2016 Q1 QReview FINAL

qreviewJanuary - March, 2016 /// NO.6/Q1

Transportation Impact Quarterly Review Supply chain news you can use.

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WHAT BUYING A CAR WILL TEACH YOUABOUT SMALL PACKAGE NEGOTIATION

PARTNERSPOTLIGHTPAGE 06

LIFE’S TOO SHORTFOR BUSINESS AS USUAL

SAME SHIPMENTS SAME DAYPAGE 04

SAME-DAY SHIPPING: A MOVE IN THE RIGHT DIRECTION

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QREVIEW is a quarterly newsletter published by Transportation Impact. All

content in this publication is under international copyright laws. No part of the

content can be reproduced in any form without the prior written permission of

Transportation Impact.

A s temperatures rise and the sun shines a little longer each day, Emerald Isle residents start gear-ing up for summer. Not only do

we prepare for impromptu post-work beach visits and sandbar hopping on the week-ends, but we also prepare for the arrival of tourist season.

In the summer months, our population of 3,775 full-time residents increases to 35,000 to 40,000. When the vacationers take up temporary residence in our tiny beach town, our restaurants are busier, the sidewalks are packed with bike riders and pedestrians and you can barely see the sand for all the towels, chairs and coolers on the beach. While the locals might avoid the grocery stores on Saturdays and Sundays as guests check in and stock their kitchens for the week, we still love the influx of beachgoers.

Those visitors bring so much diversity to our town as we welcome people from all over to enjoy everything that the North Carolina Crystal Coast has to offer. With vacationers coming from all walks of life, you never know who you’ll meet at your usual hangout or what story they’ll have to tell.

Our restaurants and local attractions also profit from the increased traffic. Seeing full parking lots and long wait times might be an inconvenience for some, but we’re happy to know our business-owning neighbors and friends are benefitting economically. The less-populated winter months seem a lot shorter when your booths and tables were filled all summer long.

The only difficult part of summer in Emerald Isle is watching the foot traffic in front of our office as people wheel their wagons to-wards the beach while we are sitting at our

desks analyzing shipping data or checking in with our clients. Thankfully, with beach access just a few steps across the street, a quick trip to dip our toes in the water or to eat a picnic lunch makes for the perfect midday break, especially when you work as hard we do.

Keith ByrdCo-Founder, Principal PartnerTransportation Impact [email protected]

Welcome

Same Shipments. Different Day.What UPS’s investment in a potential competitor suggests about the future of same-day shipments and the lengths companies will go to make them more affordable.

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Partner SpotlightOne man’s business playbook is helping high-growth companies eliminate noise and hone in on what’s important.

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Contents

It may sound simple, but the most important aspect of nego-tiating a favorable shipping con-tract – any contract, really – is knowing with absolute certainty what points within the deal are most important to you.

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Shipping Strategy

You might not know it, but the similarities be-tween haggling over the price of a new car and bargaining for better shipping rates are striking. Understanding Your Options

Here’s what you should know about the three types of 3PL providers.

Q-Tip Small Package Negotiation

DISCOUNTS

Same

We all want better rates. We want to pay less and receive more. But those who best understand what drives their own costs can better comprehend the value they bring to the carrier and thus be less inclined to be pinned down by the dreaded value proposition.

The key to this understanding, of course, is in your company’s unique shipping data. All negotiations require a give and take, and though it might seem obvious, the first thing you need to know before you can take is what you have to give.

Your package characteristics are the DNA that determines the profitability of your account in the eyes of your carrier. If you ship dense, heavy pack-ages, your boxes fill planes and trucks while leaving plenty of room for additional, billable packages to come on board from other places. To the contrary, if you ship large, lightweight packages, you’re hog-ging all the space.

So before you set out to ask for everything but the kitchen sink, break down the playing field to the simplest level. Understand that different businesses have different needs. Think critically about the ser-vices that you utilize heavily and give equal thought to the ones that you use less frequently. From there, you can do the math. If you can illustrate to your carrier rep where your value lies, they’ll understand that you see the big picture and be more likely to go to bat for getting you better discounts.

