22001122 TTLLCC CCOONNFFEERREENNCCEE:: IIMMPPOORRTTIINNGG && EEXXPPOORRTTIINNGG APRIL 23RD, 2012 ORLANDO, FL
by Jerrod Slaughter, Corporate Transportation Manager
IMPORT & EXPORT: SHIPPER PERSPECTIVE
Know the Mode Ocean service contracts and service agreements What is important?
Have a Strategy Line vs. NVOCC Request for Quotation
On Boarding KPI / Evaluation
WHAT ARE THE BASICS?
OCEAN: IMPORTANT FOR A SHIPPER
Rates
CY, IPI, Door?
Surcharges
Bunker (Fuel)
Peak Season (PSS)
General Rate
Increase (GRI)
MQC Volume
Detention Demurrage
KPI
Container Rates Type of delivery is needed Container Size Container Routing
Essential Accessorial Terms Surcharges Bunker Peak Season (PSS) General Rate Increase (GRI)
Essential Service Terms Space Guarantees Minimum Quantity Commitment (MQC) Detention & Demurrage Delay In Transit (DIT)
Performance levels / KPI
RATES: DEFINE SERVICES NEEDED
Type of delivery is needed? Container Yard (CY) Inland Port Intact (IPI) Store Door Delivery (SDD)
Container Size 20 FT, 40 FT, 40 FT High Cube, 45 FT, 53 FT (APL)
Routing All Water Service (AWS) Landbridge
Rates
ESSENTIAL ACCESSORIAL TERMS
Surcharges Advance Manifest Fee (AMS) Chassis Usage Surcharge (CUS) Document Fee (DOC) Terminal Handling Fee (THC) War Risk Surcharge (WRS) Etc. (See 40+ other terms)
Bunker (Fuel) Floating schedule
Peak Season (PSS) Typically June 1st through October 31st
General Rate Increase (GRI) / Rate Restoration (RRI)
Any time based on Carrier / Alliance
ESSENTIAL SERVICE TERMS
Space Guarantees HPH to Portland X FEU?
Minimum Quantity Commitment (MQC) 200 FEU for a year? What is the right number?
Detention (out gate)& Demurrage (in gate)
Days (calendar / working) Delay In Transit (DIT) Performance levels / KPI
Booking acceptance Service Strings / Port to Port On-Time
undesirable terms then evolve
One step at a time!
Partner with internal Legal Counsel
Include terms with new Request for Quotations
Discuss with internal stakeholders. Understand that terms can cause lengthy negotiations and potentially impact rates.
Careful not to overbuy!
Best Practice!
AAdddd teerrmmss ttoo
Understand Ocean Line vs. NVOCC
WHAT ARE THE OPTIONS?
OCEAN: LINE VS. NVOCC
OCEAN LINE NVOCC NON VESSEL OPERATING COMMON CARRIER
TThhee PPoossiittiivvee Direct relationship with Line Leverage MQC FEU volumes directly to secure terms/rate/service Assigned allocation can lead to consistent service string transit time Strong long term partnerships can assist during industry challenges
TThhee CChhaalllleennggee More complex i.e. FMC requirements Provide forecast of trade lane volumes Manage MQC volumes Resources and bench strength to manage multiple Ocean carriers Challenging to make changes
TThhee PPoossiittiivvee Flexibility with little to no commitment Less complex to manage
No FMC required for shipper No MQC requirement No long term commitment
Ability to chase rate Much closer to the market rates
TThhee CChhaalllleennggee
Subject to volatility of market Susceptible to surcharge
GRI / RRI PSS
No direct relationship with Ocean carrier Possible less predictable transit times
OCEAN: LINE VS. NVOCC
General Recommendation Depends on product shipped, Logistics Model and Needs
Over 3,000 FEU consider going direct with Line Between 3,000 1,000 mix Ocean Line with NVOCC Less than 1,000 FEU consider using NVOCC
NVOCC (Non-Vessel Operating Common Carrier - Forwarder) Volatility of Market? PSS, Market rate increases, GRI, etc. Transits vary by selected Line Little to zero relationship with Line
Ocean Line Subject to FMC Minimum Quantity Commitment (MQC)
QQ.. WWHHAATT IISS BBEETTTTEERR?? LLIINNEE OR NVOCC? Answer: Depends. It is really determined by what the shipper is seeking and alignment with their Supply Chain strategy.
VENDOR MANAGEMENT
Define Supply Chain Strategy & Needs Request for Quote (RFQ)
Know the Market Document shipper characteristics Identify and include Stakeholders Define service expectations Boilerplate Stakeholders provide suggested carrier RFQ pool Container Rate and Surcharge template Understand service string and transit offering Cost Analysis on 80%-90% volume lanes Selection
On Boarding Performance Evaluation
Operational readiness
Detailed Standard Operating Procedure (SOP) Escalation path
Limited volume at startup Slowly turn on the Valve!
Deming Wheel approach Plan, Do, Check, Act
KPI agreement Reporting requirements Quarterly or Bi-annual business review Measure transit expect vs. actual Cargo Claims Billing Issues Service Review
Booking performance Space guarantees Transit time metrics
SHIPPER NEEDS TO BE A PARTNER
Shipper provided FEU forecast by lane Best practice: 3 month rolling forecast Keep it simple!
Communicate Origin Performance Is cargo getting booked and COB as expected? Any rolls, delays, etc.? Be engaged and ask for feedback
International Air Freight Forwarding
IMPORTANT TERMS AND STRATEGY
CONTRACTING FOR AIR FREIGHT: WHAT IS IMPORTANT?
Rates by route Port-Door, Port-Port, etc.
Recommend add gateway to door as option Add Service levels that fit your need Exp, Std, Def Add tier level weight break
Know your sweet spots!! Include transit days by service by lane Define service commitments Fuel surcharge Reference by incorporation Peak Season Liability and cargo claims
FORWARDER DIFFERENTIALS
Full service forwarder vs. niche regional forwarder Carrier service area Forwarders usually handle all major lanes
A full service forwarder may compliment a Shippers needs as supply chain becomes more complex
forwarders Experts in specific geographies
Forwarders seek different freight mixes to support trade lane
Rates and very drastically between competing forwarders Shop around for best rate
INTERNATIONAL ITS AN ADVENTURE
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