Finding hidden money_e_course_2013

www.freightsavingstips.com

http://www.freightsavingstips.com


Congratulations on taking the first step towards a helping your company

achieve a best in breed inbound logistics operation! This five day e-course will help your company achieve immediate cost savings, allow you to collaborate better with vendors and set

the standard for other areas of your company.

Why Inbound Logistics? Gartner Inc, the people who publish the Supply Chain Top 25, has conducted research that sites an irrefutable link to companies that achieve supply chain excellence and greater profits (as sited in The New Supply Chain Agenda: The Five Steps That Drive Real Value). My ultimate goal in life is to help people achieve this standard. I believe inbound transportation is the foundation where a sustainable structure can be assembled. Those of you who follow the instructions outlined in this e-course will be well on your way to achieving excellence within your entire operation.


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Our Goal Our goal is to guide you to help your company to save money, streamline processes and make you look like a superstar in front of the big boss. If you are the big boss, the goal is to quiet the whispers of your employees who keep wondering what the heck you do all day. If you follow the simple steps in this e-course, I am telling you that you will see immediate cost savings and process improvement. Most importantly, your company will have laid down the frame work to achieve supply chain excellence in the rest of your operation. I’ve really designed this so that a college intern could run with this project. Even though we are aiming for operational excellence, you don’t need to be a Jedi Knight in LEAN Six Sigma to have success. In fact, if you put as much effort as you would to get a “C” grade in a college course, I promise that you will still realize cost savings and process improvement.

Who is George Muha

First, I want to make sure you know exactly who the person is behind this e-course. Why? Because I’ve spend thousands of

hours in hundreds of companies putting into practice the same strategies that I teach in this e-course. I just became tired

of watching so many people lose money, when I could just as easily share these simple strategies with the masses. I would like to take you on a “Factory Tour” of my blog Freight Savings Tips, so you can see firsthand that everything I will ever tell you comes from years of practice educating and helping hundreds of people achieve operational excellence. All of my experience comes from holding vice president and director roles for supply chain consulting firms, trucking companies and third party logistics providers over the course of my career. Through my blog, I share secrets about the transportation industry that shippers need to stay operationally sound and ahead of their competition. If you have any questions, feedback, or need assistance during this e-course, I’d love to hear from you. Just reach out to me any time at [email protected]. Okay, let’s get into the e-course so you can get into some stuff and start saving gobs of money!



DISCLAIMER

The information contained in this guide is for informational purposes only.

Any advice that I give is my opinion based on my own experience. You should always seek the advice of a professional before acting on something that I have published or recommended.

Please understand that there are some links contained in this guide that I may benefit from

financially. The material in this guide may include information, products or services by third parties. Third Party Materials comprise of the products and opinions expressed by their owners. As such, I do

not assume responsibility or liability for any Third Party material or opinions.

The publication of such Third Party Materials does not constitute my guarantee of any information, instruction, opinion, products or services contained within the Third Party Material. The use of

recommended Third Party Material does not guarantee any success and or earnings related to you or your business. Publication of such Third Party Material is simply a recommendation and an expression

of my own opinion of that material.

No part of this publication shall be reproduced, transmitted, or sold in whole or in part in any form, without the prior written consent of the author. All trademarks and registered trademarks appearing in

this guide are the property of their respective owners.

Users of this guide are advised to do their own due diligence when it comes to making business decisions and all information, products, services that have been provided should be independently verified by your own qualified professionals. By reading this guide, you agree that myself and my company is not responsible for the success or failure of your business decisions relating to any

information presented in this guide.

5© All Rights Reserved 2013

eCourse Finding Hidden Money In Inbound


Evaluate Current Vendor Programs

Okay, let’s cut out the small talk and delve right into this mother. There are three different ways transportation is set up from vendors; freight collect, prepaid & add and delivered price. What I want you to do is to simply start out by listing the vendors that make the top 20% of your purchases. Then I want you to sort them by the vendors that ship freight collect to you, prepaid & add freight onto their invoices and ones who ship delivered price.

