Freight Transportation,

 The Corporate Information Resource

 

 

Executive Summary

Information is the basis for all decisions.  Accurate information improves the chance for good decisions.  Accurate and timely information substantially increases the probability for successful decisions. 

 

Within every company there exists an inexhaustible supply of information, but its sheer size and volume can render it useless; and the cost associated with its cultivation and harvest could exhaust the corporate treasury. 

 

Freight transportation is a rich and robust corporate information resource; but too often it is viewed as a single function whose sole purpose is to move raw material in, and finished goods out.  Recognizing the dimensions and dynamics of freight transportation, immediately presents its capability as a powerful and comprehensive corporate information resource. 

 

Amongst all of the corporate functions, operations, processes, and resources, freight transportation, because of its inherent purpose, is focused and uniquely capable of penetrating every corporate department, discipline, activity, and process.  Once inside, the “freight alter ego” travels throughout the entire supply chain collecting, appending, and processing the freight transportation and associated data.  This data is ubiquitous, and once harvested, has universal corporate appeal.  It is capable of satisfying the information requirements of every department and discipline, singularly and collectively.

 

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This white paper will discuss freight transportation, its perspective, its composition, and development.  It will examine the traditional roles as well as enhanced roles of: freight terms and terms of sale/purchase; Bills of Lading; Delivery Receipts; and applicable control references, as well as other associated components that affect and are responsible for the movement of goods throughout the supply chain.  How these instruments and their relationships create an important corporate information resource, that can improve operations and performance, will also be addressed.

 

Freight Transportation

Fundamentally, “freight transportation” is a compound phrase that is descriptive of “product conveyance”.  “Freight” is defined as, “Goods carried by a vessel or vehicle,[1] and “transportation” is defined as, “A means of conveyance[2]”.  In commercial parlance, and notwithstanding these definitions, freight transportation means many things to many people.  Perhaps this is indicative of its importance and relevance in our daily lives, both personal and commercial.  On the other hand such prominence may have caused its importance to be taken for granted thus ignoring the major role it can play in commerce and industry.  Freight transportation is abundantly important and is recognizable in everything in our possession, and for that matter everything in our sight.  Freight transportation is responsible for moving everything, from any place to every place and because it touches every part of every business it  is a tremendous corporate resource.  However, because of  the lack of understanding and appreciation, industry’s singular belief in its function and purpose may have severely limited its benefits to only a few. 

 

Freight Transportation Perspectives

Perspectives are typically driven by responsibility and influenced by their environment. 

 

Freight transportation, like any subject can be understood from many different perspectives.  As an example, the traffic or transportation manager would primarily see freight transportation as managing the personnel who perform the operations associated with the movement of goods.  The sales perspective might be limited to customer delivery satisfaction; accounting would probably view freight transportation as one of the many cost items that it is responsible for monitoring; the purchasing perception might understand it as a component of the delivered cost. 

 

Every department’s and business discipline’s perception of freight transportation is seen through the eyes of their respective role and responsibility.  Some may see it in complex terms, and others will see freight transportation in simple terms.  Some may only understand freight transportation from the task perspective; perhaps their responsibility only requires the assignment of a code to the Bill of Lading.  Literally, everyone in the world is impacted by freight transportation.  In some cases freight transportation is highly visible and obvious, and in other cases such as, “the pencil on the desk” it is simply taken for granted.  If every employee were asked to describe freight transportation, and how their daily activities were influenced by it, there would be a limitless response and every response would be correct.  Because of the wealth of its data, its scope, and influence it forms the essence of the corporate information engine.  Therefore, changing its perspective should be a corporate imperative.

 

Bills of Lading

Freight transportation is capable of producing inexhaustible amounts of data, and neither its cultivation nor its harvest will exhaust the corporate treasury.  The inherent ability of the “freight alter ego” to travel throughout the supply chain on a chartered course coincidentally brings it in contact with a preponderance of corporate relevant data. 

