Understanding what a customer needs can save a lot of time, energy and money.

Replace tech rider to engineer, FOH mixer to sales person, artist to customer service department, tour accountant to budget manager, local sound company to inventory manager and instead of saying “what the venue actually needed” to “what the customer actually needed”.  Now isn’t that life imitating art, I don’t know what is.

For those of you who tend to be concerned with fuel prices (in other words, all of us), I thought this was a good visual.  Fuel prices have not peaked to the levels of mid 2008 which is a good thing.  But diesel did rise 29% from 2010 to 2011.  However, the Department of Energy is projecting fuel to remain at 2011 levels through 2012.

Courtesy of the DOE.

I wanted to give a word of advice to shippers out there they may be using a freight carrier who is on shaky financial ground.  If you are shipping with a freight carrier (I don’t want to say any names) who happens to be having a fire sale of assets, is facing a dilution of preferred stock, has a loss of customers and dealing with a very competitive LTL market you may want to make sure you pay attention.

When a larger LTL carrier goes out of business, it typically happens very fast.  It kind of like you show up to work and you get a phone call from someone you know saying, “Hey, did you hear so-and-so went under?”  Then you’re like, Oh crap!  What are we going to do?

Generally speaking, shippers don’t have to worry that much about the shipments that are in that carriers system.  The freight carrier will likely keep a lean staff on board so they can make sure they clean out their system of all remaining freight.  However, some of those shipments may take longer than normal to deliver.

But what you do need to concern yourself with is which carrier is going to handle your business now, and how competitive of rates you will be able to secure.

When a large motor carrier leaves the business it helps out the surviving carriers because of the influx of new business.  Carriers immediately get very selective of the business they want to move, generally keeping the more profitable business and dumping less attractive business.  Conversely, what this means for shippers is that rates rise up or it becomes impossible to negotiate aggressive rates.

So a suggested solution if all of your eggs are in the shaky carrier’s basket is to hedge it and start mixing it up now.  Engage another carrier and secure good pricing while you can.  It’s wise to start feeding that carrier some business to keep them in the mix.  That way, when that inevitable day comes for your carrier you won’t skip a beat.

Listen up you bean counters that are already fretting about going over 2012 budgets.  Over the last two years diesel fuel prices spiked nearly 29% ($2.99 average for 2010 vs. $3.84 average for 2011). However, according to the Department of Energy, diesel in 2012 is expected to average $3.85 per gallon, which is basically the same average for 2011.  You never can predict these things for sure, but the chatter around the transportation industry aligns with these forecasts.

Source: www.eia.doe.gov

In an effort to keep our roads safe from sleepy truck drivers the US Government is making changes to the hours of service rules.  On December 22, 2011 the Department of Transportation and the Federal Motor Carrier Safety Administration (FMCSA) announced regulations that mandate a new limit on the hours per week truck drivers can work.

Under the new rule, effective July 1, 2013, drivers will only be allowed to work up to 70 hours/7-day period, down from 82 hours currently. The rule maintains a limit of 11 hours of continuous time a driver can be behind the wheel.

Source: www.fmcsa.dot.gov

Kiss your supply chain.  No, I am not telling you to kiss your supply chain that way you weirdo!  I’m talking about the K.I.S.S. way.  You know, the Keep It

Keeping it simple in supply chain and operations can sometimes pay better dividends than having a great idea that is hard to implement.

Simple Silly way!

A very smart person told me one time that the best ideas don’t always get the best results.  Sometimes it’s the simple idea that is easy to implement that brings the most benefits.

I’m going to follow my own advice and K.I.S.S. this article.  Cheerio!

Do you question the way your company does certain things and wonder if there might be a better way things could be done?  Here’s a simple test to see if your company has any fangled processes in place that take much more time, man power and money than it should.  Simply ask the people who are in charge of the

It's not uncommon for bad practices within a company linger for years costing the company huge dollars in wasted time and tied up resources..

area this question: “Why do we do that?”

If the answer is, “Because that is what we’ve always done.” that process is likely ripe for improvement.

Most companies, as they grow, do form bad habits.  It’s generally no one’s fault.  This usually happens because someone creates a work-around.  Then someone else creates another work around to offset inefficiencies in the original work-around.  Then someone else gets hired and creates another work-around to offset the other work-arounds.  Then ten years later, someone asks, “Why do we do it that way?  That’s when you get the old reply of, “Because that is what we’ve always done.”

If you find yourself in that spot, don’t blame anyone.  Just find the best practice for that situation and create a new, more efficient set of rules for that particular process.