STOP: I just gave you an action item so stop, take out a piece of paper and list your vendors that 20% of your business filters through. Now identify which ones where the terms are freight collect via your preferred carrier, prepaid & add and delivered price. I want you to see for yourself how you will tackle each vendor. I told you were going to move fast. Now that you have these vendors sorted out, let’s look at how we’ll address each category.

Freight Collect

For this category, there is not much we will do right away so put all the vendors where your freight terms are collect to your company to the side for now. We will get back to them but there is other low hanging fruit that we need to get to first.

ACTION: There is no action right now on your freight collect vendors. But don’t lose this list of vendors because we will come back to it.

Prepaid & Add

Okay, here’s where there is some meat that we can start gnawing off the bone like a carnivorous dinosaur. So, you should have a list of all the vendors where they are prepay and adding freight to their invoice and charging you for both freight and product on one invoice. This is the easiest to convert so that you can start to save money and reduce truck congestion at your dock.

The way you tackle this is to pull the last several months of invoices from each vendor on the prepaid & add list. Then pull all of the delivery receipts for the corresponding invoices. The delivery receipts are those pieces of paper the trucking company makes you sign and gives you a copy when they deliver your vendors product. So if you have your vendors invoice and the matching delivery receipt, you have everything you need to price compare. The goal here is to make sure it makes sense (i.e. cheaper without sacrificing service) to ship collect via your own preferred freight carrier, vs. your vendor’s freight program (and the likely markup they are tacking on to it). To compare your own vendors freight program to yours, simply refer to the delivery receipt to get the exact shipper and destination zip codes, weight and freight class. Once you have that information, plug that into the rating engines for the carriers you have set up under your account. When you get that rate, compare it to what the vendor

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charged you. Do this process to as many vendor invoices you can until you feel comfortable that you have identified the vendors whose prepaid and add programs are more costly than you shipping collect. Don’t start screaming at your vendors just yet. I know, you’re pissed because you’ve just figured out that some of your most loyal suppliers are ripping you off. But try to be cool. We will be addressing these vendors in a few days. But before we do we need to get some other stuff in order. For now, just identify who the vendors are that we will be converting from prepaid and add to freight collect.

Delivered Price

One day I am going to write a totally separate book regarding “delivered price”. I am going to title it No Virginia, There Is No Such Thing as Free Freight. Personally I do not like delivered price/free freight programs for two reasons. One is because it takes control away from the buying company. And second,

because the freight cost is hidden. Although I agree living in ignorance is bliss, it doesn’t fall in line with supply chain excellence, so companies need to address this. We will focus on this later in the course. But for now, just make sure you have separated the top vendors you have delivered price programs with. ACTION: Identify the top vendors you have delivered price programs with.

HOMEWORK

Okay class, that is enough for today. If you followed these instructions you don’t have any homework. Just to ensure you accomplished today’s goals, you should have:

• a list of your vendors broken down into three separate categories;

1. vendors who ship collect via your freight account

2. vendors who currently ship prepaid and add but who you’ve identified where it is cheaper if you did ship collect via your own account

3. vendors who ship “delivered price” to you. Again, we are focusing only on the vendors who handle the top 20% of your business

We’ll duplicate our efforts for the remaining vendors later on. But for now, let’s just stay focused on this top 20%. Don’t forget this list for tomorrow’s session. Now get a good night’s sleep because tomorrow is going to be fun!

I told you we were going to move fast! So put on your seat belt and take out your umbrella, because tomorrow its going to start to rain money!





Today we are going to learn how to create inbound routing instructions. Why? To take all the guessing work away from your vendors about your intentions of controlling inbound logistics, but of course!

Creating Inbound Routing Instructions

It is important to deliberate with vendors how to deal with you when it comes to shipping. So it is necessary to generate a standard for all vendors so you can begin to take charge of your supply chain.