 

As the corporate life bloodline to the market; freight transportation’s functions, activities, and processes begin with the Bill of Lading.  This instrument is replete with primary and connective data whose information capabilities are almost limitless.  By examining these data we can begin to understand the depth and breadth of their reach and, at the very least, our curiosity will drive us to understand their relationships.  It can be effectively argued that the Bill of Lading can tell the most comprehensive story of every company.  Its data elements can tell us how often, and how much, certain products are shipped to specific areas.  The resulting distribution patterns can be compared with sales forecasts; this comparison could reveal product performance and do so at many levels.  As an example, if henna based shampoo sells best in certain ethnic markets, the distribution pattern may demonstrate that some of those markets are not being served.  Likewise, Bill of Lading data elements when aligned with Purchase Order data can provide collaborative information about manufacturing and manufacturing consumption that would help us better understand inventory.  The supply chain components are connected by freight transportation, and the Bill of Lading is the initiating instrument.  Its proximity with sales and purchase orders makes the Bill of Lading the primary information vehicle.

 

Bills of Lading, Sales/Purchase Orders and Freight Bills

A Bill of Lading is a contract for carriage and receipt for merchandise.  In this capacity it has immediate access to: sales orders or invoices, purchase orders and freight bills.  In turn, the associated data offers direct access to the entire corporate network, which through the Bill of Lading can penetrate the corporate information and process web at a myriad number of critical data points.  As an example, the Bill of Lading reference number may be identical to a sales order or associated with it.  Consequently, a salesperson’s identification would be allied with the Sales Order.  Likewise, the Purchase Order similarly carries its respective information.  The Freight Bill identifies the “shipper’s number” which, coincidentally is the Bill of Lading Number or can be the Purchase Order number.  The data carried by the Bill of Lading, Sales Order and Purchase Order are the primary drivers of the corporate information engine.  The relationship between these instruments, with the Bill of Lading at the center is uniquely capable of driving a continuously refreshed flow of mission critical, corporate performance information.  The allied data will expose areas of opportunity, provide corporate insight, suggest sales performance monitoring, and can improve forecasting as well as presenting a myriad number of potential opportunities.  The information can be presented historically and interactively.  Through ongoing performance monitoring potential failures can be prevented and modifications can be implemented for avoidance.

 

Freight transportation opens a major information portal into every company.  Through this portal we can examine such things as: individual or comparative sales performance by product, person, and shipping location.  Pattern recognition allows us to develop an understanding and appreciation of: the volume and types of shipments, frequency, distribution market, trade class, freight cost/sale value, as well as back order information.  These discoveries can be viewed directionally by: customer, salesperson, product, and destination or through any of the data that is touched during the freight lifecycle.  Inventory levels, by product and class can be identified.  Distribution patterns regarding vendor performance become obvious by analyzing the data beginning with the Bill of Lading, if issued as a component of the Purchase Order, or by the Purchase Order in combination with the Delivery Receipt.

 

Some business models rely heavily on promotions and spiffs.  In this business case it is critically important to understand how the promotion or spiff performs.  Which promotions and spiffs work best: at what times; in what quantities; for which salesperson and why.  Clearly, the instruments associated with freight transportation and driven by the primary and secondary data will yield the answers to all of these questions.  While this may be of specific interest to some companies, most consumer goods companies are keenly interested in the movement of their goods within the sales cycle.  This “buy-in and sell-through” analysis is significantly improved when companies use freight transportation data and information.  

 

The “new freight paradigm” developed by TransportGistics, establishes that “freight” as an identity begins with its first recognition, simply as an entity and continuing through description, identification and ultimate consumption.  Through TransportGistics’ “Freight Lifecycle Management” (sm) techniques, and the use of its TRaIDS product, full and complete information about the product, at each of the touch points within the supply chain are made visible.  By knowing when the product was shipped, when it was delivered to the store, the counter and then to the customer, all of the data necessary for an accurate and timely “buy-in and sell-through analysis” is readily available.  Additionally, any person, place, or event that affects the velocity of the product through the supply chain is known.  Knowing who, where and when allows for appropriate and immediate corrective action. Making sure that goods arrive at the store to meet breaking advertisements, and that the goods are at the counter in order for the customer to acquire them and making sure that commissions are paid to the salesperson on time are critical components of a successful sales process.  The data associated with the “new freight paradigm” initiates and supports the entire buy-in and sell through knowledgebase. 

