TMS must also have more specific traits to include the following Real Time Freight Automation To combat rising transportation costs the application must make it easy for users around the country to execute policies that deliver immediate freight savings. Today, that means the application must be built with a state- of- the- art web services architecture, in order to receive live carrier rates over the Internet. No more theoretical savings, but hard ROI based on live, vendor neutral access to real- time market rates. 2. Organizational Control To regain control over inbound freight management, freight costs, and mitigating risk, a best- in- class application must have a rules engine, based on optimized plans and routing guides. The system must be flexible to accommodate custom company business rules, yet powerful enough to force all users, both internal and external, to follow the policies that ensure efficient and cost effective shipping. The system s usability must be such that controls can be designed and implemented by logistics experts with decades of hands- on experience in logistics, rather than by computer technicians. 3. Visibility and Data Analysis Reporting For true shipment- level visibility and reporting, a carrier neutral, mode- agnostic data repository is critical. On- demand, managers must be able to identify up- to date trends and patterns, accurately forecast demand and supply, and make real- time decisions based on actual data, rather than guesswork.

10 10 4. Speed and Scalable The TMS must be able to support rapid growth demands, while not feeling bloated with unnecessary features requiring onerous training or orientation. Busy logistics professionals need practical tools that deliver results immediately. A system should still work as effectively whether you have 2 inbound freight shipments per day or 100. Inbound freight management, over time, with a scalable system, should start to see greater returns as your company grows. 5. Dedicated Technology and Up to Date Web Standards The technology driving the automation must be based open standards and an SOA architecture to allow easy integration with existing systems, including ERP. The inbound freight management shipping application must allow for rapid deployment. Delays due to IT controls and backlog reduce savings and put the success of deployment at risk. A dedicated technology team behind the TMS and logistics service provider will eliminate such updates and backlogs. Ask the provider if they themselves develop and iterate the application/system, or if the provider outsources to a software company.

11 11 Technology + Expert Logistics = Success! process control over the entire inbound logistics element of their global supply chain. When a TMS is not used, the primary benefit to the customer is the expertise of the managed service provider. - Provide full freight claims management - Provide freight accounting services Inbound Logistics & Integrated Freight Managed Services The role of integrated freight management services, as a compliment to a TMS technology offering, is to address the problem of supplier compliance, reduce costs, and to bring logistics expertise to bear on every inbound shipment. Offerings vary in the degree of automation, the integration of the players in the ecosystem, and in depth/breadth of expertise. The best freight management service providers use a TMS software and connect the suppliers directly into the system. The TMS software also gives them the ability to both implement rules and process and change them rapidly. Compliance by suppliers is achieved initially through the customer s request. Once suppliers benefit from the reduction in errors, they prefer the managed service and the improved customer satisfaction. The customer uses the same TMS as the freight management services team to track and trace inbound shipments, finally gaining complete visibility, and Best Practices to Expect for Inbound Logistics from a Freight Management Services Provider In order to effectively manage all aspects of inbound logistics, a managed service must be able to: - Provide the ability to track and trace shipments for multiple customer roles - Process shipment for all modes of transport - Demonstrate logistics expertise in carrier relationships - Manage shipment scheduling, processing and execution - Manage contract negotiation and renewals - Monitor and enforce business rules - Seek dynamic, vendor- neutral freight bidding for transportation, as needed - Provide comprehensive real- time reporting - Understand and manage reverse logistics

12 12 Cerasis: Your Inbound Freight Management Partner Who is Cerasis? - Founded in Lead Logistics Provider Specializing in Freight Management - State- of- the- Art Cloud Based TMS - Comprehensive Freight Management Services Including, but not limited to: - Analysis and Audit of Existing Shipping Practices and Carrier Rates - Carrier Rate/Rules Negotiations and Bidding Services - Contract Management - Inbound Routing and Compliance Program - Volume/Spot Quotes, Truckload Routing (dedicated lanes & brokering) - Invoice Auditing and Consolidated Weekly Billing - Claims Processing and Maintenance - Shipper Compliance Auditing Solutions Custom Tailored to Meet Your Needs Modes Supported - LTL North America - FTL - Intermodal - Specialized Dedicated Transportation Services - FedEx Small Package Cerasis Inbound Freight Solutions Your team needs more time to focus on core competencies. - Solution: Cerasis can give your team back valuable time by handling some of the time consuming duties associated with freight operations including routing inbound shipments, scheduling pickups, shopping for volume/spot quotes, re- routing shipments in transit, auditing invoices, resolving invoice discrepancies, and processing claims. Suppliers don t always comply with AER s routing guide. - Solution: Cerasis Freight Desk will route your inbound shipments ensuring they are routed to your specifications at the best possible rates. There may be situations in which you would prefer to route inbound shipments yourself and with our system, you have that option. Need ability to monitor compliance for AER shipping locations. - Solution: Our least cost compliance feature requires shippers to input a reason when they do not ship via the least cost carrier. Our Least Cost Compliance Report sorts non- compliant shipments by reason and displays lost savings data. Need for standardization of procedures. - Solution: Cerasis will partner with you to implement a process designed to get all of your locations on the same page; following the same procedures. Need more visibility and control over all shipping operations for all locations. - Solution: Cerasis TMS with organization views. No easy way to determine impact of freight costs on customer profitability. - Solution: Freight expenses can be sorted by customer and exported into Excel for analysis. Auditing freight bills and researching variances is a drain on resources.