A good routing guide must break down for each vendor which carriers and mode (parcel, less-than-truckload, truckload, air freight carrier, etc.) should be used based on weight, density and location. Making certain no detail is left out is a must. I’ve seen way many instances where the wrong mode was shipped with costly results because the inbound directions were limited or vague. The point of the routing guide is to outline specifics so vendors don’t have to be in a position of

guessing how to ship to you. So today we are going to create instructions vendors will live by when shipping to you.

Draw Up Rules First, you need to write down the rules you need your vendors to follow in order to make your life easier. Get some of your receiving, purchasing and accounting folks involved in these ideas. These are unique to you and so be specific. The theme here is to outline all of the things that cut down on extra work for your company (i.e. like purchase order numbers your system needs to match, labels that helps your receiving people unload faster, call before requirements to help your planning, etc). If you’re blanking on what these standards for you, here are some sample ones to help inspire you.

Make sure all shipments are labeled correctly and have packing slip attached on the outside of the merchandise.

All Bill of Ladings (BOL) and shipping labels must show the purchase order number.

For multiple shipments to the same destination, on the same day, each PO must be consolidated on one BOL.

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If you cannot meet the delivery date specified on a PO, you must notify XYZ purchasing manager.

LTL and TL orders require a minimum of 24 hours advance delivery notification. Only core carriers have standing appointments at the distribution centers.

Failure to comply with XYZ’s routing instructions may result in a “Non-Compliance” fee of $50.00 in addition to any other fees XYZ may incur as a result of not following the instructions.

Once you’ve outlined the specific rules that work best for you, next will be to create a consequence for not following your instructions. The point of this is not to nickle and dime your business partners. The point is to get inbound under control. Including a financial penalty for not following your rules will usually ensure vendor compliance - which is what you;re looking for. Whatever these penalties are is up to you. Just make sure they trigger vendor cooperation.

Building a Carrier Matrix

Supporting the routing guide with an easy to use carrier matrix will go a long way in helping to drive compliance. The matrix should outline clearly the carriers a vendor should use based on whatever criteria you decide (like their geographical location, size of order, etc.). This guideline should also include a breakdown of which mode should be used.

Below is a sample routing guide and carrier matrix. Feel free to use these samples as templates when creating your own routing procedures.

*If your struggling to come up with a penalty structure, a good place to go for inspiration is

your customers routing instructions. Surely you must have some customers who have

made the effort to control their inbound. If you deal with any big box retailers

as customers, a good suggestion is to use their

penalty structure as a guide.

'





XYZ CompanyInbound Shipping Guide

Guidelines: Please Use the following core Carriers

Less than 100 LbsSmall Parcel CarriersFedEx Ground

100 to 9,999 lbs or less than 8 pallets. LTL Carriers:See Routing Matrix

Over 10,000 lbs, 750 cubic it or over 8 pallets Call the XYZ Transportation Dept. (888) 555-5000 ext 100 for a truckload carrier option.

Key Shipping Guidelines

1. Make sure all shipments are labeled correctly and have packing slip attached on the outside of the merchandise.

2. All bill of Ladings (BOL) and shipping labels must show the purchase order number.

3. For multiple shipments to the same destination, on the same day, each PO must be consolidated on one BOL.

4. If you cannot meet the delivery date specificed on a PO, you must notify XYZ purchasing manager.

5. LTL and TL orders require a minimum of 24 hours advance delivery notification. Only core carriers have standing appointments at the distribution centers.

6. Failure to comply with XVZ’s routing instructions may result in a “Non-Compliance” fee of $ 50.00 in addition to any other fees XYZ may incur as a result of not following the instructions.

7. We receive the right to notify you of inappropriate shipping methods that do not meet the level of vendor cooperation that we accept. The use of non-core carriers creates inefficiencies within XYZ’s supply chain and will result in a chargeback of applicable freight over charges plus a $ 50 penalty fee to be deducted against the suppliers next invoice.