ANALYZESTRATEGIZEREALIZE /// [3][2] /// QREVIEW · January - March, 2016 · NO.6/Q1 /// transportationimpact.com

It’s no secret that UPS, FedEx and Ama-zon, along with just about every other package carrier, are pulling out all the stops in their respective attempts to keep up with increasing e-commerce demand. That area of the market has been con-sistently difficult to efficiently capitalize on for UPS and FedEx, especially during the holidays. And as competition across virtually all industries increases, the race to the bottom line often boils down to which companies can put their products in customers’ hands the fastest, even if not necessarily at the lowest cost.

Internet ImpulseTo fully understand the same-day sce-nario, it’s necessary first to understand the difference between the impulse consumer’s willingness to pay a premium for faster service and the more cost-con-scious one’s desire to still receive an order quickly, but for a lower price.

E-commerce has substantially lowered barriers to entry, allowing entrepre-neurs to thrive collectively in the face of conglomerates. While one small business that sells t-shirts online could never compete with companies like Walmart or Target a decade ago, the sheer volume of those individual small businesses now provides strength in numbers, allowing sustainability mainly by enabling precise, targeted focus. These specialty markets have experienced enough growth through e-commerce that many of the individu-al businesses are able to leverage just enough discounts from their primary small package carriers to syphon cus-tomers away from bigger retailers with clever marketing strategies, comparable products and quick turnaround times.

One thing those companies likely could not afford, however, would be the steep prices associated with same-day services from major carriers like UPS, FedEx or Am-azon. Even though these costs probably

would be passed on to customers, lagging volumes still would result in higher base costs. This would price many smaller businesses out of at least some business, depending on just how specialized their specific target markets are.

Davids vs. GoliathsFurther complicating the way ahead for smaller shippers is the leverage larger companies have with omni-channel dis-tribution. The ability to fulfill orders from neighborhood brick and mortar stores, combined with larger discounts for ship-ping services, leaves large retailers, for instance, more than capable of competing directly with smaller companies selling the same products.

All is not lost for the small business, however. There are several very important facets of the supply chain for which the Davids of the world still have the upper hand; mainly cost to serve and custom-er service. While a larger competitor may be able to fill orders from any or all of its stores, there is, of course, great and complex cost associated with the resources required to do so. Staff, assets and technology have tangible, hard-dollar costs, while implementation, strategy

and execution have soft-dollar costs that many companies still struggle to manage efficiently.

Undoubtedly, a large part of big box re-tailers’ plans is to afford online customers the same ability to make an impulse pur-chase as in-store shoppers. Store displays and in-store layouts and promotions are things we’re all familiar with. How many times have you seen a child throwing a tantrum in the checkout line? There’s a reason the candy isn’t stocked next to the area rugs.

Grownups are impulse buyers, too, especially those of us who are still young enough to sometimes wonder wheth-er we’ve grown up or not. The modern consumer wants the best of both worlds – the convenience of shopping online and the access to instant gratification.

And while it’s not quite instantaneous yet, same-day delivery is a move in the right direction.

Same Shipments. Same Day.

In an intriguing move, UPS announced on February 24 that it has put cash behind a same-day-delivery startup called Deliv, which Fortune speculates could someday become a UPS competitor.

A UPS spokesperson said that the company sees same-day delivery as a growing segment and con-

tends that its investment would be “a better use of resources ... than to test ideas internally.”

The move certainly isn’t unprec-edented. In fact, it’s somewhat common for the carrier, according to Forbes, who says this strategy is used often with UPS’s venture capital fund, called the Strategic Enterprise Fund.

Regardless how the relationship unfolds, the move shines an unavoidable spotlight on the same-day sector, which seems to be gaining traction despite the fact that UPS doesn’t “see the economics for same-day delivery for retail packages as currently fulfilled by Deliv.”

The race to the bottom line often boils down to which companies can put their products in customers’ hands the fastest . . .

Supply Chain Solutions

The modern consumer wants the best of both

worlds – the convenience of shopping online

and the access to instant gratification.

DelivSame day delivery is offered in existing checkout, whether online, mobile, phone, or in store. Customers choose when and where their purchase is delivered.


numbers that reflect where they are in achieving their results.

The scorecard data identifies problems, called “rocks,” that need the most focus. Individuals are chosen to be accountable for each rock, and responsibilities are del-egated where needed to insure that the correct person is handling the right rock.

The EOS also implements a new way for department heads and managers to keep track of their to-do lists and those of their employees. Through Level 10, or L10, meetings with clear agendas and time restraints, each team member stays on topic, establishes tasks to be completed following the meeting and provides valu-able feedback about where they currently stand on the scorecard.

