Keep Balance between Rate and Lead Time Through Origin Ocean Consolidation

A company sourcing materials and finished goods from multiple overseas suppliers desired to reduce transportation costs by switching to origin ocean consolidation in a manner that would balance additional lead time with the threat of missed customer orders. The customer also did not want to purchase excess product in order to fill containers that would impact inventory turnover or lead to greater obsolescence and markdowns. Given their business requirement to remain competitive, they needed a platform to manage the origin ocean consolidation process in order to achieve the desired product cost levels. However, the company was concerned that combining cargo from multiple suppliers in the same container would create “black holes”, a lack of control, unnecessary complexity, and excessive lead time.

OPPORTUNITY

Issues on both sides of the water were contributing to the problem. First, the customer shipped primarily LCL and was underutilizing FCL containers, since it relied upon suppliers and its forwarder to choose the equipment and decide which cargo should be sent for consolidation. The process did not include controls or upstream visibility for the shipper, forwarder, and customer to coordinate planning of transportation according to order need by dates. Moreover, the current mechanisms built into the process did not provide an effective means for the customer to review bookings internally and determine whether additional lead times would be acceptable. The customer was also challenged by the large number of LCL deliveries driven by the origin booking process. This created additional cost and time for receiving that strained the warehouse teams and prevented them from completing their other responsibilities. Finally, excessive document handling and customs entry costs were created by the current process to manifest with the carrier and enter with customs each booking separately.

OUR SOLUTION

FriendShip acquired the customer’s data and modeled this through a proprietary simulation tool to understand the baseline cost situation and potential scenarios that would achieve significant transportation savings while providing visibility to potential lead time tradeoffs and needed business rules. FriendShip reviewed the findings with the customer and discussed what need by date, volume, and weight business rules should be activated within exp.o Order Management Bookings (OMB), FriendShip’ online order-based booking tool that is integrated with the origin booking process to provide upstream visibility. Likewise, OMB’s functionality to validate shipment estimated arrival date against order need by dates would be configured to allow approvals to need by date exceptions at the order level. Each party to approve or reject potential late orders due to consolidation would be able to log in and see the exceptions that applied just to their particular orders and either approve or reject warnings based upon their requirements. Once orders were approved, FriendShip would finalize both factory loaded container and consolidation planning at a local level with the suppliers in order to optimize bookings and drive the appropriate volume into the consolidation process. For consolidated cargo, FriendShip would provide the load sequence of orders within containers in both online and offline reporting to improve visibility for and productivity of receiving teams. Finally, FriendShip implemented its online, on-demand supplier scorecard within exp.o analytics to drive adherence to on-time performance. Improvement in this area would help achieve the customer’s alignment of order dates to potential consolidation opportunities.

THE RESULTS

The customer realized a long-term, per shipment reduction in total transportation cost by over $450 per container. The number of LCL shipments were reduced by over 75%. Per container utilization improved by over 15% with greater usage of larger container sizes without the issue of ordering excessive inventory. Charges for “fixed” transactional fees such as entry, manifest, security filing, and delivery were reduced by over 25% given the reduction in shipment and container count and the ability to consolidate shipment documents. The customer, suppliers, and FriendShip gained visibility to potential order delivery exceptions in a common communication platform that allowed all parties to make improved decisions. Improvements to the program are reviewed on an ongoing basis through FriendShip’ business review process and Freight Efficiency Scorecard methodology.