FREIGHT MANAGEMENT FREIGHT MANAGEMENT TRAININGTRAINING

Instructions and TipsInstructions and Tips

What is Freight Management?What is Freight Management?

Definition: To handle or direct with a Definition: To handle or direct with a degree of skill, to exercise executive, degree of skill, to exercise executive, administrative and supervisory administrative and supervisory direction of the loading and direction of the loading and transporting of goods that need to be transporting of goods that need to be shipped or transported from one shipped or transported from one destination to another resulting in destination to another resulting in compensation.compensation.

Purchasing Freight ManagerPurchasing Freight Manager

State Purchasing hired a freight manager State Purchasing hired a freight manager to analyze freight and develop freight to analyze freight and develop freight contracts to save transportation dollars.contracts to save transportation dollars.

““Nothing moves for free”.Nothing moves for free”. Purchasing agents have the right to route Purchasing agents have the right to route

freight.freight. The state always has the option to use the The state always has the option to use the

vendor’s carrier or to choose another vendor’s carrier or to choose another source.source.

Benchmark ProgramBenchmark Program

In a bid response, vendors are required to In a bid response, vendors are required to include:include:

1) F.O.B. Origin, less freight and1) F.O.B. Origin, less freight and2) F.O.B. Destination, with freight2) F.O.B. Destination, with freight

Upon request our freight manager will compare Upon request our freight manager will compare the vendor’s freight rates with freight prices the vendor’s freight rates with freight prices offered by other carriers. Based on product, offered by other carriers. Based on product, weight, shipping point and destination.weight, shipping point and destination.

Our expectation is the vendor’s freight allowance Our expectation is the vendor’s freight allowance will usually beat our state freight rates.will usually beat our state freight rates.

The difference between the F.O.B. Origin and The difference between the F.O.B. Origin and F.O.B. Destination prices is the vendor’s freight F.O.B. Destination prices is the vendor’s freight allowance.allowance.

What Has WorkedWhat Has Worked Analysis of vendor bids ensures the Analysis of vendor bids ensures the

proper type of state carrier pricing is proper type of state carrier pricing is compared against vendor’s freight compared against vendor’s freight prices (freight allowance). The prices (freight allowance). The awarded bids include the optimal awarded bids include the optimal carrier’s rates with no change in carrier’s rates with no change in transit times or service.transit times or service.

State freight program annual cost State freight program annual cost avoidance is $500,000.00.avoidance is $500,000.00.

What Has Worked cont…What Has Worked cont… State Purchasing freight manager can State Purchasing freight manager can

advise and consult with agencies and advise and consult with agencies and political subdivisions to determine proper political subdivisions to determine proper carrier selection, i.e. air, small package carrier selection, i.e. air, small package ground, LTL or truckload, to meet their ground, LTL or truckload, to meet their needs for both inbound and outbound needs for both inbound and outbound shipping.shipping.

Provide agencies with freight pricing tools, Provide agencies with freight pricing tools, i.e. LTL rate disks, to enable them to make i.e. LTL rate disks, to enable them to make informed freight pricing decisions. Most informed freight pricing decisions. Most carrier rates are posted on the State carrier rates are posted on the State website.website.

Measurable freight savings program.Measurable freight savings program. Agencies retain their freight dollars saved.Agencies retain their freight dollars saved.

State of Utah Freight ContractsState of Utah Freight Contracts

Small Package Delivery Less-Than-Truckload TruckloadSmall Package Delivery Less-Than-Truckload Truckload Contract (LTL) ContractContract (LTL) Contract

I--------------I---------------I----------II--------------I---------------I----------I1 oz. +/- 200 lbs. 10,000 lbs. 44,000 lbs.+ 1 oz. +/- 200 lbs. 10,000 lbs. 44,000 lbs.+

MA454 Fed Ex PD-136 UPS Freight CarrierMA454 Fed Ex PD-136 UPS Freight Carrier (WSCA Contract)(WSCA Contract) (formerly Overnite) C.R. England, Inc. (formerly Overnite) C.R. England, Inc. All-Ways Trucking, Inc.All-Ways Trucking, Inc.

Contracts apply to intrastate, interstate and international shipments.Contracts apply to intrastate, interstate and international shipments.

Ref: Ref: www.purchasing.utah.govwww.purchasing.utah.gov ( (Other freight contracts are posted on Other freight contracts are posted on web site)web site)

Some Ways Freight Dollars Were Some Ways Freight Dollars Were Saved in Past PurchasesSaved in Past Purchases

Classroom Furniture for School Classroom Furniture for School DistrictDistrict

Vendor freight proposal: $14,000 for two truckloads of shipping from Los Angeles to Salt Lake City. State carrier charged $6,800 total for both truckloads. Cost savings of $7,200.00.