AL AR AZ CA CO CT DC DE FL GA

LTL 1 AVRT AVRT UPGF UPGF UPGF UPGF UPGF UPGF AVRT AVRT

LTL 2 HMES HMES CNWY CNWY CNWY CNWY CNWY CNWY HMES HMES

Parcel FedEx FedEx FedEx FedEx FedEx FedEx FedEx FedEx FedEx FedEx

Truckload Call us Call us Call us Call us Call us Call us Call us Call us Call us Call us

International Call us Call us Call us Call us Call us Call us Call us Call us Call us Call us

HOMEWORK

Today’s homework is to create a routing guide and carrier matrix that will tell your vendor how to ship to you. We are not sending this out to any vendors yet. All tonight’s homework involves is creating these two items. Feel free to copy the samples above and populate with your instructions and carrier guide. Now get some rest because tomorrow we are going to start putting some real money into your pockets

SCAC Cods: AVRT – Avenritt, HMES-USF Holland, NEMF-New England Motor Freight, CNWY-Conway Motor Freight

Truckload- Call (888) 555-5000

International Call (888) 555-5000





Okay, let’s stop fooling around and start putting some real dollars into your pockets! Today we are going to convert the vendors who are prepay and adding freight to their invoice to collect under your account.

Convert Prepay and Add to Collect

Right now, I want you to refer to the prepay and add vendor list you created two days ago. This is the list of vendors who you identified where it is cheaper to route via collect vs. their marked up freight charges.

The way you are going to this is, one by one you will advise your vendors to follow your routing instructions. Most vendors that are prepay and adding freight should be more than happy to follow your shipping

instructions. Although it may be a small profit center for them, they’ll likely rather to make you happy then make a few bucks on freight. So today’s lesson is all about putting the extra bucks they’re making on freight into your pockets where it belongs.

Sometimes vendors will push back on your routing instructions. But that’s too bad because its our money they are messing with! If they want to absorb freight with no extra costs to you, then that is their prerogative. But if it is going to cost you more to ship by their method, then you

need to convert this or take your business somewhere else.

If you do feel vendors are hemming and hawing, and you don’t want to get ugly with them. We can take the high road to begin with. Here are some nifty comebacks that could come in handy if vendors give a little guff about your new shipping instructions.

• “Congestion on our receiving dock is a big problem so we need to cut down the number of carriers.”

• “Our company is on a journey to supply chain excellence.”

• “We want to collaborate better with our suppliers to streamline processes.”

However, it’s not necessary to go overboard explaining things with suppliers. You’ve just learned that their deal sucks, so there is no need to fool around. Plus, at the end of the day, suppliers know who the customers are so they’ll likely comply as much as they can.

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There may be some legitimate reasons why your vendor cannot use your shipping instructions (like the supplier is in a remote location). You’ll have to weight some of those instances out. But for the most part, this exercise should be a nice windfall for your company if you have more than a few vendors who have been shipping prepaid and add.

Added Tax Benefit: Depending where you are located, there might be an added tax benefit by paying the

freight carriers direct as opposed to “prepaid and added” to your vendors’

invoices. In some jurisdictions, the tax laws right off freight costs if they

are paid direct to freight carriers. But they don’t offer the break if it is added to a vendor invoices as “shipping & handling”. Check

with your accountant to see if your company can get some tax relief.

HOMEWORK

Go through each vendor you found that is costing you more under their prepay and add program and convert them to collect under your carrier agreements. Remember, we are setting the table for supply chain excellence so make sure your vendors know these instructions are requirements not suggestions. Now go and git ‘er done!





Are you having fun yet? Have you asked the boss man or woman for a raise yet? If not, hold off. Let’s put more money in their pockets so they’ll throw in a big bonus too.

Unblundling Delivered Price Programs

Today we are going to walk through the process of unbundling delivered pricing programs. I know exactly what some of you are saying to yourself. “Why would we touch our “free” freight programs? I mean after all, its FREE!”

However, you need to know that nothing is “free” - especially when it comes

to delivered price programs. Freight is in there, its just hidden! Vendors typically have some small minimum order threshold they want customers to buy. Then they bury the costs of freight and product into a delivered price.

The point of today’s lesson is to extrapolate the freight portion of the delivered price to give you the information to have the upper hand in negotiations.

