23rd Annual Study on Trends and Issues in Logistics and Transportation. Study was completed by the Dr. Karl Manrodt, Dr. Mary Holcomb, in partnership with Con-way and CarrierDirect. Logistics Management was also a partner in the process; a webinar on the topic can be found on their website.
The New Rules for Winning the Game 23 rd Annual Trends and Issues in Logistics and Transportation Thank You to Our Respondents We are pleased to present the findings of the 2014 Issues and Trends in Transportation and Logistics. Our hope is that this data will provide useful information regarding current developments in our industry, and assist you in better managing your organization. Thank you again for your continued support of this research effort. 2 Research Team Karl B. Manrodt, Ph.D. o Professor o Georgia Southern University Mary Holcomb, Ph.D. o Associate Professor o University of Tennessee Tommy Barnes o President o Con-way Multimodal Joel Clum o President o CarrierDirect 3 Agenda ! Current State of Transportation and Logistics ! The New Rules of the Game ! Winning the Game: The New “Masters of Logistics” 4
Transcript
The New Rules for Winning the Game
23rd Annual Trends and Issues in Logistics and Transportation
Thank You to Our Respondents
We are pleased to present the findings of the 2014 Issues and Trends in Transportation and Logistics. Our hope is that this data will provide useful information regarding current developments in our industry, and assist you in better managing your organization. Thank you again for your continued support of this research effort.
2
Research Team
Karl B. Manrodt, Ph.D. o Professor o Georgia Southern University
Mary Holcomb, Ph.D.
o Associate Professor o University of Tennessee
Tommy Barnes o President o Con-way Multimodal
Joel Clum
o President o CarrierDirect
3
Agenda
! Current State of Transportation and Logistics ! The New Rules of the Game
! Winning the Game: The New “Masters of Logistics”
4
Current State
The New Rules for Winning the Game
Representing the Marketplace
This is approximately 3.5% of total
transportation expenditures
Sample represents over $30.1 billion in transportation expenditures
776 respondents from 16 industry sectors represented in this study
Challengers Take The Lead Annual Sales of Respondents
Percent of Respondents
How Did Your Company Perform?
1 (Much Better)
2 3 4
5 (Much Worse)
Mean of Respondents
2.01&
2.28&
2.37&
2.28&
2.37&
2.03&
2.38&
2.39&
2.36&
2.47&
0& 0.5& 1& 1.5& 2& 2.5& 3&
Customer&service&levels&
Firm&profiHbility&
Revenue&growth&
CompeHHve&posiHon&/&Market&share&
Return&on&assets&
2013&
2014&8
9
0.0%&
17.6%&
23.5%&
11.8%&
20.6%&
26.5%&
2.8%&
12.7%&
25.4%&
15.5%&
12.7%&
30.9%&
0%& 5%& 10%& 15%& 20%& 25%& 30%& 35%&
<&1%&
152%&
253%&
354%&
455%&
>&5%&
Percent'of'Respondents'
Percen
t'of'S
ales'
2013&2014&
Transportation Spending Is Increasing
���TL Dominates The Transportation Budget
0.3%&
0.7%&
5.8%&
4.0%&
2.3%&
5.7%&
8.8%&
7.1%&
9.6%&
9.9%&
18.5%&
27.2%&
0.2%&
0.1%&
5.0%&
4.0%&
5.0%&
4.8%&
3.1%&
8.4%&
4.2%&
14.9%&
21.1%&
29.1%&
0%& 5%& 10%& 15%& 20%& 25%& 30%& 35%&
DomesHc&ocean&(barge)&
Other:&&
Intermodal&
Rail&
Air&freight&
&Small&package&
Dedicated&
&Surface&parcel&(e.g.&UPS/FedEx)&
InternaHonal&ocean&
Private&fleet&
<L&
TL&
2013&
2014&
10
Inventory Management is Challenging Companies
Cash to cash cycle
50.0 days
Average days sales
outstanding 34.5
Inventory turns -
finished goods 17.5 Days sales in
finished goods
inventory 46.3
2013
Cash to cash cycle
47.3 days
Average days sales
outstanding 28.5
Inventory turns -
finished goods 14.7 Days sales in
finished goods
inventory 39.0
2014
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Tough Challenges Continue
Cost to serve (distribution)
Changing customer requirements
Demand uncertainty
Inventory management
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The New Rules for Winning the Game
• Pick Your Partners Carefully #1
#2
#3
• Mind and Mine the Gap Between Current and Desired State #4
• Maintain a Competitive Position #5
• Collaboration is a Game Winning Strategy
• Play the Same Game
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#1: Pick Your Partners Carefully
The New Rules for Winning the Game
The Top Factors in Purchasing Transportation Services