“The goal of these structured meetings is to simplify the system. Clarity and sim-plicity is the way to achieve real, simple results,” said Goetz.

And real, simple results are what TI is achieving. Through Goetz’s coaching and the proven system of his EOS, Transpor-tation Impact isn’t just focusing on the offense and defense of the supply chain management world, it is transforming the way that it plays the game.

until 2012, Goetz truly became an entre-preneur during his high school days.

“I started washing cars and mowing lawns,” said Goetz. “I was making money and pro-viding a great service. I recruited some of my buddies and I built a business out of it.”

Eliminating frustrationThat passion for putting together teams and building businesses led Goetz into the civil engineering field and later into forming a successful company that services businesses across eastern North Carolina.

The implementation of Goetz’s EOS focuses on solving five common frustra-tions of entrepreneurs: lacking control, hitting the growth ceiling, insufficient profit, employee frustrations and inability to gain traction.

“Of those five, the most difficult frustra-tion to overcome and solve is hitting the ceiling,” said Goetz. “As things get over-complex, executives can’t achieve their goals. Between putting out fires and handling day-to-day operations there’s not enough time in the day to focus on the company. They need to take a day out of their busy schedules to really work on the business, not in the business.”

Time dedication is a key part of apply-ing the EOS. The first day of the 2-year commitment is a complex seven hours of evaluating areas of concern, developing the process for improvement, and identi-fying the company’s vision and values.

Long-term planningOnce an executive management team develops the company’s vision, 1-year plan, 3-year picture and 10-year target, they then set up a scorecard to track the

More infobenjamingoetz.com

Ben Goetz Companies

Sports teams need inno-vative playbooks and coaches to run effective plays and win games. Likewise, successful companies need a busi-

ness coach and entrepreneurial operating system (EOS) to make smart decisions and win clients. Ben Goetz, founder and CEO of Ben Goetz Companies, wears the coach’s hat at Transportation Impact, guiding TI’s team with his playbook of practical business methods and leading the compa-ny towards winning seasons for many years to come.

Goetz began Ben Goetz Compa-nies in August 2012, and since then he has helped 30 entrepre-neurs and their executive teams transform the way they do busi-ness in order to establish their missions and achieve results.While he didn’t start his company

A Playbook for

Ben Goetz leads executive teams down the path of success with his proven process.

SUCCESSI believe we are called

to be entrepreneurs always focused on

creating value for others.

-Ben Goetz


Partner Spotlight

Shipping Strategy Small Package Negotiation

What Buying a Carwill Teach You About

Small Package Negotiation

Buying a new car is one of most exciting and one of the most miserable experiences all rolled into one. On one hand, there is that shiny, new

set of wheels you’ve wanted for a while now – maybe even your entire life. On the other, there’s the price tag; the mere sight of which invokes that inevitable thought: I can’t believe I’m about do this.

So you do what everyone does. You negotiate. Every conceivable point of leverage is applied full tilt in an

effort to drive off the lot feeling high on that new car smell undeterred by an emptiness in the pit of your stomach (and wallet).

The sales rep starts at the sticker price, you start somewhere short of it, and together you embark on a bat-tle between “This is as low as we can go” and “This is the most I’m willing to pay.” Fueled by stubbornness and stale coffee you hold your ground as the rep pawns himself between you and the number cruncher fighting to protect the dealership’s bottom line.


Shipping Strategy Small Package Negotiation

easy for decision makers to worry about rubbing their carrier the wrong way, con-sidering the vital role that the national carriers play in helping businesses get their products into their customers’ hands quickly and reliably. The fact that there are essentially only two players in the small package market means that lever-age is harder to come by. Unlike the car dealer, the carriers have the upper hand since they know your options are limited.

Regardless, no company wants to lose business. It’s important to remember that so long as the business is profitable, it still makes good sense. If you do your homework and can resist the pressures to focus on anything other than the bottom line first (the bells and whistles may be important, but first make sure they are affordable), then you will arrive at a solution that makes everyone happy. You will save money and your carrier will make money.

