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A Well Executed Transportation Strategy

by Doug Hill

In today’s uncertain economic environment, companies are challenged by volatile costs and competitive market pressures. Expectations continue to mount for businesses to perform profitably and predictably, and to deliver value for both their customers and investors. Companies, therefore, must find ways to improve bottom-line performance and better respond to the pace and speed of change and rising customer expectations.

Notwithstanding the short-term environment, these same businesses must have time to focus attention on building their long-term business viability as well. That means having to strategically rethink how to manage their business by evaluating the time needed to support areas of non-core business functions, and the capital investment needed to remain competitive. Clear direction and attention given to the company’s core competencies should deliver the greatest return to the company’s customers, shareholders and employees.

For companies that choose to strategically focus internal resources on their own core competencies, they need to be aware that inbound and outbound transportation, fleet management and maintenance of the fleet are just a few critical areas companies must address to ensure products are delivered to the customer when and where they are needed. If not properly executed, this could seriously impact business and profitability.

Transportation is a complex industry and one that requires expertise. The truck’s technology is becoming more complicated, which takes new diagnostic tools and considerable training for qualified technicians to fix them. The new clean EPA certified truck engines introduced in late 2002 not only cost more to purchase, but may cost more to maintain, adding unavoidable cost increases to an already performance-stressed business. This, in addition to rising insurance premiums, continuing labor issues and access to capital are just a few additions to the perennial pressures inherent in doing business today. No matter how good a company may be at managing its fleet, the added pressures of the marketplace and economy are catalysts to outsourcing all or part of the transportation side of your business.

The options for transportation outsourcing, and the solution sets vary and should be tailored to meet a company’s specific business objectives. However, there are several key considerations to think about when selecting a transportation provider.

First, you want to engage a partner who will become the fabric to your business, with a proven process in place to evaluate the value the transportation solution brings to your current business objectives. Specific goal-setting, aligned with your own business objectives is key. The provider should be focused on monitoring key performance indicators and should guarantee performance.

Secondly, the provider should demonstrate consultative and operating experience to provide the right mix of common carrier options and dedicated fleet alternatives with the flexibility and quality service needed to achieve predetermined goals.

Another factor to consider is the resources and networks the provider has in place to support a company’s goals for growth, as well as help provide a shield from the uncertainty that often results from regulatory developments and market fluctuations.

Ultimately, a business needs a process with which to evaluate a provider’s plan, so it can be assured the plan will add value to its current supply chain and customers. This process becomes the yardstick for measuring the economic benefits and improvement to a company’s competitive position, and determining what key performance indicators should be selected.

The choice between using outsourced transportation providers versus running a private fleet may be as simple as needing to improve business performance by relieving the company of its non-core business challenges. For example, a company may decide to own its fleet but engage a specialized maintenance and vehicle management service provider to help ensure the fleet is up and running efficiently. Or, because of the costly expense involved in purchasing a fleet of trucks, a company may decide to go with a full service lease solution which encompasses a turnkey fleet of vehicles and its required maintenance. Several immediate payoffs include reduced capital expenditures on non-core investments, avoidance of risks associated with the purchase, operation and disposal of depreciating assets, and predictable future costs. There may well be a cost reduction advantage for the business, as well as improved service levels to the company’s customers.

Taking the outsourcing a step further, there is a continuing trend for Dedicated Contract Carriage (DCC) solution services. DCC is a customized bundle of transportation management services that is flexible and provides all the service advantages of a private fleet and the convenience of a for-hire carrier, with built-in optimization alternatives to refine transportation and logistics needs. It takes the consultation a step further by executing a strategy that may include transportation management expertise, labor procurement and performance management, labor training, routing & scheduling with a focus on maximizing asset utilization, safety, regulatory compliance and risk management. These are structured to meet the cost and service expectations mutually agreed upon at the start of the business relationship. DCC allows the customer’s management to be more focused on its core business issues, to increase its competitive position and better meet the needs of its supply chain.

Other value-added services under this offering and provided to specific customers may include yard management, financial alternatives, special handling of products, unattended delivery, technology and communication systems support (including on-board computers), reverse logistics and a model for continuous improvement.

The result? A well-executed transportation strategy that provides better use of capital, less management time needed for day-to-day fleet activities, and improved customer service enhancing a business’ competitive position and profitability.

And that’s just what a garage door manufacturer discovered. This Mississauga-Ontario-based manufacturer of quality residential garage doors and industrial loading doors, providing 35 years of innovation and service to the industry, has a North American network comprises six manufacturing facilities and 46 distribution centres across the continent.

The Canadian company services Southern Ontario and Quebec from its Mississauga base, making deliveries from Windsor to Orillia in the north, and stretching to Quebec City to the east. Originally, the manufacturer’s customers, primarily retailers and installers, would receive their orders from independent transportation carriers, paying them directly. Eventually, the manufacturer invested in its own specialized fleet of trailers, customized to transport the heavy, bulky doors. The product was loaded at the depot for each independent driver to pick up and haul. However, the products were often damaged when they were unloaded on-site. This costly factor in addition to scheduling conflicts created an inefficient delivery system with poor customer service.

This burden challenged and began to jeopardize the garage door manufacturer’s growth strategy of trying to get their products into large national retailers. The garage door manufacturer recognized that to reach their growth goals, they would require a reliable and efficient delivery system, and that good customer service could only be achieved with an outsourcing partner. The manufacturer made the decision to outsource their transportation functions to Ryder. After careful analysis, a Dedicated Contract Carriage solution was implemented. The program has been successful, and has played a significant role in helping the door manufacturer’s business increase. The avoidable costs of damaged product have been significantly reduced, creating lower expenses for the garage door manufacturer, and better service delivery quality for their customers.

This manufacturer communicates its needs and then hands over all transportation matters to Ryder, which takes care of scheduling, making appointments, routing of trips and administrative details.

Through the DCC service offering, Ryder provides the design and management of the transportation program to meet the door manufacturer’s needs. An offsite manager is shared with other Ryder DCC clients, located at the Toronto hub-centre. This is one of three hub-centres providing 24 hours/day, seven days/week support for clients’ constantly evolving requirements. All delivery points are entered into the RyderDispatch System and the optimal route is developed for each shipment. In Ontario, there is one outbound route dispatch per day, with an average of eight stops per trip and 180 units delivered, including doors, rails, tracks, springs, openers and parts. This is a dynamic, 24 hours a day, five days-a-week operation that is constantly evolving as business increases.

At the present time, Ryder provides one full-time tractor and driver for the Ontario deliveries, using two of the garage door manufacturer owned trailers, and another vehicle is supplied on a part-time basis for deliveries to Quebec, Monday through Wednesday. If any emergencies arise, additional transportation can be quickly sourced from an extensive fleet.

The motivation to use DCC may be as simple as management wanting to control costs. It may also support development of new geographic markets; or provide more shipment capacity and flexibility. Clearly, problems like high driver turnover, hours of service violations, labor unrest, and the outlay of capital for non-core requirements can be overcome through this application.

Many companies like this garage door manufacturer have business products that require special handling, such as primary metals, high-tech or automotive products, and could benefit from a fresh re-examination of their delivery systems. Businesses with time-sensitive products, such as those in the food & beverage or newspaper industries, or companies that provide unattended delivery, should also evaluate the transportation solution offering of Dedicated Contract Carriage services. Improved service and a more efficient transportation operation could result in driving more profit to the bottom line.

But whatever option of transportation outsourcing is decided upon, select a provider who not only has the experience and infrastructure in place, but one who is accountable and is committed to providing the most value to your business.