UNCOVERING THE COSTS

The most important part of unbundling these freight programs is to understand the costs to ship product to you are buying from your vendors. This is not as complex as it may seem. If you were able to convert the prepaid and add

orders to collect in Day 2, then you have the skill set to do this. Plus, to have success here, all you need to do is follow my lead. First, follow these simple steps:

1. Refer to the list of vendors you made in Day 1 that have delivered or “free” freight programs.

2. Pull the last few months of order invoices for these vendors.

3. Pull the corresponding deliver receipts for these invoices.

4. Use the delivery receipts to rate what it would have cost you if you shipped this collect.

Once you have identified what it would have cost you if you shipped this collect, then you have a pretty good idea of what it is costing your vendor to ship it to you. Now that you have that information, you want to calculate what freight is as a percentage of invoice on multiple orders for each vendor. The larger the sample you gather the better.

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THE STRATEGY

The strategy in converting delivered or “free” freight programs to collect, is to secure an allowance or discount from your vendor in exchange for routing via your own carrier. Stay with me here, this is about to get good. The key is to get your vendor to give you an allowance that is greater than what it costs you to ship collect.

So if you determined it costs you 4% to ship collect via your own provider, then you need to get an allowance that is higher than this. So if your vendor agrees to give you a 6% concession on the product in exchange for you routing via your own carrier, then you are essentially benefiting from a 2% delta.

Remember that it will likely be a negotiation with your vendor to arrive at a number that makes sense for you, so start high and leave some wiggle room.

THE NEGOTIATION

When dealing with a vendor, you need to state your case why you NEED to ship collect. Give them the same reasons you used for your prepay and add vendors from yesterday’s e-course:

Congestion on our receiving dock is a big problem so we need to cut down the number of carriers.

Our company is on a journey to supply chain excellence.

We want to collaborate better with our suppliers to streamline processes.

If you don’t follow our guidelines, we’ll go elsewhere with our business.

Conversion of these delivered price programs requires tact so make sure you have your game face on the whole time. Remember, this only makes sense to do if the allowance they give you is more than what it costs you to ship via your own carrier.

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DON’T FALL INTO THIS TRAP

A common mistake I see people make is this: they instruct their vendors they are shipping collect and request an allowance. We are not “requesting” anything here. We are asking for what we need, so knowing what allowance to ask for is a must.

When a vendor gets a “request” to provide an allowance for routing collect, this will likely be lower then your costs to ship it. I’ve seen people convert these programs to collect with an allowance that ends up costing the buying company more - which defeats the entire process. So lets make sure we’re smart about what we’re doing.

HOMEWORK

Refer to your list of delivered price vendors and unbundle these costs by comparing to what it would cost under your freight programs. Identify what freight is as a percentage of invoice for each vendor. Start asking your vendors for allowances that are greater than this number so they can accommodate your “inbound freight initiative”.





Congrats! You’ve made it to the final day of reckoning! If you’ve followed my instructions over the past four days, I guarantee you’ve put money back into your company’s cash register (where it belongs)!. Now that you’re becoming a pro at affecting the top 20% of your vendors, you have the tools to go after the remaining 85%. After you do that, you are going to use the principles outlined below to skyrocket your business to unforeseen heights! Now, let’s land this ship.

Collaborate With Vendors

To achieve the pinnacle of supply chain excellence within inbound, there are several things that you must have. Some of these include analytics, key performance indicators, technology, Lean training and several other items. But you don’t need the Millennium Falcon to make some real and lasting changes. The one thing you really need to master is the art of collaboration.

col·lab·o·ra·tion/kəˌlabəˈrāSHən/Noun

The action of working with someone to produce or create something.Something produced or created in this way.

Synonymscooperation - contribution

Collaboration is a word that gets thrown around a lot in business. But the problem is it’s rarely ever used to it’s full potential. The reason is not because people do not know how to collaborate, its because they over complicate it. So in this session, I am going to give you the secret that will change your view about collaboration and get your vendors eating from your hands.