 

Freight Terms and Expediting Receivables

All businesses are keenly interested in expediting their receivables.  Freight transportation data and proper terms of sale will result in accelerating corporate receivables. 

 

In its capacity as both a contract for carriage and receipt for merchandise, the Bill of Lading establishes the time and place that the freight is receipted for by the carrier.  When the terms of sale are FOB origin, title passes at the time and place of pick-up and when the terms of sale are FOB destination, title will pass at the time and place of delivery.  As soon as the carrier issues the Bill of Lading, or when the freight is tendered to the consignee, invoice dating should begin.  Utilizing the freight transportation data to drive the invoicing process will provide the necessary information to expedite the receivables and offer every company the opportunity to support its timely invoice demands and information needs to improve their cash management. 

 

The terms of sale/purchase dictate the passage of title and therefore significantly influence payment dating.  Knowing exactly when title passes is tantamount to anticipating the date of payment.  The Bill of Lading is the device that provides access to carrier delivery information.  It should be used to support the enforcement of invoice payment dates as well as used for analytical purposes to create a baseline for improvement or modification.

 

In addition to expediting receivables, the size of most freight budgets allows that amount of capital to be used in more advantageous ways than simply being committed to the payment of freight.  As a negotiating tool this expense has enormous potential.  Effective use of the freight expense in a time sensitive reimbursement program can properly secure improved transportation services and eliminate the need to borrow or purchase money for other capital requirements.  TransportGistics has developed an entire program called, “freight cash asset management” (sm).  Its primary understanding recognizes that the freight expense can be converted to an asset.  From this perspective, an immediate benefit can be found in cash flow and improved capital utilization.

 

Freight terms and routing data also play an important role in corporate performance because their data elements, in conjunction with freight transportation data will supply the necessary information to improve customer service.  Questions regarding service level and delivery performance are just two examples of the importance of the data utilization.  Incurring premium transportation expense is only appropriate if needed, and if needed there must be a means to determine if the deliveries are being performed in accordance with the expense.  An example of this can found in a consulting assignment with an insurance company that distributed more than 2,000 overnight shipments every night to their various offices and agents.  Understanding the field needs and comparing them with delivery performance, two important discoveries were immediately identified:  Agent expectation and usage were dissimilar and the deliveries were inconsistent with home office expectation.  The data clearly demonstrated cost and service level alternatives that reduced the freight expense by more than 22%.  These findings have been replicated in consumer products companies as well.  In addition to cost reduction, customer service was dramatically improved because customer expectations were placed in sync with the company’s order cycle, routing and shipping practices.  Customers no longer had to estimate the order cycle time, they simply identified their inventory need and based upon the freight transportation data, alternative and meaningful service levels were offered.  Unnecessary premium freight expense was eliminated.

 

