Logistics Processes

Module 1: Transportation Management

Facilitator Name/Date/Etc

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Learning
objectives
• Understand the factors involved in making
modal decisions considering an
organization’s objectives

• Explain the benefits and risks of carrier

selection including the use of procurement
tools, sourcing strategies, value-added
services, and fleet structure

• Discuss the rationale and supportive criteria

for outsourcing logistics

• Understand the role of technology in logistics

and its impact on an organization including
investment and allocation of resources

Transportation Systems – Module 2 –Transportation By Water

Transportation Systems
 •Transportation Management is a process that assembles the various
transportation needs of a firm, its suppliers and customers, and creates a
system of benchmarks, performance requirements and reporting mechanisms
to provide the firm and its stakeholders with the most cost-effective service.
•The process must include a detailed assessment of carriers, the nature of
their business and how they perform in the marketplace. The evaluation
process is not limited to the shipper or consignor. Carriers must also evaluate
potential shippers to assess how the addition of this freight will impact their
existing business.

•Price is not often mentioned as a primary factor in sourcing, selecting and

working with service providers. Transportation management is a process of
complex cause-and-effect analyses that, when properly combined, offers
the best overall cost toLogistics
the supply chain system.
Processes – Module 1 – Transportation Management
Transportation Systems
 Modal Decisions

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 The decision-making process is about
Trade-offs in Modal Options
• The decision on mode of transportation is services
all or part of a process - not only based on price
• The transportation decision maker assesses which
mode is best suited to convey that product in the
most efficient manner

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Modal Decision Factors
• Lead time for delivery
• The nature of the product (size, weight,
susceptibility to damage)
• The comparative cost of loading, securing and
unloading the product
• Available modes and modal equipment
• Available materials handling capacity of shipping
and receiving facilities
• The impact of inventory and warehousing costs
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Modal Decision Factors
• The nature of the voyage (weather, distance, administrative
delays, number of stops, number of transfers, number of
in-process changes to the product)
• Intermodal links (can one switch form one mode
to another in a cost/time efficient location)
• The acceptable percentage of cost of freight to
the value of the product and the nature of the sale
• The cost if the product is not where it is supposed to be
(cost of shut down, cost of production or promotional delays)

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Secondary Decision Factors
• Carrier and modal dependability
• Speed of transport
• Consistent transport availability per lane
• Freight handling capacity of the carrier(s)

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Modal Selection
• The primary component in modal selection is the availability of the chosen mode
to the shipper, the receiver, and to any intermediate in-process (en-route) stop,
such as the different manufacturing locations or different locations for parts of
the manufacturing process (sub-assemblies, assemblies, rework), different
warehousing or storage locations and different outlets (retail, industrial or
distributor), that the shipment may encounter.
• Once the transportation manager knows what modes or group of modes can best
satisfy the needs of all parties, then a trade-off analysis can be accomplished
• One of the most basic tools available for primary modal selection analysis is the
use of cost centres.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Cost
Centres

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Considering Intermodal Transport
• Logistics professionals must consider other modes of transport to offer both
strategic and cost saving advantages.
• Intermodal transportation combines the best features of each mode to create
cost-efficient and seamless carriage of goods
• Properly sourced and considered, intermodal transportation can eliminate
characteristics of a single source/mode which constrain time and resources.

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Factors affecting the choice of
intermodal transport
• Capacity/Equipment and Driver Shortages
• Environment, Fuel and Road Congestion
• Service Consistency
• Technology
• Cost Savings

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Provider/Carrier Selection

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Provider/Carrier Selection
• Transportation costs can represent a significant amount of a firm’s overall costs.
To help manage these costs buying transportation services must be thoroughly
evaluated.
• The transportation provider selected must satisfy the needs and objectives of the
buying firm.
• Buyers must exercise due diligence, by creating a carrier profile, a matrix that
equally qualifies carriers.

