Monthly Archives: September 2016

Provider Sustentation 68: Carriers

Roll on highway, Roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler roll on (Roll on)

If you decide against 3PL firms, which bring a disadvantage for every advantage, then your only option is to manage the carriers on your own. Without providers, the full force of their damnation is thrust upon you.

Thanks to the outsourcing outsourcing craze that began in the 80’s, no one makes their own stuff anymore which means that they are dependent on logistics carriers to get the products to the warehouses and then again to get the product to the retail stores. And these carriers know that, to use a common expression, they got you by the balls.

Now it’s true capacity isn’t always full capacity, especially in off season, and at these times there is some negotiation room, despite what the carriers will initially tell you, but at peak season when the holiday rush is closing in and half (or more) of your annual sales are at stake, and the carriers really are at, or close to, peak capacity, the carriers are in control and they know it. Fuel surcharges pile up. Overtime charges pile up more. And you’ll pay because if you don’t, your product won’t arrive on time, putting your sales, and profits, at risk. But this isn’t the biggest problem. If the driver shortage continues to worsen, their might come a day when you are willing to gladly pay those surcharges and overcharges but still won’t get your products delivered.

So what do you do?

1. Understand your overall shipping needs.

Map your entire supply chain, associated annual volume levels, associated revenue, and associated criticality. Understand that going out to tender category by category or region by region is not always the best way to do things.

2. Do a national, if not global, supply chain tender.

Do a large supply chain tender across regional, national, and global carriers across all volume where the goal is to award all strategic volume and all high revenue volume to a handful of carriers which will guarantee year round capacity and customer of choice status to your organization in return for long term, guaranteed shipments and income. The bigger the number, the hungrier the carrier.

3. Give a little more to get a little more.

Use optimization to balance cost versus delivery times and service level guarantees. Select carriers that can easily handle the load, are financially stable, and willing to give your deliveries priority in exchange for large volumes, timely payment, and relationship building (and lean transformation help) over penny pinching.

4. Don’t sweat the small stuff.

Some lanes will have to go local, and some smaller carriers won’t give you the best rates, but you can still use competitive bidding and not lose much by making sure the majority of volume is under sound management. You can’t completely escape the damnation, so just settle for getting as much as you can under control.

Geopolitical Sustentation 25: Government Actions

Upon review of our damnation series, we know that governments can be a major source of damnation. From their meddling in the employment rate (economic damnation 3), currency strength (economic damnation 5), and their sheltering of the 1% (economic damnation 7); their lack of support for postal services (infrastructure damnation 11), ports (infrastructure damnation 13), and roads (infrastructure damnation 14); their (mis)management of customs acts (geopolitical damnation 28), trade embargoes (geopolitical damnation 29), and the TPP poison pills (geopolitical damnation 30); their taxation (regulatory damnation 33), tariffs (regulatory damnation 34), and health and safety (regulatory damnation 35); and their poor urbanization plans (societal damnation 43), utter lack of support for education (societal damnation 44), and their handling of workers’ rights legislation (societal damnation 48), their damning meddling is everywhere. (It’s more ubiquitous than the meddling of those meddling kids.)

But this is just the tip of the iceberg. In our damnation post we listed a few of the more focussed damnations that will cause you a never ending nightmare.

  • Budget Freeze
  • State of Emergency
  • New Legislation Outlawing your Product or Service
  • Criminal Charges against your Organization or Executives

1. Don’t Sell Governments More Than You Can Afford to Maintain in the Receivables Indefinitely.

There’s no guarantee of quick payment, or even late payment in the timeframe you are led to believe it will materialize in. Government might be good money, long term contracts, and guaranteed references, but they aren’t always the best customers if you need money now. Make sure you have a core business selling to the private sector that can sustain you through the dry times.

2. Don’t be slack in receivables recognition and collection

Insure all deliverables are received, acknowledged, and accepted on a timely basis. Make sure the invoice gets in the approved payment queue ASAP, and follow up the minute a payment date is missed. You don’t want multiple invoices in a queue during a budget freeze or budget shortfall. You want as few as possible, and you want them front of the queue as soon as the freeze is lifted.

3. Keep abreast of any proposed legislation that could impact your product

You want plenty of time to engage lobbyists if you can afford it, and if the product line is that profitable, or identify reformulations (or replacements) if the product is important, but not worth enough to engage lobbyists to try and alter the legislation appropriately (which may not be successful).

4. Make sure you have well documented policies and procedures in place … and all follow them.

Have a policy that failure to follow policies and procedures, especially those that are designed to protect the organization and stay on the right side of the law, will result in immediate discipline and possible dismissal. Also implement monitoring systems and processes to do your best to ensure that all individuals follow critical policies and procedures. The goal is that if someone breaks the law, it’s doing so in a way not supported or condoned by the company.

5. Make sure the board oversees the executive and reviews key financial reports and deals on a regular basis.

If one of your executives is engaging in shady business practices, you want to discover it and take action first. It’s often the difference between a slap on the wrist and a public hanging. (And don’t say you have nothing to worry about. It’s well known that the job that attracts the most psychopaths is that of the CEO, with the job that attracts the second most psychopaths being that of the lawyer who defends him.)