In-Store Modeling and Freight Transportation

An interesting example of TransportGistics (TGs) innovative use of freight transportation data occurred during another consulting assignment for a client in the cosmetic and fragrance industry.  TGs Consulting and Convergence Practice Groups were asked to study “in-store modeling” and present their findings.  In-store modeling is a sales process whereby models walk in and around the retail store, approach customers randomly asking them if they would like to “experience” a fragrance.  The client’s primary interest was in determining if in-store modeling was effective.  While traditional consulting methods and processes would have delivered answers to the client, the TGs teams approach enabled a substantive report along with important recommendations that also provided the client with a unique method to monitor performance interactively.  Using historic freight transportation data, specific shipments comprised the database.  Because the client had already been using the TRaIDS product, this data combined with the shipment data connected the, “whom, when and where” of each shipment.  Drilling down, the “buy-in and sell-through” together with the respective commission reports identified individual product performance.  Next, the consultants used the model database to connect modeling days to the product sales.  Data analysis supported the premise that sales appreciably increased when in-store modeling was employed.  However, the combined databases were able to provide the client with significantly more information, duly supported with the appropriate decision criteria that allowed them to more effectively use in-store modeling.  The client learned which products sold best on days with certain characteristics and the most productive times of the day.  The TG consultants also recognized retail customer buying patterns from the database and understood the importance of external influences, such as weather.  By overlaying weather databases, the buying patterns were further refined; rainy days demonstrated increased sales of certain fragrances.  Likewise, cold days demonstrated that other fragrances sold best.  The opportunities that flowed from these discoveries allowed the client to significantly improve product distribution.  Ongoing performance was supported by collecting the freight transportation data from the transaction stream.  Significant cost reductions were realized in freight transportation, inventory and models were paid in a more timely fashion.  While there were many additional benefits that the client realized, Spiffs and promotions could now be targeted and focused thereby used far more effectively. 

 

The Supply Chain

Adding to its scope of influence and increasing its level of complexity, and therefore its capability, freight transportation should also be viewed as the “master link” in the supply chain.  This perspective allows you to see an increase in the amount and type of data that will reside in the corporate data/information repository.  Freight transportation is also the “moving” vehicle and mission critical component of the supply chain, that is, absent freight transportation there is no supply chain.  Further, freight transportation connects all of the trading partners.  As freight moves up and down the supply chain, the “freight alter ego” is collecting, appending, and processing the data.  Throughout the supply chain, there are virtual and actual stops or “touch points” at which identifiable activity occurs.  These touch points are responsible for multiple events, one of which causes the identity of the trading partners to change.  Consider the manufacturer; when they initiate a shipment they are the consignor or shipper; when they receive a shipment they are the consignee or receiver.  When the manufacturer purchases raw material, they could be the buyer and the consignee.  When they ship the finished product they are the seller and the consignor.  On the other hand the manufacturer may not be visible during all or at certain segments of the freight lifecycle.  As an example, a manufacturer may simply purchase goods and arrange for them to be shipped from the source to a converter and the converter may ship to a finisher; at no time is the manufacturer the shipper or the consignee.  Understanding the importance of transient trading partner identification along with the data and information opportunities that are available at every touch point in the supply chain will provide the creative and imaginative visionary with an unlimited supply of opportunity. 

 

Conclusion

If you agree with the “law of commerce and logistics”, that is, “increasing the speed of electronic commerce results in the consequential demand to accelerate the supply chain”, the inability of yesterday’s practices and tools to keep pace with the speed of the supply chain will cause their failures to surface at an unmanageable rate.  Freight transportation’s primary and connective data offers every company a rich and robust harvest of timely and accurate information that will substantially increase the probability for successful and profitable decisions

 

Freight transportation is responsible for moving everything, from any place to every place and its freight alter ego roams throughout the entire supply chain.  Consequently, it should be viewed as a highly influential corporate resource and knowledgebase that can be readily used for inquiry, analysis, and performance monitoring.  Freight transportation is pervasive and because of its ability to join the trading partners, it is highly capable of providing superior management information.

 

About TransportGistics, Inc.

TransportGistics is a global, multi-product and services company that provides market leading, simple, incremental solutions for transportation management and logistics functions within the supply chain.

 

TransportGistics commitment to education is portrayed through its advancement of professional logistics and transportation programs.  Its white paper site presents important and timely transportation and logistics subjects each month, and is regularly visited by more than 30,000 companies in the private and public sectors, universities and governments, worldwide. It is an active partner at the Center of Excellence in Wireless Internet and Information Technology at the State University of New York-Stony Brook.

 

Continuation

Please consider this white paper as a continuum in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com.

 

Disclaimer

The information presented herein represents the opinion of the author, but not necessarily the opinion of TransportGistics, Inc.  This white paper is not presented as a legal position or as a recommendation.

 

“Freight Lifecycle Management” and “Freight Cash Asset Management” are sales marks of TransportGistics, Inc.

 

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