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Carrier Profiling
• On-Time Service Performance • Insurance and Safety
• Speed of Delivery • Responsiveness
• Consistency of Service • Knowledge & Experience
• Terminals, Locations, Service Areas • Handling
• Size of Carrier • Accessorial charges
• Equipment Availability • Education & Training
• Claims Experience • Financial Stability
• Continuous Improvement

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Sample
Carrier
Profile

Page 1-5
Logistics Processes – Module 1 – Transportation Management
Transportation Systems
 Basic Requirements (1 out of 2)
In addition to contact information, a
carrier profile should also include:
• Year established/opened for business and any pertinent ownership/affiliation
information
• Key company contacts
• Union Affiliation: contract expiration dates, whether federally/provincially
regulated
• Insurance Company, cargo deductibles and maximum liability limits
• Surety bond (if a load broker) or some other supporting documentation
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Basic Requirements (2 out of 2)
• Annual Sales estimate: This will assist in
determining the relative size of your firm
versus that of the potential supplier
• Banking Information: Part of the credit
application
• Payment Terms
• Compliance with mandated standards, such
as ISO, security initiatives
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Specific Requirements
Based on the nature of the buyer’s business, some
of additional requested information could include:
• Equipment information.
• Operational Information.
• Customs Initiatives (such as Customs-Trade
Partnership Against Terrorism (C-TPAT),
Customs Self-Assessment (CSA) or Free
and Secure Trade (FAST) approval).
• Delivery requirements.
• Advertising materials.
• Copies of the carrier operating authorities.
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Identify Acceptable Cost/Service
Trade-Offs
• Visit potential suppliers
• Transportation Brokers
• Associations
• Directories
• Internet
• Trade Publications & Newsletters

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Shipper Selection by the Carrier
• Financial Stability
• Product Knowledge
• Growth Opportunities
• Cooperation in Dispatch, Loading and
Unloading
• Professional Contact

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Single vs. Multiple Carrier Strategies
The use of a single carrier can have the following advantages:

• Reduce dispatch times

• Reduce the burden on your accounts payable system
• Reduce congestion at shipping or receiving docks
• Increase labour efficiencies in the shipper’s/receiver’s facilities
• Create/allow a system of trust and interdependence between carrier and firm
• Increase volumes tendered to one carrier, thereby increasing negotiating
power on costs and service levels
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Single vs. Multiple Carrier Strategies
The use of a single carrier can have
the following disadvantages:
• Hamper the shipping firm’s ability to grow with changes to transportation
services and options.
• Place all shipments/receipts in peril should carrier equipment shortages, strike or
insolvency occur.
• Force inter-lining due to the restricted service offerings of the primary carrier.

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Multiple Carrier Strategies remain effective
when:
• The primary carrier cannot or will not service an area
• The shipping/receiving firm wishes to maintain support for regional or local
carriers
• Modal combinations create the best overall service efficiencies
• Terms of sale dictate carrier selection
• Some supply chain partners must be serviced by very specific equipment
• The firm’s shipping volumes exceed what one single carrier can handle

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Elements of the RF tools:
• Required services or products • Geographic coverage
• Average shipment sizes • Duration of project
• Frequency of orders • Special handling
• Timelines to tender • Additional services
• Volumes tendered (quantity, weight • Equipment required
ranges) • Loading/unloading requirements
• Annual volumes • Insurance requirements
• Relevant product considerations • Required Service Levels

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Request for Quotation (RFQ) /
Request for Proposal (RFP)
The RFQ/RFP is a process by which a shipper asks carriers to submit a quote and
bid on a chance to fulfill certain transportation related tasks.
An RFQ is usually the first step in submitting a request for proposal (RFP). These
two documents are similar, as they provide details of the services required, but
RFQs generally ask for a more comprehensive price quote.
RFQs may be sent singly, or as an attachment to an RFP.

