the discounts are there—you just have to dig
Re: "surcharge survival strategies" (July 2008)
Good article! I, too, am faced with surcharge upon surcharge on my LTL shipments. I am a warehouse operations manager with a warehouse in New Jersey and one in California, with freight expenses of over $400,000 per year. As fuel prices began to skyrocket, I first went to my carriers to see what could be done about it, and I was pretty much stonewalled. Redoing my discount structure was out of the question—with all of my discounts in the 80 to 85 percent range, the carriers didn't want to hear about it.
So I decided to go in a whole other direction. I called in one of my carrier reps—one with whom I have a friendly relationship and can talk to off the record. What I learned was most enlightening: Although most people don't know it, carriers do have programs outside of the traditional straight discounted pricing tariffs. It is up to you, as the customer, to dig and dig until you find them and then pester the carriers until you get these programs in place.
Many carriers will offer rebate programs based on your monthly spending: The more business you do with them, the bigger your rebate. Some offer tiered discounts based on the weight of an individual shipment. One carrier put a program in place for me that included an 80-percent discount for shipments weighing up to 999 pounds, an 81-percent discount for shipments weighing 1,000 to 1,999 pounds, and an 82-percent discount for shipments weighing 2,000 pounds and up. All of the carriers have volume shipment rates for larger shipments—those weighing 5,000 pounds and greater. FAK (freight, all kinds) pricing can be another way to get better rates.
Forget about trying to get rid of the fuel surcharge. If you're not Wal-Mart, it's just not going to happen. With the types of changes I have made with our carriers, my company will be in a better position when and if fuel prices ever come down and when all of the general rate increases come through in the spring.
Dan Hogan, Broadway Industries
tried and true
Re: "old concept, new justification," FastLane (August 2008)
Cliff Lynch is right on when he writes about the tried-and-true concept of combining small shipments into large ones. Assembly programs like the collection and consolidation of small shipments to retailers as well as simple multi-stop truckloads or even railcar loads all pushed the LTL costs downward. Likewise, pool distribution is seeing a comeback as in the Trammel Crow example described. Fuel prices are likely to remain high ... forever. So Cliff's reminder to look to the "old concepts" is excellent advice.
Charles W. Clowdis Jr., Global Insight (USA) Inc.
more on going "lean"
Re: "the secret to going 'lean'" (August 2008)
Pat Kelley and Ron Hounsell make an excellent observation about the neglect of the people aspect of lean initiatives. While they present a compelling argument for using a pay-for-performance program in distribution centers, they've neglected two key factors for success in such a program.
First, the incentive bonuses paid must be based on fair and reasonable expectations (often multi-variable engineered standards). Measurements that do not accurately reflect the operation can lead to unrealistic expectations, poor decisions, and a general lack of faith in the program.
Second, incentive programs must balance productivity gains with checks to ensure accuracy, safety, and quality. Successful programs usually involve some "teeth" that go along with added associate payouts (e.g., minimum accuracy ratings based on random audits).
Incentive programs, while often overlooked, have the potential to increase workforce productivity by 30 to 50 percent if implemented properly, and it is great to see a focused article on this important topic.
Steve Scales, Kurt Salmon Associates
