What do Shippers Want? Presented to Ohio Trucking Association September 19, 2016

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1 What do Shippers Want? Presented to Ohio Trucking Association September 19, 2016

2 Carriers can relate to this one: Ridiculous fines from receivers from pallet conditions to being 15 minutes late and they hold you up for two hours. How can I best prepare for supply chain disruptions? I have heard a lot about investing in drivers but not much discussion about investing in the customer service team. My phone never rings anymore but it dings at least a thousand times a day. How do you see robotics and unmanned delivery vehicles and drones changing the logistics world as we know it? How are carriers coping with all the regulations? How will they affect me? Bet the carriers won t believe this one. I need TIMELY BILLING

3 ARE SHIPPERS (AKA TRANSPORTATION PROFESSIONALS) BECOMING EXTINCT? Some Stories from the Front

4 Are Shippers (aka transportation professionals) becoming extinct? One company literally put the transportation group out to bid within the corporation to see if anyone would want them. Fortunately, the group had been able to produce significant cost savings and clearly provided value and was snapped up by the CFO. Now the challenge becomes explaining (another word for selling) the function to a group that is unfamiliar with transportation. Another shipper had her corporate group add international transportation to the domestic group s workload with very little additional resources to do the job. Consequently, their workload doubled and the stress level increased proportionately.

5 Is this the world as Shippers know it?

6 WHAT ARE SHIPPERS SAYING TO US?

7 Internal Shipper Issues The days when transportation was the invisible department somewhere down in the warehouse are gone. As transportation costs increase, it has now become front and center in the minds of senior management. Shippers need to insure that senior management understands the function and has a basic knowledge of how outside elements are affecting their transportation budgets More and more companies are looking to outsource their transportation function, not considering the fact that in order to be successful, these 3PL relationships need to be managed and their activities overseen by educated and informed personnel.

8 Federal & Regulatory Agencies Add to Shipper Concerns FMCSA wants to regulate shippers, receivers, brokers and forwarders in addition to carriers The recently passed rule against driver coercion should alarm shippers Inconsistent safety ratings due to inconsistent enforcement cause liability exposure for shippers. HOS regulations have increased shipper s transportation costs by 3 to 5% Recent changes in the Uniform Bill of Lading by NMFTA causes liability concerns for shippers.

9 Current Business Alignment Stagnant business performance coupled with tighter capacity in many transportation modes has created an increased need for shippers to leverage their transportation spend An increasing percentage of the transportation budget is being spent on direct from plant to consumer shipments; for many companies the transportation budget must cover this and 6 other channels of distribution Technology continues to be under utilized by companies in managing transportation and distribution Service performance has reached record lows with no indication that the bottom has been reached Shippers and carriers must redefine the way they collectively manage transportation in order to survive and thrive the forces driving the evolution of this critical function

10 SOME SHIPPER STATISTICS

11 The Power of Company Size Transportation spend as a percent of sales increased at a brisk pace over the last 12 months >$9 billion $5-$9 billion 2.2% 3.1% 4.1% 4.2% Annual company revenue $3-$5 billion $2-$3 billion $1-$2 billion $500 million-$1 billion $250-$500 million 3.3% 6.6% 6.6% 7.7% 8.6% 10.4% 10.5% 9.9% 11.6% 12.1% <$250 million 10.6% 11.6% 0% 7% 14% Source: 24 th Annual Trends and Issues in Logistics and Transportation Transportation spend as a percent of sales

12 Inbound Transportation Spend for 2015 Reflects Global Freight Flows LTL 25.4% International ocean TL 15.2% 16.2% Surface parcel 10.7% Private Air freight Small package Intermodal Dedicated Rail Domestic ocean (barge) Other: 7.4% 6.2% 5.6% 4.6% 3.3% 2.9% 1.5% 1.0% Source: 24 th Annual Trends and Issues in Logistics and Transportation 0% 15% 30% Percent of respondents

13 Outbound Transportation Dominated by Motor Carriage TL LTL Private Small package International Dedicated Surface parcel Air Intermodal Rail Barge Other 2.3% 3.6% 4.0% 3.1% 0.3% 1.2% 0.7% 0.7% 9.9% 5.8% 8.1% 9.6% 7.9% 8.8% 6.4% 7.1% 6.1% 5.8% 5.8% 13.5% 18.5% 21.9% 21.7% 27.2% % 15% 30% Percent of respondents Source: 24 th Annual Trends and Issues in Logistics and Transportation