First, I’d like to tell you the most common mistake about collaboration. Everybody

wants to really work in conjunction with their

suppliers. So the biggest faux pas they do is get

the biggest available leader in their company to talk to

the biggest available leader

at the company they want to

collaborate with. They have a big

three hour meeting to discuss how they

will “collaborate” with each other, then they

come up with a game plan that won’t work in a million

years. After that they go out and spend too much on food and drinks.

Sound familiar?

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But for collaboration to take hold, its the folks in the trenches need to be taking the lead. In fact, the keystone to collaboration is to get keep anyone with a tie (or even a collared shirt) completely out of the conversation. Trust me, these people are useless when it comes to collaboration. What you want to do is to get the people in the plant that are doing the day to day work to speak to the people in the plant that are doing the day to day work of the collaborating company.

When this happens, something magical happens. It’s the same kind of thing that occurs when you bring an interpreter to a conversation where everyone is speaking a foreign language. Typically, this unwinds in this three step process. 1. The plant guys/gals correct all of the redundant things leadership or sales people set up.

o I have witnessed the following conversation multiple times. A plant manager of the shipping company says, “I wish we could ship once a week, but your purchasing department says they need the inventory dispersed throughout the week.” The operations person from the customer says, “I wish you would ship once a

week. Your product just sits all week so I don’t know what they are talking about.” Boom! Within the next 30 seconds, instead of shipping four small orders a week, a consolidated weekly shipment was arranged. Plus the freight on the consolidated order is much less than the multiple smaller orders.

2. The plant guys/gals look for additional areas that make their lives easier.

o Operational people know how operational people think. So once they untangle all the things that were previously set up, they can start looking at ways to help each other. The way operational people think is if they can find ways to cut out waste, they’ll do it. My favorite example of this is when a warehouse

manager friend of mine had her vendor continue to

ship her truckloads of product, except without packaging. The packaging was

just being thrown out and repacked in her own branded

boxes. You can read this example in its entirety

HERE. The end result is the vendor saved a ton of money

in packaging materials and my friend cut out hours of unpacking the product and paying to have the corrugated thrown out. She also put herself in a position to ask for lower prices (which is where the gold is).

3. A new, unbreakable bond is formed.

o Once operational people start speaking the same language, its like they are working for the same company. They get to know each other’s operation as their own and can start to rely on each other in a way a sales person or C-level’s can’t manufacture with theories and promises (or expensive bar tabs).

This three step process is not the rule or a road map. It’s just outlines some of the real benefits that can unfold when collaborating the right way. The point is, if you allow the people in the trenches to do the collaboration, healthy results are the output. In summation, the pinnacle of managing inbound transportation is collaboration. The secret to collaboration is to get the suits out of the way and allow operations folks to intermingle. Once collaboration is in full swing, then you can start talking price points. If the collaboration resulted in a cost savings for the vendor, then there is ammunition to start the negotiating process. HOMEWORK Go down to your plant floor and find out who in your company knows the ins and outs of the day to day operation. Tap that person on the shoulder and tell them you are taking a road trip to your biggest vendor.


http://freightsavingstips.com/2011/01/15/collaborating-with-customers-to-improve-your-supply-chain-performance/

Final Words from George

Congratulations! If you’ve made it to this point, you’re awesome, seriously! I know I’ve provided you with a lot to think about in this e-course, but you now have the road map to take the information that you now know and put into practical use in your company.

Thank You So Much! I hope you have enjoyed this e-course asmuch as I loved writing it for you. I can’tthank you enough for your continuedsupport of the Freight Savings Tips Blogand everything I do.

I appreciate each and every one of you fortaking the time out of each day or eveningto read this, and if you have an extrasecond, I would love to hear what you think about it.

Please leave a comment at www.freightsavingstips.com/ecourse, or if you'd rather reach in me in private, don’thesitate to shoot me an email at [email protected]. You can also connect to me through Google+, LinkedIn, Facebook and Twitter.

I read each and every single comment and email, so don’t be afraid to say hi!


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Finding hidden money_e_course_2013