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Some basic steps in the RFP/RFQ
process are:
• Develop proposal specifics
• Prepare a written RFP/RFQ document
• Identify and submit to qualified vendors with a
common deadline

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 RFQ Submissions
• Receive & evaluate responses
• Ensure “like” responses
• Analyze terms and conditions
• Identify exceptions and omissions
• Calculate annual cost variations
• Select preferred vendor and award tender
• Negotiate final terms and complete
• Establish contract agreement
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Adding Value

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Adding Value
• Value added services can be key to the culture of a supplier, and its full potential
value can be difficult to assess when evaluating or choosing service suppliers
• Many value added processes can be requested or driven by the decision maker by
building them into the vendor assessment process, or in a request for quotation
• Another method for obtaining and assessing value added services is by asking
potential providers what services they presently provide as “value added”

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Value Added Services - Examples
• Faster service times • Provision of customized financial or
• Reduced product handling credit terms
• In-transit tracking • Installation of the delivered product
• Cross docking and consolidation • Maintaining a spare parts inventory
services • Single billing for multi-modal
• Electronic data links between provider shipments
and customer • Packaging and dunnage services
• Software and templates for document • Specialized equipment
preparation

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Fleet Considerations

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Private vs Dedicated/Contract Fleet
• Private fleets can be either company-owned or leased equipment and involve
either company employed drivers or the use of a driver service.
• A company would normally be in control of the management of this fleet,
including all related costs and services.
• Private trucking can be less expensive than common or dedicated/contract
carriage.
• It can offer full control and use of equipment for product moment.
• Private fleet managers are required to constantly review fleet utilization, reducing
empty miles and maintenance costs to keep the operation optimized, and
profitable. Page 1-15

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Private vs Dedicated/Contract Fleet
• Dedicated or Contract Fleet services will involve a contractual arrangement to
outsource fleet ownership.
• Many third party providers or common carriers offer this type of service. Contract
carriers are for hire carriers.
• They operate on a dedicated basis for contracted customers, on a short or long
term basis.
Advantages including:
• • Dedicated/specialized equipment and drivers
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• • Dedicated pick-up and delivery times and a fixed rate or cost structur
Logistics Processes – Module 1 – Transportation Management
Transportation Systems
 Analysis of the
Private Fleet
• Fleet Roster
• Fleet Costing
• Fleet Policy

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Fleet
Operating
Costs

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Operational Measurements of
a Typical Fleet

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Outsourcing Logistics

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Reasons for Outsourcing
• Warehousing and distribution • Electronic systems management
• Shipment tracking/tracing • Fleet management
• Transportation management • Invoice auditing and payment
• Freight forwarding • Inventory planning and management
• Electronic communication • Documentation preparation
• Supply chain planning • Customs Clearance and auditing

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Technology

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Transportation Management Software
• Software for Transportation Management has many applications
• It does not solve all the issues or problems in a business. It is a planning tool that
requires planning and guidance.
• Applying poor data to the system will result in little more than manipulated, yet
poor information.
• The total investment in data management goes beyond just paying for the
software.

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Technology can assist in the
transportation function, using some of the
following functions
• Auditing and rating of carrier invoices
• Routing and dispatching of shipments
• Fleet management
• Load configuration
• Satellite tracking
• Facilities planning
• Budgeting and forecasting Page 1-14

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Technology in Transportation - Applications

• On-board computers (OBCs) measure fuel and mileage information including

consumption and details for tax reporting.
• Freight Audit System (in-house freight accrual, audit and payment systems).
• Transportation Management Software (TMS) improves the manual process of
carrier and rate selection.
• Fleet Maintenance Software (relatively low-cost software packages).
• Routing Software
• Purchasing Software
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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Technology in Transportation –
Additional consideration
• Support & Training
• Implementation
• Life Cycle