14 Direct to Consumer An Increasing Portion of Transportation Spend Supplier direct to customer's store, 3.6% DC direct to customer's store, 14.0% Our DCs to customer DCs, 18.9% Plant direct to customer's store, 9.9% Our supplier direct to consumer, 6.4% Our plant direct to consumer, 36.2% Our DC direct to consumer, 11.0% Source: 24 th Annual Trends and Issues in Logistics and Transportation

15 Managing Domestic Transportation Using Less Sophisticated Tools and Methods to Manage Domestic Transportation A software package or module that is part of an ERP 19.6% A software package installed in an on-premise data center 23.5% A software package running and hosted by a 3PL 15.7% Manual methods, including those supplemented with spreadsheets, or other productivity tools 27.5% A software package running and hosted in the cloud 5.9% Other 7.8% 0% 15% 30% Percent of respondents Source: 24 th Annual Trends and Issues in Logistics and Transportation 15

16 Primary Method Used for Procuring Transportation Services Inbound Spot market 21.6% Outbound Contract 43.1% Controlled by supplier 35.3% Spot market 26.5% Contract 42.9% Controlled by customer 30.6% 16

17 What Portion of a Company s Freight Contracts Are Rebid During The Event? Managing Freight Contracts Ø 55.6% of respondents rebid only a portion of their freight contracts Ø 33.3% of respondents rebid all of their freight contracts How Often are Freight Contracts Rebid? As conditions warrant but at least once a year, 16.2% More frequently than quarterly, 13.5% Every quarter, 5.4% Ø 11.1% of respondents use another process More than two years, 21.6% Semi-annually, 13.5% Annually, 16.3% Biannually (every 2 year), 13.5% 17

18 Who Manages Transportation in the Supply Chain? 3PL - non-asset based 13.0% In-house, centralized 44.9% Carrier - asset based 11.6% 3PL - asset based 14.5% 60.8% of respondents manage transportation in-house In-house, decentralized 15.9% 18

19 Who is Making the Transportation Decisions? Percent of Respondents Area managing/ controlling activity Preparation and solicitation of RFQs Carrier negotiations Operational planning Carrier performance evaluation Purchasing/ procurement 17.9* * Transportation/ logistics 46.2* * 80.8 Jointly by procurement and transportation * * Other TOTAL *Statistically significant change YOY. 19

20 SHIPPERS VS. CARRIERS How can we both Win?

21 Misaligned Business Objectives Maximizing profitability 25.1% 37.5% Increasing customer satisfaction 29.2% 33.9% Maximizing asset utilization 6.9% 20.8% Carriers Shippers Reducing costs 12.5% 34.1% 0% 20% 40% 21

22 Transportation Scorecard Mode of Transportation TL 62.1% 73.1% 76.4% LTL 72.2% 78.8% 81.1% Rail 35.3% 85.5% 74.0% Intermodal 51.9% 75.8% 72.8% Parcel 73.8% 90.6% 83.0% Data represents mean responses 22

23 Primary Actions by Shippers for Leveraging Transportation Spend Priority 1 Increase Shipment Visibility Priority 2 Increase use of Dedicated Segment service levels for customers Extend lead time for some Increase delivery window for some

24 Primary Actions by Shippers for Leveraging Transportation Spend Priority 3 Make both information and loads available to carriers much earlier than in the past (AM preferred) Increase use of drop and hook trailers Priority 4 Increased use of multi-modal shipments Improve shipment consolidation Reduce re-routing and re-scheduling Use more sophisticated tools

25 Doing the Things that Matter: Shipper Perspective 1. Ability to respond to changes 2. Ease of doing business 3. Performance factors 4. Cost of service 5. Potential for a long-term relationship Source: NASSTRAC Shipper Survey

26 Strategic Carrier of Choice: Top 5 Scorecard Metrics 1. On-time delivery 2. Reliability of service 3. Ease of doing business 4. Equipment availability 5. Ability to respond to changes

27 Now what do the Carriers say?

28

29 Shipper of Choice Scorecard Elements LEVEL 1 METRICS LEVEL 2 METRICS LEVEL 3 METRICS LEVEL 4 METRICS One Time Shipping Flexibility Feedback/Recognition Clear Expectations Consistent Volume Timely Payments Data/Information Sharing No/Few Empty Miles Driver Productivity (quick unload, low detention)

30 The Transportation Evolution: Surviving to Thriving Three Steps to Reposition the Way Shippers Manage Transportation Ø Re-orient the corporate perspective Ø Ø Develop a solid plan with your carrier base Invest in the developing relationships that will make both parties better

31 Thank You! Gail Rutkowski Executive Director, NASSTRAC

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