13 13 - Solution: Cerasis will audit your freight bills using a three step validation process that enables us to resolve carrier errors before you are billed and obtain supporting documentation for invoices that have been correctly adjusted. You will receive a pre/post audit weekly consolidated invoice from Cerasis. Accounting has to spend time allocating freight costs to G/L accounts. - Solution: G/L codes will be loaded into system and assigned to shipments at time of processing. These codes will follow the shipment all the way through invoicing and reports can be sorted by these codes and exported into Excel for further analysis. Shipment handling expenses not being recouped. - Solution: Cerasis incentive feature allows you to add a handling charge to the freight cost that remains transparent to your customer. Buyers need a quick way to estimate freight charges for raw materials and supplies purchases and sales staff needs a quick way to estimate freight charges for customer bids. - Solution: Quick quote feature in Cerasis TMS. Customers have to contact AER sales or shipping staff for delivery updates, tracking info, and POD s. - Solution: Customers will receive automatic shipment notification s with tracking links. Cerasis TMS = The Cerasis Rater - True lane based rating engine. - Shipments rated and presented on screen in least cost order with carrier transit and limit of liability information. - Shipment control panel to expedite shipment processing and auto- schedule pickups. - Guaranteed shipment costs allow you to bill product and freight costs simultaneously without waiting for the freight bill! - Quick quote feature for sales and purchasing personnel. - Complete visibility of all shipment activity. - Inbound receiving report to assist with planning and scheduling. - Powerful tools and reports to help you manage trends and ensure compliance. - Organization views to facilitate management of all shipping locations. - Online invoice center provides electronic invoice access, adjustment requests, and payment options enabling you to go paperless. - Customer satisfaction tools including automatic shipment notifications with tracking links. Cerasis Process Approach - Customize a solution designed to meet your specific transportation needs - Execute a partnership agreement - Negotiate rates with carriers on your behalf - Conduct a commodity review - Collaborate with your management team to implement our custom solution - Follow up to ensure your staff is fully trained and compliant - Provide you with outstanding service and support on an ongoing basis - Conduct quarterly account review meetings

14 14 Cerasis Team An Exceptional Group of Experienced Freight Professionals Striving to Exceed Your Expectations Dedicated Customer Service Representative Freight Desk - Volume/Spot Quotes - Truckload Quotes - Routing of Inbound Shipments - Hotshot, International, and Guaranteed Shipments - Assistance with Freight in Transit Issues Claims Specialist Carrier Relations Group - Rate and Rules Negotiations - Carrier Contract and Relationship Management - Carrier Performance Monitoring Implementation Team - Oversees New Account Setup and Account Specific Bid Process - Conducts Commodity Review - Works with Your Management Team to Implement your Custom Solution - Provides Training Cerasis Technology In- House IT Department Integration - Working with your IT Staff, we can help design a solution that will pull order information from your ERP system and write fulfillment and accounting information back to your system. XML Web Servicesour TMS System to perform most of the common tasks related to Conclusion shipping. This allows you to rate/ship from a custom built application, retrieve shipping costs for use on E- Commerce sites, and provide shipping costs and tracking for online store sales. Custom Reports. The advantages of such a turnkey system are numerous. The best pricing is secured for both at will shipping, as well by applying pre- negotiated carrier contracts to regular inbound shipping. Thorough tracking of all logistics activities provides more informed shipping history when negotiating new contracts. Logistics expertise in the freight management services provider ensures business rule development and enforcement is performed by professionals able to monitor the processes, execute modifications as exceptions arise, and recommend long- term changes as the shipping environment changes. Invoice consolidation and visibility into the true costs of inbound shipping enable businesses to implement process changes, if necessary, and reduce costs.

15 15 Outsourcing both the technological solution and the logistics expertise, eases the burden on internal shipping organizations, as well as IT staff. A service empowered by a TMS solution is fast and inexpensive to deploy, requires no new hardware or software, and provides access to users company- wide depending on role. Improving visibility, controlling processes, and better cost management through a managed service empowered by an effective inbound logistics program, through both technology and integrated services, reduces costs and improves operations. CERASIS: YOUR TRANSPORTATION MANAGEMENT SOLUTIONS PROVIDERS With a Focus on Managed Freight Solutions that save you time and money during freight claims. Education is Key and Knowledge is POWER when it comes to freight claims! Know the freight claim laws Before you ship, know the differences between insurance and liability, as well as how you can prevent damage and claims Know the importance of freight claims, and how to file one yourself (even if you outsource this to a provider!) Use Technology Consider using expert services to handle your freight claims If you d like to schedule a consultation with one of our sales reps, please visit our website at Cerasis, a top third party logistics company offering a transportation management system and managed transportation services, including freight claims management, have 4 freight claims management specialists who are certified in freight claims management. The 4 staff have completed the Institute of Logistical Managements freight claims course which focused on effective freight claims management. The course was challenging and academic in nature, with all three Cerasis employees completing 9 quizzes, 9 essays, and 1 two- hour final exam. Cerasis has offered turnkey freight claims management and technology solutions, alongside their other managed transportation and freight services, since the company's founding in The freight claims management team instructs shippers on how to first understand freight claims, damage, and loss and then files the freight claim on the shippers' behalves, following up with both carriers and shippers until the claim is satisfied. The new ILM certification for Cerasis employees shows the commitment of the third party logistics company to offer the best service possible to their more than 3,600 current manufacturers and distributors who ship freight in North America. If you are having issues effectively managing freight claims, make sure you reach out to Cerasis today! Fill out a Contact Request at: Call Us at us at

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