Outbound Transportation Collaboration Do-It-Yourself (DIY)

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1 Outbound Transportation Collaboration Do-It-Yourself (DIY) Author: Homayoun Taherian Advisor: Dr. Chris Caplice MIT SCM ResearchFest May 22-23, 2013

2 Agenda Overview Methodology Case study May 22-23, 2013 MIT SCM ResearchFest 2

3 Agenda Overview Methodology Case study May 22-23, 2013 MIT SCM ResearchFest 3

4 Outbound Transportation Collaboration Consolidation of shipments across firms shipping from common origins to common destinations Focus of research: ground transportation Transportation Collaboration Do-It-Yourself (DIY) 3 rd Party Passive (Opportunistic) Active (Planned) May 22-23, 2013 MIT SCM ResearchFest 4

5 Motivation? Steady rise in transportation costs Desire of customers to reduce inventory levels Transportation inefficiencies Truck Transportation Loaded Miles (75%) Empty Miles (25%) Utilized Space (64%) Unutilized Space (36%) May 22-23, 2013 MIT SCM ResearchFest 5

6 Transportation Collaboration Benefits Shipper Benefits Consolidation of Shipments Improved Vehicle Utilization Reduced Transportation Cost and CO 2 Emissions Recipient Benefits Opportunity to reduce inventory levels and receiving costs May 22-23, 2013 MIT SCM ResearchFest 6

7 Agenda Overview Methodology Case study May 22-23, 2013 MIT SCM ResearchFest 7

8 Research Questions 1. How do you qualify shippers for transportation collaboration? 2. What are the potential savings from outbound transportation collaboration? 3. How do you implement a DIY collaboration model? May 22-23, 2013 MIT SCM ResearchFest 8

9 Collaboration Qualification Hard constraints: Collaboration is not possible Shipping food and hazardous material Shipping using bulk tanker vs. dry van Soft constraints: Collaboration is possible with enough will and investment Competitive considerations Company culture May 22-23, 2013 MIT SCM ResearchFest 9

10 Savings Quantification Consolidation analysis using pool point distribution and multi-stop truckloads (MSTL) Destination Area Pool Point Origin Area MSTL May 22-23, 2013 MIT SCM ResearchFest 10

11 DIY Implementation Conducted interviews with several companies with DIY collaboration experience Key interview sections: Collaboration motivation and background Scope of collaboration Data sharing and analysis Collaboration process Collaboration costs and benefits Savings sharing May 22-23, 2013 MIT SCM ResearchFest 11

12 Agenda Overview Methodology Case study May 22-23, 2013 MIT SCM ResearchFest 12

13 Case Study Six companies (A thru F) in the Midwest Shipping origins are in a 10 mile radius area Company Industry Avg. Lbs/Shipment Dominant Shipment Type A Agriculture Machinery 2,818 LTL B Electric Equipment 1,904 LTL C Chemicals 2,450 LTL D Cleaning Chemicals 4,002 LTL E Consumer Packaged 33,650 TL Goods F Construction Machinery 160 Parcel May 22-23, 2013 MIT SCM ResearchFest 13

14 Destinations May 22-23, 2013 MIT SCM ResearchFest 14

15 Identified 20 High Density Destinations May 22-23, 2013 MIT SCM ResearchFest 15

16 Pool Point Analysis Excluded TL volume for each region Compared current LTL cost to pool point costs Pool point costs: LTL delivery charges at the destination Line haul charges to LTL carrier hub at destination region Pickup charges via MSTL at the origin May 22-23, 2013 MIT SCM ResearchFest 16

17 Pool Point Results 3 of 20 regions show savings without shipment delays Regions include SF, LA, NY and amount to $263,000 in savings (8% of LTL spend to these regions) Companies B, C and D achieved 90% of the savings Company Industry Avg. Lbs/Shipment Dominant Shipment Type B Electric Equipment 1,904 LTL C Chemicals 2,450 LTL D Cleaning Chemicals 4,002 LTL May 22-23, 2013 MIT SCM ResearchFest 17

18 Pool Point Results Pool point savings can increase up to $1.5M if companies are able to delay their shipments May 22-23, 2013 MIT SCM ResearchFest 18

19 MSTL Analysis Consolidate LTLs on TLs LTL shipments ride for free MSTL extra costs: Destination stop off and out-of-routemile charges Origin stop off charges May 22-23, 2013 MIT SCM ResearchFest 19

20 MSTL Results 18% of the LTL volume to the 20 regions was consolidated on MSTLs $744,000 in savings was identified. SF, NY and LA represent 55% of the savings Companies C, D and E achieved 90% of the savings Company Industry Avg. Lbs/Shipment C Chemicals 2,450 LTL D Cleaning Chemicals 4,002 LTL Consumer E Packaged 33,650 TL Goods Dominant Shipment Type May 22-23, 2013 MIT SCM ResearchFest 20

21 Consolidation Summary Companies A and F do not benefit much from collaboration in this community Savings are not mutually exclusive Company Industry Avg. Lbs/Shipment Dominant Shipment Type A Agriculture Machinery 2,818 LTL B Electric Equipment 1,904 LTL C Chemicals 2,450 LTL D Cleaning Chemicals 4,002 LTL Consumer E Packaged 33,650 TL Goods F Construction Machinery 160 Parcel Pool Point Savings $ 263,000 MSTL Savings $ 744,000 May 22-23, 2013 MIT SCM ResearchFest 21

22 Conclusions Companies in very different industries can benefit from transportation collaboration MSTL opportunities depend largely on existing TL volumes Pool point opportunities depend largely on consistent LTL volume to small destination areas Longer line hauls show higher savings potentials May 22-23, 2013 MIT SCM ResearchFest 22

23 Questions? Thank you May 22-23, 2013 MIT SCM ResearchFest 23

24 Collaboration in Supply Chain Vertical Collaboration External Collaboration (Suppliers) External Collaboration (Other Organizations) Internal Collaboration External Collaboration (Competitors) Horizontal Collaboration External Collaboration (Customers) Barratt, 2004 May 22-23, 2013 MIT SCM ResearchFest 24