Attribute Very high importance Cost of service Capacity commitments Potential for long term relationship Performance factors (e.g. service levels, safety record) High importance Ability to respond to changes Industry trends (shortages/overcapacity) Ease of doing business (e.g. administrative efficiency in claims processing) Strategic importance of the services to the overall business Carrier’s reputation
LEAN OPERATING CULTURE: CUSTOMER FIRST RESPECT FOR
PEOPLE CONTINUOUS
IMPROVEMENT SERVANT
LEADERSHIP RESPECT FOR
PLANET
Carrier
Management Account
Engagement
Analytical Leverage
Infrastructure
People
Global Deployment
Deliver value to our customers by continuously improving cost and service levels through innovative solutions, technology, strategic sourcing and Lean process discipline
Vision
World class transportation procurement that drives substantial value to customers and providers
Transportation Provider Strategic Framework
“What We Have Here Is A Failure To Communicate”
36.9%
6.5%
32.7%
23.8%
14.3%
14.3%
32.7%
38.8%
0% 10% 20% 30% 40% 50%
Reducing costs
Maximizing asset utilization
Increasing customer satisfaction
Maximizing profitability
Carriers Shippers
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#1 Cost
Savings
#2 Reduced Damages
#3 Improved Visibility
#1 Profit
Improvement
#2 Packaging
Improvements
#3 Asset
Demand Forecasting
C O N F L I C T
Shipper Goals Carrier Goals
Source: Con-way Freight, Inc.
Shippers and Carriers: Misaligned Goals
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#3: Collaboration is a Game Winning Strategy
The New Rules for Winning the Game
Intensity of Involvement
Do you share the same perspective as your carrier or shipper?
What are the implications if you don’t share the same perspective?
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Shippers and Carriers: Where They Agree
1 Strongly agree
2 3 4 5 6 7 Strongly disagree
Transportation services are highly standardized
Companies rely heavily on price when choosing a strategic/core carrier
The costs for switching significant volumes of freight from one strategic carrier to another are low
The process of moving to a new strategic carrier is quick and easy
Strategic or core carriers help their customers achieve business goals and objectives through services provided
Represents a gap between shipper and carrier mean score of <= 0.2
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Shippers and Carriers: Contrasting Perspectives
1 Strongly agree
2 3 4 5 6 7 Strongly disagree
Transportation services provided require a great deal of specialized knowledge
Shippers 2.62
Carriers 3.00
It is extremely difficult to standardize processes and procedures for our company’s transportation services
Shippers 3.47
Carriers 3.86
Strategic or core carriers have multiple options for executing transportation operations
Shippers 3.40
Carriers 3.86
Strategic or core carriers are the primary source of innovation in transportation services
Shippers 3.40
Carriers 3.86
Transportation services are identical in quality
Shipper 3.90
Carrier 4.47
Strategic or core carriers help to create new business opportunities
Shippers 3.07
Carriers 3.67
Shippers and Carriers: Time To Talk
1 Strongly agree
2 3 4 5 6 7 Strongly disagree
There are no frequent changes in our company’s mix of strategic or core carriers
Shippers 2.81
Carriers 4.00
The requirements for our strategic or core carriers do not frequently change
Shippers 2.55
Carriers 4.33
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#4: Mind and Mine the Gaps Between Current and Desired State
for the Winning Edge
The New Rules for Winning the Game
Transportation Scorecard Results Mixed
Mode of Transportation 2014 2013
TL 73.1% 76.4%
LTL 78.8% 81.1%
Rail 85.5% 74.0%
Intermodal 75.8% 72.8%
Parcel 90.6% 83.0%
Data represent mean responses 31
Best Service For “Best” Customers
“Best” customer
On time delivery Over/short/damage
Backorders Correct invoice
Shipment complaints Perfect order
“Average” customer
96.3 1.0 2.3
97.8 1.1
97.2
92.7 1.7 3.5
96.1 1.8
94.9
Average score = 97.8 Average score = 96.1
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What Initiatives Will Enable Companies to Increase Operational Flexibility?