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Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Benchmarking Systems & Processes
• On-time pick ups
• On-time deliveries
• Cleanliness of modal equipment
• Suitability of modal equipment (dimensionally, weight capacity, ability to load)
• Number of pick ups made per period (day, hour, week)
• Number of deliveries made per period
• Number of claims incurred and settled
• Load factor per modal unit
• Invoice accuracy
• Response to operational inquiries

Transportation Systems – Module 2 –Transportation By Water

Transportation Systems
 Border Initiatives
• Border clearance & security compliance is one of the most important
challenges facing the transportation industry today
• Border delays impact delivery times and cost companies in both countries
millions of dollars per day in lost productivity (over 70% of cross border freight
moves by truck)
• The US and Canada have instituted programs to increase border security:

C-TPAT PIP CSA FAST

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Transportation Systems – Module 2 –Transportation By Water

Transportation Systems
 Page 1-13
Border Initiatives
Customs-Trade Partnership Against Terrorism Customs Self Assessment (CSA)
(C-TPAT) • Streamlined Clearance Process
• Designates companies as low risk • Streamlined Accounting Process
• Lower examination rates, higher priority importers
• Can join Canadian Partners in Protection (PIP)

Free and Secure Trade (FAST)

• Moves Pre-approved goods across the border
Partners In Protection (PIP) • Harmonized commercial process for approved
• Canada Border Services shippers & carriers using registered drivers
• Commits to secure supply chain

Transportation Systems – Module 2 –Transportation By Water

Transportation Systems
 Module Highlights

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Module Highlights
• Transportation managers must understand the typical factors that are to be
considered when reviewing and operating business units.
• Transportation management is a process of complex cause and effect analysis.
• Modal decisions are based on many factors including: lead time, product
characteristics, materials handling equipment, inventory levels, and cost.
• Best practice carrier selection process includes the development of an accurate
carrier profile that will assist in evaluating the Carrier’s capabilities and overall
compatibility with an organization.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Module Highlights
• Evaluation of potential carriers includes examination of: service levels, locations,
equipment, personnel, claims experience, insurance and safety records,
responsiveness, handling techniques, charges, technology integration, cultural
compatibility and financial stability.
• The decision on adopting a single source carrier over multiple carriers requires
analysis of single source benefits against risk.
• RFQs and RFPs are procurement tools used by organizations to clearly identify a
need for sourcing while providing adaptable structure around response timing
and formatting.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Module Highlights
• Intermodal transportation, when considered by an organization, can eliminate
many mode specific constraints while combining the key advantages of various
modes.
• Supply chain managers must be aware of border crossing challenges and work to
minimize or eliminate delays and infractions for improper export or import.
• Value added services should be sought from transport providers and may include:
faster transit times, handling reductions, tracking, cross docking/consolidation
services, technology integration, packing/dunnage management, and specialized
equipment.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Module Highlights
• Several factors support organizations use of private fleets or dedicated contract
carriage including the requirement for specialized equipment, availability of
carriers, service level requirements, availability of capital, and corporate
experience/knowledge of transportation.
• Companies that choose to outsource a portion of their transportation business
attempt to obtain expertise and resources for a reasonable expense.
• Risk management includes identifying organizational exposure and challenges
and proactively addressing these issues to manage appropriate levels of risk for
the organization.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Module Highlights
• Strategies for risk management specific to logistics include examination of claim
root causes, packaging techniques, distribution channels, and education and
training.
• Software solutions should be actively examined for organizational benefit
understanding the procurement and implementation stages as unique functions
for successful integration.
• Creating a series of benchmarking metrics will allow for fact based comparison of
portions of your supply chain including internal operations, carrier performance,
customer satisfaction and overall service delivery.

Logistics Processes – Module 1 – Transportation Management

Transportation Systems
 Key Terms & Concepts
• Cost Centres
• RFP / RFQ
• Single vs Multiple Carrier strategies
• CTPAT, PIP, CSA, FAST
• Transportation Management System
(TMS)

Logistics Processes – Module 1 – Transportation Management

Transportation Systems