Then both of you can buy a car!Minutes turn into hours and you gaze out the showroom window wondering whether that beige sedan with the dirty windshield is really so bad after all.You might not know it, but the similarities between haggling over the price of a new car and bargaining for better shipping rates are striking. Take the following into consideration during your next carrier negotiation:

The Sales PitchThe best car for the money vs. The best discounts in the market for a company of your size

Let’s face it, it’s about the margins. Whether you’re buying the car or negoti-ating a carrier contract, finance is looking at the bottom line. How much money will we make?

not the value doesn’t come anywhere close to offsetting the hard-dollar savings you will forgo in exchange for it.The carriers push value adds in much the same way. Take warehouse design, for instance. You may have heard some-thing along these lines before: We can’t discount the services any more than we already have, but what we can do is help you improve efficiencies which will save you even more money.

Says who? What tangible benefit will your company receive from something like a warehouse design? Maybe you will save money that way, but the carrier will benefit, too; probably by lowering its cost to service your account. The point is that, as is the case with the service plan, the cost to your carrier is not equivalent to the hard-dollar savings you’re looking for on the front end. Furthermore, the carrier has the ability to do both for you. If you weren’t talking discounts and needed the same help on a certain supply chain initiative, your carrier likely would be all ears. They might not be as eager to jump on it (What do they really stand to gain?). But if they are honest about their commit-ment to partnership, the two of you will find ways to make ends meet.

Stay focused on the price, and let your carrier know that cost is your number one concern. The dog and pony show is secondary.

The Electric Bill“After we pay the light bill...” vs. “After we pay the light bill...”

We all have bills to pay. If you tell your boss that you need a raise because there isn’t a whole lot left after you pay the light bill, you’re not going to get very far. Everyone has an operating ratio. People who own car dealerships own 70-foot

sport-fishing yachts. People who own UPS and FedEx own hundreds of airplanes and tens of thousands of vehicles. All of them can pay the light bill, believe me.

It’s a legitimate point, to be sure. Every-one has to look out for the bottom line and no one is in business to lose money. However, pricing engineers have factored every penny into the equation and have a very clear picture of how low they can go. If you’re requesting discounts so steep that the company on the other end of the negotiation can’t pay the bills, then the answer will be no, plain and simple. If they start nickel-and-diming, it may be an indication that you’re getting close to the breaking point. Don’t forget that the other side is fighting for ground just like you.

If the price you pay eats into the margin, they will make up for it somewhere else.

These and other similarities are found in just about all good negotiations. It’s

company can actually go. That’s why the car salesperson makes so many trips back and forth with the message “This is lowest price we can offer.” Like it or not, your carrier rep is trained to do the exact same thing.

They can go lower. And if you play your cards correctly, they will go lower.

The Value PropositionThe service plan vs. The warehouse design

How many times have you ever bought a car and not been lectured on the value of the service plan? It comes in many forms. Extended warranties, free maintenance, you name it. This essentially costs the dealership nothing, and more often than

Don’t take offense; that’s why people are in business. Don’t take no for an answer, either. What most buyers don’t know (or don’t realize) is that in both situations the sales rep doesn’t actually know where the bottom line is. He or she is simply at the mercy of the pricing department. In either scenario that department manages its information very skillfully.

While that may seem hard to fathom, think about it: How badly would the company’s margins deteriorate over time if the balance of power was spread hap-hazardly throughout the sales team?

Sure, some would be diligent in their attentiveness to the bottom line, but salespeople are salespeople. They get paid to sell, and many of them are going to justify a sale above all else, including the company’s profit. Car dealerships and carriers alike are very aware of this, and take measures to limit how low the


Supply Chain Solutions 3PLs

Choosing the right third-party logistics (3PL) provider is a big decision for a company. More and more, com-panies are looking for single-source providers

capable of managing a larger chunk of their overall supply chain. In the past, many vendors specialized in one particular area — small package, technology, packaging supplies,

freight, etc. — and the varied sources made things inherently complex. That has long been counterintuitive for shippers whose No. 1 objective was to simplify.

As is the case with the trucking industry itself — there are more than 1,100 less-than-truckload and truck-load carriers — 3PLs are all over the place, and it can be tough to decide which one best suits your needs.

UNDERSTANDINGYOUROPTIONS

What you should know about the three types of 3PL providers

3PLs are all over the place, and it can be tough to decide which

one best suits your needs.

[12] /// QREVIEW · January - March, 2016 · NO.6/Q1 /// transportationimpact.com ANALYZESTRATEGIZEREALIZE /// [13]

Supply Chain Solutions 3PLs

of the carrier agent model is that only certain carriers will work with companies that fall within that model due to potential conflicts of interest. If only certain bars are paying cab drivers a cut of the money they bring in at the door, it will obviously facilitate bias and limit the number of carri-ers a company ultimately has to choose from.