Reduce supply lead time
Increase collaboration with key customers
Integrate internal processes
Increase collaboration with key suppliers
Reduce order fulfillment lead times
Reconfigure the order fulfillment process to be more responsive to changes in demand
5.62
5.56
5.50
5.50
5.48
5.47
Scale 1 – 7; 1= Not very important; 7 = Very important
Mean score
Operating Flexibility: Initiatives Completed by the Most Companies Over the Last 12 Months
2) Aligned labor force skills to better meet changing demand requirements
1) Use of multiple transportation modes
3) Key customers - shared capacity forecasts and increased collaboration
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Operating Flexibility: Top 3 Projects Currently Being Implemented
2) Increasing collaboration with key suppliers
1) Integrating internal processes
3) Reducing supply lead time
35
#5: Maintain a Competitive Position
The New Rules for Winning the Game
The Global Supply Chain Execution Challenge
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No Overall Improvement in Domestic Supply Chain Visibility
NOTE: 1 = very visible; 7 = not very visible 5.6
4.3
4.0 3.7 3.5 4.9
Supplier Supplier’s Supplier Company Customer Outbound Inbound
2014 Score = 20.87
4.63 2.77 3.30 2.94 2.16 3.60 2013 Score = 19.40
5.01 3.76 2.16 2.77 3.30 3.87
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Islands of Improvement in International Supply Chain Visibility
NOTE: 1 = very visible; 7 = not very visible 5.6
4.3
4.0 3.7 3.5 4.9
Supplier Supplier’s Supplier Company Customer Outbound Inbound
2014 Score = 20.71
4.94 2.92 3.54 3.05 2.58 3.69 2013 Score = 20.72
5.11 2.16 3.62 2.77 3.12 3.93
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Ownership: The Preferred Option for Domestic Transportation Management Software
8.0%
10.6%
19.9%
14.6%
23.2%
23.8%
0.0% 10.0% 20.0% 30.0%
Other
A software package running and hosted in the cloud
Manual methods, including those supplemented with spreadsheets, email or other productivity tools
A software package running and hosted by a 3PL
A software package installed in an on-premise data center
A software package or module that is part of an ERP
Percent of respondents
Managing Domestic Transportation - 2014
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Distribution Utilizes Several Approaches in Managing Domestic Activities
2.8%
14.0%
20.6%
15.4%
21.3%
25.9%
0.0% 10.0% 20.0% 30.0%
Other
A software package running and hosted in the cloud
Manual methods, including those supplemented with spreadsheets, email or other productivity tools
A software package running and hosted by a 3PL
A software package installed in an on-premise data center
A software package or module that is part of an ERP
Percent of respondents
Managing Domestic Distribution - 2014
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Changes in the Procurement of Transportation Services
Procedurally 26.7%
Contracturally 23.3%
Strategically 43.3%
Structurally 6.7%
In the last two years, our procurement of transportation services has changed in the following ways:
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A different focus now than in the past such as a shift from cost to quality of service, or
vice versa
A different purchasing process now than in the past
With changes in areas such as the length of contract or specificity of service quality
With different functions procuring transportation services than in the past
In 2014 Who Made Transportation Decisions?
Preparation and solicitation
of RFQs
Carrier Negotiations
Operational Planning
Carrier Performance Evaluation
Purchasing/ Procurement 9.8%& 7.4%& 3.7%& 3.8%&
Transportation/ Logistics
63.4%& 77.8%& 79.0%& 80.8%&
Jointly by procurement and
transportation 25.6%& 11.1%& 16.2%& 14.1%&
Other 1.2%& 3.7%& 1.2%& 1.3%&
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The “Newfangled” Masters of Logistics
Playing the Game to Win
What Will the New Masters of Logistics Look Like?
! They choose strategic partners that make them better ! They work with their strategic partners to develop a plan
for achieving their respective goals ! They identify the gaps between current and desired future
practices for both parties ! They develop shared solutions with their strategic partners
to close the gaps ! As a team, they leverage the results of the previous efforts
