Upcoming Meetings

Change Management

March 14, 2017
5:45 PM to 7:30 PM

Caesar's Table
125 N Market
Wichita, KS 67202

Our speaker will be Steve Maley and this will be a joint meeting with ASQ

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Demand Driven Sales & Operations Planning

April 11, 2017
5:45 PM to 7:30 PM

To be determined

Our speaker will be Carol Ptak

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Apics News

Shape the Future of Supply Chain Management as a Young Professional Board Guest
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APICS Launches New Website to Advance Digital Offering for Supply Chain Community
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HEC Montreal Wins International Student Team Competition At APICS 2016
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Welcome to the APICS Wichita Chapter!2016 C-BAR award

Are you interested in getting more involved with the operations of the Wichita Chapter?  We have two board positions open (VP of Marketing and President-Elect).  No experience is necessary.  For more information, contact Sandy Jessop at president@apics-wichita.com.

Message from our President - Managing Freight - Hidden costs in your supply chain

Last fall, APICS Wichita had the opportunity to host Andy Dean, Director of the Indirect Center of Excellence and Transportation and Logistics at Textron, Inc. He spoke to us about Logistics and the importance of managing freight spend. Andy has worked in the transportation and logistics field for most of his career and is one of the most knowledgeable people I know on the subject. One of the insights he gave was in managing outbound AND inbound freight, which is where I want to focus today.

Outbound freight is used to calculate the KPI of freight as a percent of sales. Inbound freight is generally generated from supplier shipments and may be hidden in the cost of the parts, showing up as Purchased Price Variance on the financial statements, or could be a line item on the invoice if the supplier is pre-paying the freight and adding it back onto the bill.

Many times, we focus on the freight we have complete control over. For many businesses, this is outbound freight via truckload, less than truckload (LTL), International, and/or small package. In understanding and controlling your freight spend, you must understand the benchmark of freight as a Percent of Sales for your industry as well as associated accessorial charges by mode. The benchmark information simply lets you know if you are winning or losing, meaning, are you doing better than your competitors. Understanding the accessorial charges by mode allows you to negotiate and/or prevent the accessorial charges from ever happening. Accessorial charges may include having to setup an appointment to deliver, a failed attempt to deliver, COD, inside delivery meaning the driver had to go inside a business to deliver, basically anything that might drive cost into the delivery of the product. For example, UPS small package may charge an accessorial for a residential delivery or for an invalid address. These accessorial charges start to add up.

A hidden transportation miss financially is when you are shipping to a customer and pre-paying the freight and adding it back onto the invoice. If you have not allowed for the full accessorial charge, you are potentially not getting fully reimbursed for the freight. One way to prevent this from happening is if you use the customer’s UPS or Fed Ex customer code when shipping their product. Another way to handle this issue is through a Transportation Management System (TMS). TMS shows you the costs associated with the shipment as the bill of laden is being generated. TMS will also prevent the need for pre or post audits and will typically provide correct USPS addresses for delivery, eliminating most of the surprise associated with accessorial charges. Some companies even consider freight as part of revenue generation in that they pre-pay the freight and add the freight to the invoice with a markup for handling.

If your company is part of a larger corporation, collaboration on transportation spend can provide significant savings. Alone, one company may be considered a small customer to a YRC or Ryder. If you combine the spend across the corporation, suddenly you may be a national account to be reckoned with and fought over. This drives competitive pressure to win your business, which is good.

Another area that can impact freight costs is when you expedite. It is better to have an expedite service on retainer and negotiated upfront. You lose all leverage if you wait until you need it and will pay tens of thousands more for the service than you should.

The harder freight to manage is inbound freight. You must work closely with the Purchasing / Sourcing department before tackling this area. Suppliers may have built the freight into the price of the part. If you ask the supplier to ship via your provider without resolving the part price, you will end up paying for freight twice without even knowing it. Ideally, by taking over the inbound freight, you get the freight off the invoice and out of the part price thereby eliminating any ability for the supplier to overcharge for freight due to “handling”.

The hidden costs associated with transportation and logistics are real but manageable if you take the time to understand your business. 

Sandy Jessop