Shipper’s AgentsShipper’s agents determine which carriers best suit a com-pany’s needs and negotiate rates with all of those carriers and thus build a customer its own network. This type of 3PL likely has its own version of a transportation management system (TMS) or is at least capable of loading a custom-er’s custom rates into the TMS they already use. This type of provider empowers its cus-tomers to analyze price and

service for each shipment at manifest and to quickly notify a carrier and produce a bill of lading. While brokerages and carrier agents also provide similar visibility through TMS, a shipper can be more certain that their costs are market appropriate, since a shipper’s agent 3PL likely gets com-pensated based on measured savings; therefore, the better rates they negotiate for you, the larger their share. The cus-tomized rates combined with the level of visibility provided by the TMS can really make the freight shipping process more streamlined and cost-ef-fective. The downside with some shipper’s agents is that they withhold the rights to the rates they negotiate for cus-tomers. Good 3PLs, though, will negotiate the rates in their customers’ names. These true partnerships will not only provide access to all carriers

to ensure that a company can match its needs against the open market, but empower the company to free itself from a partnership down the road without incurring finan-cial hardship.

The 3PL that’s right for a company can depend heavily on volume and overall spend. Shippers with relatively low freight volume can benefit from brokerages or carrier agents and may be too small to qualify for the services provided by a shipper’s agent. If you’re looking for outside

help to manage your freight, however, knowing and under-standing what types of help are out there are important first steps in making the cor-rect decision. Shipper’s agents are a perfect fit for shippers with a sophisticated supply chain.

One of the first questions you should ask a prospective 3PL provider is a simple one: Whom do they represent?

Shipper’s agents determine which carriers best suit a com-pany’s needs . . . and thus build a customer its own network

the 3PL will match the freight, density and destination with the carrier within its network that can best meet the needs of the customer. The customer will never see the bottom line price that the carrier will charge for the freight, since the 3PL will obviously need to profit on the transaction as well. Therefore, it can be difficult for the customer to know where the markup is. Depending on volumes, the customer probably would negotiate better rates on its own, but not everyone has the resources. The downside

by companies with relatively light freight volume, broker-ages can provide benefit, but freight moving with any regu-larity likely will require a 3PL with a broader portfolio.

Carrier AgentsCarrier agents obtain pricing from a network of carriers and resell their rates to shippers. Think of them like taxi drivers that get a cut of the cover any time someone requests to be taken to the “best bar in town.” Companies looking to move freight will contact their 3PL with the bill of lading, and

One of the first questions you should ask a prospective 3PL provider is a simple one: Whom do they represent? Essentially there are three types of 3PL provider, and all play an important role within the industry. Deciding which one is right for your company will boil down to your specific needs. Those should be pretty apparent. As for the types of 3PL suitors, below is a breakdown to help you better understand which type is right for you:

BrokersIn the simplest form, freight brokers are most concerned with matching cost and ser-vice needs to individual ship-ments. In other words, brokers are transaction-minded. When a shipper uses a broker, it’s a lot like investing in the stock market; sometimes you win and sometimes you lose. Bro-

kerages can be great options for transactional shipments when the “stock market” is doing well. The downside is volatility and the fact that, because brokerages are commanding volume from dif-ferent places to fill truckloads, they are basically middlemen. The brokerage itself owns the rates, not the customer, since the brokerage is responsible for the total volume. Some-times shipments are a lot cheaper, and sometimes they are a lot more expensive. In many ways, technology has forced brokerages to either expand their service offerings or abandon the business altogether. Those that are still in the game, however, understand the strengths and weaknesses of their preferred providers and can match a shipper’s individual freight with a carrier that will make ends meet. Frequently used


Emailed $419 worth of automated address corrections to distribution center. Scheduled monthly email audit-savings report for parcel review meetings. Set up GL coding for web orders, service department and warehouse. Noted $1,284 in soft-dollar savings opportunities and customized dashboard with Air-to-Ground report.

What did you dobefore your first cup of coffee?

Schedule a 20-minute Parcel Intelligence Dashboard demo and learn how you can optimize your shipping spend and capture all your FedEx and UPS refunds.

transportationimpact.com // [email protected] // 252.764.2885

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2016 Q1 QReview FINAL