TIP:  A lot of times service providers are up to speed on the latest best practices.  So contacting the service provider who presides over the area in question might offer practical solutions.  In other words, if the tangled process is in payroll, ask the payroll provider if they can suggest a better way.  If over accounting, ask the ERP provider.  You get the idea.

A great alternative to consider when trying to reduce overall transportation costs is rail.  A rail provider can come to your facility and pick up your load just

Rail, like pork, is a healthy and cheaper alternative to over-the-road truckload service.

like a truckload carrier.  The difference is for the line haul portion of trip, your shipment is moving via rail road.

The down side of using rail is that the transit times are slower than normal over-the-road service; sometimes even doubling the time.  However, for stock transfers or inventory replenishment fast delivery is not always required so rail offers a great lesser cost option.

So when evaluating your transportation network, consider the other white meat – rail.

HAVING AN EQUALIZED “FREE FREIGHT” PROGRAM KILLS PROFITS, SO CHANGE IT

It’s common for shippers to have an equalized free freight program.  What I mean by equalized freight program I am talking about offering “free freight” to customers who purchase a certain amount of volume of goods, regardless of their geographical location.  The problem is transportation costs vary across different geographical areas.  That ends up varying gross profit margins in those same geographical areas.

Off-setting "Free Freight" programs by taking into consideration geography can set the stage for healthy profits.

The solution to this doesn’t require quantum physics or even more than a few paragraphs from me.  It’s rather simple.  Shippers can improve their gross profit margins by reviewing transportation costs over their customer base or geographical area to get a good handle of the impact to profits.  Then alter the “free freight” program to geographical areas that are taking the bigger hit on freight by implementing a surcharge or an increase in product price.

Once the financial implications are understood, shippers can create rules.  An example would be to give “free freight” within a certain radius.  Then, there could be an outer radius where freight is free after a certain fixed surcharge.  If another radius level makes sense, then the surcharge can be bigger.

The bottom line take away from this article is that there is no reason companies need to make less profit margins just because a customer is in a faraway geographical location.

The book The New Supply Chain Agenda (Harvard 2010) outlines an excellent strategy to help companies achieve supply chain excellence.  This book also has some very effective self surveys to help companies identify the current state of things concerning their own supply chain operations.  However, I like to keep things simple and wanted to share a way a company could use the highlights of this book do a quick 30,000 foot self survey of their respective operations.

The supporting website of The New Supply Chain Agenda outlines five pillars the authors (Dittmann, Slone & Mentzer) say must be mastered for a company achieve operational excellence.  So companies that want to measure their own supply chains can simply rank themselves against these pillars along with the supporting definitions given by the website.

THE SUPPLY CHAIN SELF TEST

Rank your supply chain on a scale from 1 to 5 to (one being very unsatisfied and five being very satisfied) to understand how you feel about the current state of things.

Talent is the first of the five pillars to drive supply chain excellence. If you don’t have the right people in place, you can’t build an appropriate strategy and you certainly can’t execute it. Finding talent for supply chain positions has unique challenges due in large part to the cross-functional and cross-company process challenges faced by supply chain executives today.  RATE:  1  2  3  4  5

Technology is always critical, but the real key is making sure you choose the right supply chain technology and successfully implement it. Improperly understood or implemented, technology can cause severe damage rather than improvement. You must be careful in how technology you select and apply the latest supply chain technologies, especially given the extremely complex nature of today’s global supply chains.  RATE: 1  2  3  4  5

Internal Collaboration involves each function in your firm playing a critical role in a successful supply chain; and will help you develop a clear vision for how they can work together to achieve supply chain excellence. In the book, there is a self assessment you should complete to honestly evaluate your process for aligning the demand and supply sides of the firm.  RATE:  1  2  3  4  5

External Collaboration focuses on how your company can achieve break though results by collaborating externally with both your suppliers and your customers. Best practices for collaboration exist and are being applied by more and more firms.  RATE:  1  2  3  4  5

Managing Supply Chain Change addresses the last but equally critical pillar of a supply chain excellence strategy. Everything else is for naught if you don’t execute successfully. You need to learn how to increase your chances of success on the path to supply chain excellence. Because of their cross-functional, cross-company nature, supply chain projects are more difficult to implement than those in other functional areas.  RATE:  1  2  3  4  5

Doing such a self inventory gives companies the chance to identify if a deeper dive is necessary.  More importantly, what can come out of these kinds of evaluations is a roadmap to a future desired state and all the benefits that come along with that.