Some Ways Freight Dollars Were Some Ways Freight Dollars Were Saved in Past Purchases cont…Saved in Past Purchases cont…

New Boiler System for State University An over dimension truck plus two

additional flatbed truckloads. Vendor freight quote: $44,902.00. State freight carrier cost: $19,550.00. Savings of $25,352.00. Note: Vendor's freight quote was for a total of six truckloads.

Bookcases & Shelves for State Prison Vendor Quote: $1,060. State carrier LTL

price: $410.00. Freight Savings $649.00

Western States Contracting Alliance (WSCA)Western States Contracting Alliance (WSCA) Small Package Delivery Contracts Small Package Delivery Contracts

This multi-state consolidation of shipping This multi-state consolidation of shipping volume to achieve greater freight savings volume to achieve greater freight savings and service can be accessed on the State and service can be accessed on the State Cooperative Contract #MA-454 with Cooperative Contract #MA-454 with FedEx at the State Purchasing Website FedEx at the State Purchasing Website www.purchasing.utah.govwww.purchasing.utah.gov

Additional Contract InformationAdditional Contract Information Contract #MA-454 has no shipping minimum Contract #MA-454 has no shipping minimum

volume required. Significant measurable savings volume required. Significant measurable savings through no pick-up fees, capped fuel surcharges through no pick-up fees, capped fuel surcharges and lower rates. Rates are frozen for one year. and lower rates. Rates are frozen for one year. Contracts became effective: August 28, 2006. Contracts became effective: August 28, 2006. Uniform rates apply to inbound, outbound, Uniform rates apply to inbound, outbound, intrastate and interstate shipments.intrastate and interstate shipments.

Fifteen participating states as of September 2008: Fifteen participating states as of September 2008: Utah (lead State) Alaska, Arizona, Arkansas, Utah (lead State) Alaska, Arizona, Arkansas, California, Colorado, Idaho, Minnesota, Montana, California, Colorado, Idaho, Minnesota, Montana, Nevada, New Hampshire, Oregon, South Dakota, Nevada, New Hampshire, Oregon, South Dakota, Washington and Wyoming.Washington and Wyoming.

Ongoing Benefits of Freight Program Ongoing Benefits of Freight Program Cost AvoidanceCost Avoidance

Freight analysis continues to help control and Freight analysis continues to help control and reduce state shipping costs.reduce state shipping costs.

More agency buyers now analyze vendor freight More agency buyers now analyze vendor freight cost and service options. Call state freight cost and service options. Call state freight manager when necessary on an as needed basis.manager when necessary on an as needed basis.

Requiring vendors to justify additional fuel Requiring vendors to justify additional fuel surcharge requests on existing state and agency surcharge requests on existing state and agency contracts saves money.contracts saves money.

Sole source freight pricing is being scrutinized by Sole source freight pricing is being scrutinized by State Purchasing.State Purchasing.

Future Challenges and Future Challenges and OpportunitiesOpportunities

Watch bids where a Watch bids where a % of total cost% of total cost is is quoted as the freight price. quoted as the freight price.

Obtain actual freight cost versus “shipping Obtain actual freight cost versus “shipping and handling ”where possible”.and handling ”where possible”.

Avoid vendor bid response – F.O.B. Origin Avoid vendor bid response – F.O.B. Origin Freight Collect (Sarbanes Oxley Act of Freight Collect (Sarbanes Oxley Act of 2002).2002).

Future Challenges and Future Challenges and Opportunities cont…Opportunities cont…

Shipment routing instructions on purchase orders Shipment routing instructions on purchase orders must be specific for vendors to follow. must be specific for vendors to follow.

State Agencies are allowed to get phone quotes State Agencies are allowed to get phone quotes for purchases totaling less than $5,000. Buyer for purchases totaling less than $5,000. Buyer should make sure you request the freight charges should make sure you request the freight charges as part of that quote.as part of that quote.

When submitting a sole source justification to When submitting a sole source justification to State Purchasing for approval, your cost estimate State Purchasing for approval, your cost estimate must include freight costs.must include freight costs.

State Freight ManagerState Freight Manager Dan Reisner Dan ReisnerState of UtahState of Utah

voice: 801-538-3216voice: 801-538-3216fax: 801-538-3882fax: 801-538-3882

email: email: dreisner@utah.govdreisner@utah.gov