Transportation and Distribution Management - Report Example

Transportation Management of the of the of the College FedEx: transportation management: carrier selection process, documentation and shipper-carrier relationship. Introduction: Transportation plays an important role in efficient and effective functioning of logistics operations. This report discusses transportation management of one of the leading logistics companies in particular carrier selection process, documentation and shipper-carrier relationship. In logistic companies, the efficiency of moving products depends on the operation of transportation. If there is a progress in technique and management principles then, it has a positive impact on the moving load, delivery speed, service quality, operation costs, the usage of facilities and energy saving. Transportation plays an important role in manipulating logistic. FedEx Corporation: FedEx Corporation consists of powerful independent companies that have independent operations, but they compete collectively. The FedEx family includes: FedEx express: it is the world’s largest company in the transportation FedEx Ground: it is the second largest company in North America that provides small package delivery service FedEx Freight: it provides regional LTL services FedEx custom critical: it is surface expedited carrier worldwide, FedEx trade networks: it serves as a high-tech customs broker and trade facilitator. The selection of the transportation service to customers result as a result of underlying process: (FedEx Supply Chain., 2014) The vision of FedEx supply chain services is to become the world leader in global integrated logistics management, supply chain solutions and time-definite delivery (FedEx, 2014a). In the international market, FedEx faces competition from DHL, UPS, foreign postal authorities like Deutsche post and TNT N.V, freight forwarders, passenger airlines and all-cargo airlines. A comprehensive review of the FedEx company statistics are presented in graph below: (Statistic Brain, n.d.) Younkin, (2006) in an article has identified six aspects that determine the position of the company on the best practices quantum of the transportation management. The systematic process is graphically presented below: (Younkin, 2006) Carrier selection process: There are three important aspects of transportation management: Carrier selection, documentation and shipper carrier relationship. