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IDII Software Newsletter Volume 1 No. 16 December 7th 2000 |
To assist the professional dealing with software in Warehousing Distribution, Logistics,
and the Supply Chain.
Subscribe to newsletter Now..
| Techniques, Vision, & Educational Thoughts "Computerized Shipping Systems - Return on Investment - Part 3" Since we are on the subject of reducing shipping charges, let's look at the cost of having a "free" system. We've all been taught that "there is no such thing as a free lunch." And it is true. These systems provided by the carriers are built into the cost of doing business with that shipper. The consequence is that the shipper is not getting as significant a discount as he could or deserves. I know this because I know many former UPS, FedEx, and Airborne managers, including people whose job it was to calculate the amount of discount a shipper should receive. As indicated in Chapter 16 of my book, Beware of Carriers Bearing Free Gifts!, a company that gives up their "free" shipping system can obtain a better discount from their carrier of 3-5% by renegotiating their contract after installing an independently provided multi-carrier shipping system." Following the numbers from our example, 3% of your yearly freight charges of $528,000 comes to $15,840 a year. Now, let's address why it is important to look "inward" towards reducing shipping costs, even in instances where the customer is paying the freight charges anyway. A VP of Finance might not even notice freight charges are a problem if on an income statement, the expense line item for freight paid is comparable to the freight charges collected. Consequently, the freight charges would not be considered a significant expense. The problem with this thinking is that the money spent in freight can be leveraged for increased profitability. Many companies unknowingly have a completely inconsistent system for billing freight charges. What they should do is bill their customer for the retail freight and keep the discount for themselves. If they have a carrier provided system from UPS or RPS (FedEx Ground) then this is what they are doing, because those are the freight charges their systems print on the audit labels. But, if at the same time, they have a carrier provided system from Airborne or FedEx, then they are billing the discounted freight charges and the freight is just a pass through item. And if they have a system from both carriers, they are doing it both ways, thus, inconsistently. The problem here is that they are probably losing money in their shipping department because they are stuck paying all the chargeback items on their bills for incorrect addresses or surcharges for residential shipments. My suggestion moves the savings right to the bottom line! This is also true for the next three areas I will discuss. If your company is utilizing a particular carrier's insurance, you are probably paying too much. Most of the carriers provide the first $100 of insurance for a package free. If a package is worth over $100 and is damaged (unless the shipper "declared its value" in the shipping system, it is not covered). If you want appropriate coverage you are forced to pay extra. UPS charges $.35 per $100 for declared value after the first $100. This is why it is important to know how many packages you "insure" a day and what the average per package value is. Let's say in our example that you insure 10% of your packages, or 20 packages a day, and each has an average value of $900. You would be paying 8 x $.35 (remember the first $100 is free) or $2.80 per package. Multiplied by 20 per day, the total is $56 a day or $1,232 a month. You could use an alternate insurance company and get the same coverage for only $493 a month, saving $739 a month. Or if you rarely have claims, you could self-insure and save the entire $1,232. We would program your shipping system to calculate the insurance using UPS rates, bill the customer for that amount, and you add the whole $1,232 a month or $14,784 per year to your bottom-line (less any losses). This is explained further in Chapter 15, Alternate Insurance Programs: An Important Marker on the Low Cost Shipping Road. Does your company ever ship multiple orders to customers in the same day? If these are shipments going to the same address, then you potentially qualify for consolidation discounts that could save up to 40%. The carriers rate packages by weight, zip code, and service level. They offer discounts if the shipper is sending multiple packages to the same address that total over 100 pounds for air shipments and 200 pounds for ground shipments. It costs them less because they can deliver the packages with just one stop for their driver. But if one shipment is being processed in the morning and the other in the afternoon, it would be nearly impossible for a shipper to remember and group these packages together for the consolidated discount. And, if yours is an organization with multiple workstations that are not networked (like those provided by most of the carriers), there is virtually no way of calculating or determining these savings. Let's say that two orders consisting of 10 packages each could qualify for this discount. The average savings would be about $40 per order, multiplied by two orders a day ($80 a day). This comes to $1,760 a month or $21,120 a year! Chapter 13, Save 40% on Delivery Costs, gives a further explanation. Did you know that all the carriers, except the post office, absolutely positively guarantee that their packages will arrive by the time they promise or the shipping is free? They do a pretty good job of delivering packages overall; the problem is, when they don't keep their promise, they don't automatically give the money back. You have to catch them and then file a claim. According to Consumer Reports, UPS is typically late about 20% of the time with their ground shipments and 10% with their air shipments. Let's just say in our example that 10% of your 200 packages shipped per day are late. That would be 20 packages at $10 each or $200 a day, totaling $4,400 a month. My company has developed a patent pending technology that automatically obtains that money for clients on a contingency basis of 50% of the actual monetary savings. In this case, the company would save $2,200 a month or $26,400 per year. Again, this money goes directly to your bottom line. Mark A. Taylor, President of Taylor Systems Engineering Corp.) |
Impact In Software Design Software designers in ERP, WMS, OMS should decide which path to take. Path #1: Partner with an existing SMS solution. See Software Directory. Path #2: Build your own SMS - realizing that twice a year rate changes WITH new forms of rates & new addons from each carrier could be required. Phil Obal TIP from Phil If the system has multiple carriers, then one can "rate shop". There are a good number of software companies that provide multi-carrier solutions. See Software Directory. |
Educational / White Papers
- Excellent New White Paper
on "CTM = Collaborative
Transportation Management (PDF)" from Logility, a provider
of logistics, advanced planning, transportation management systems,
and WMS software. CFPR
was a hit - Now it is time for CTM for the transportation side! Very,
very useful white paper!
- Excellent White Paper
on "TEN Go-Live
Surprises (PDF)" from Benchmarking Partners. Findings
from 62 companies regarding post-implementation of new ERP software.
Any WMS, ERP, or TMS installation - any large software installation
can learn from this useful white paper. Have
you had your "REALITY CHECK" (or should we say "REALITY
SHOCK") lately?
- Excellent White Paper on "Planning for Success - A Best Practice Guide to Internet Fulfillment (PDF)" from LIS, a growing, international provider of supply chain execution systems and WMS software.
IDII News
- Searching for new logistics or warehouse
software? New and improved version 3 of our STANDARD WAREHOUSE & LOGISTICS RFI /
RFP. New questions have been added. New feature
added where each question asks for planned release and
enhancement cost approximations, when the current production release does
not "fully" perform the
requested
function.
- Contains approximately 300 detailed questions that are detailed with a pop-up text box, color-coded answers, and validation of answers. RFI questions are ready to send out to software vendors. One may modify existing questions and add their own questions. See press release for latest information..
- Catalyst International (WMS, NASDAQ: CLYS) and Viewlocity (B2B, web monitoring, XML) have signed an OEM agreement whereby Viewlocity's integration broker will be bundled
with Catalyst's web-based warehouse
management
solution. Viewlocity's integration broker will be
a key technology foundation allowing
customizable
information access via portals, real
time
alerts, application-to-application
integration
with other supply chain applications
and
collaboration via exchanges for the
Catalyst
WMS. Catalyst will work with Viewlocity
to
optimize the technology to support
the specific
information and business process
needs of
Catalyst customers.
- E-Stamp (SMS, WMS, NASDAQ: ESTM) Phases Out Internet Postage to Focus on Web-Based Shipping And Logistics
Business. E-Stamp Corporation announced that it will
phase out its Internet postage product
line
to enable the Company to focus on
its web-based
shipping and logistics solutions.
- HotStatus Enterprises (WMS, ASP) established an alliance with Warehouse Optimization,
developers of AutoPalletP3, a powerful case-picking and
pallet-building expert-system product. AutoPalletP3 is a powerful case-picking
and pallet-building product originally developed
by Warehouse Optimization for the exclusive
use of Procter & Gamble one of the world's
largest and most profitable consumer goods
companies. AutoPalletP3 has recently been
packaged for Internet-deployment in order
to support firms of all sizes. HotStatus's
WMS "HotStock" provides receiving
through shipping functionality for the warehouse,
and requires no software license fees or
server hardware. HotConnect is a comprehensive
"user-driven" messaging system
that enables bi-directional "real time"
communication between applications. HotConnect
will be utilized to integrate HotStock with
AutoPalletP3.
- LIS (WMS, TMS) selects Unibar's BARCODE 2000 Server Software
to Create Labels With LIS Dispatcher-WMS.
- Logility (WMS, TMS, APS, B2B, NASDAQ: LGTY) announce Logility Voyager Select(TM), extending transportation services to business-to-business
(B2B) Net Markets and private company portals.
Voyager Select is to support the
numerous
one-to-many relationships inherent
to the
Net Market architecture. These Internet-based
communities will benefit from increased
liquidity
as they deliver advanced logistics
and transportation
solutions that facilitate complete
buy/sell
transactions.
Today, Net Market participants must make sourcing decisions without consideration of transportation service and cost information or investigate transportation alternatives off-line. This reduces the Net Market's value to the community, adding steps to the procurement process and potentially adding costs to the transaction. Voyager Select enables users to determine the total landed cost of a purchase by accurately determining best mode and carrier for the order and consideration in the buying decision. Voyager Select calculates the least cost for purchases based on weight, product type, cube and origin/destination for small package/express, less-than-truckload (LTL), truckload (TL), rail and intermodal shipments.
- Manhattan Associates (WMS, TMS, NASDAQ: MANH) Announces Additional Transportation Management Capabilities in Logistics PRO. Now offers Airborne@Home and USPS delivery
confirmation capabilities in Logistics PRO,
its integrated transportation management
system recently acquired through an acquisition
of Intrepa. With the Airborne@Home service, Airborne
picks up the package and delivers it to the
local post office of the recipient, and the
United States Postal Service performs the
final delivery to the residence.
In addition, Logistics PRO users can now track postal service shipments through U.S. Postal Service Delivery Confirmation options. This includes Priority Mail(TM) and Standard Mail, which includes Parcel Select, Parcel Post, Bound Printed Matter, Special Standard Mail, and Library Mail. Logistics PRO generates all tracking numbers and transmits the data to the USPS Web site. Through the USPS Web site, Logistics PRO users can receive delivery status of packages, including the date, time and ZIP code of delivery. Both of these features are added benefit to the end consumer who can take advantage of more convenient shipping options and to track the status of their order.
- McHugh (TMS, WMS) and LXE Inc. announced that McHugh Software
International, Inc. has re-certified
LXE's
6200 family of wireless networking
infrastructure
products for 900MHz radio frequency
environments,
to include LXE's new MX1 wireless
hand-held
and LXE(R) PowerHouse Series(TM)
1380 Vehicle
Mount Computers.
- Provia Software (WMS, TMS, 3PL) announced the availability of the company's
FOURSITE product in an Application Service
Provider (ASP) format. Through 3pl2deliver.com,
clients can subscribe to the software which
is hosted in a secure high-availability data
center.
Radcliffe Systems (WMS, TMS, 3PL) announced the release of ROC V 8.05 which features new functionality for the following: (1) 3PL industry, (2) enhancements to the trailer and traffic planning module, and (3) an additional timing feature requested by food warehouse clients. For 3PL, ROC now contains a client master template, which, once defined allows users to track all tasks, storage space and freight charges associated with the products of specific clients. It also offers functions for the creation of both summarized and detailed transaction reports.
"Timed Release" function. This allows users to take a group of products and put them into a special hold status for a specified amount of time. When the "timer" elapses the product becomes available for sale. This is a common process for warehouses that fast freeze food products. Enhancements made to the Traffic and Trailer Planning module where users can split orders between multiple trailer loads and enter pickup and appointments times for carriers.
Quotes to Ponder
- "Sweat plus sacrifice equals success."
--Charles O. Finley - "Each day is a new life. Seize it. Live
it."
--David Guy Powers
http://www.acwiwarehouses.com - American Chain of Warehouse
http://www.iwla.org - International Warehouse Logistics Association
Scripture to Ponder
"So teach us to number our days, that we may get us a heart of wisdom.." Psalms 90:12
Good Book
| "Computerized Shipping Systems: Increasing
Profit & Productivity Through Technology (New Millennium Edition)" |
 |
| Taylor, Mark A. | See reviews and more information on this book at Amazon.com |
Another Good Book
| "What To Look For In Warehouse Management System Software" |  |
| Obal, Philip | See reviews and more information on this book at Amazon.com |
Valuable Future Events
MAY 9 TO 11, 2001 - E-LOGISTICS EXPO - The Logistics Institute at Georgia Tech, GFB, Announce an Educational Conference
and Team-focused Tradeshow in Atlanta, GA.
Responding to the need to bring leading-edge
education and world-class solutions providers
together in a "team environment,"
the e-Logistics Expo announced today the
creation of a new "knowledge tradeshow"
to be held next May in Atlanta. The Expo
will be held at the Georgia World Congress
Center. The Expo features a full three-day
educational conference led by The Logistics
Institute at Georgia Tech. Contact Carrolyn
Prescott at GFB at 404-524-7777, or e-mail
to cprescott@gfb-expo.com
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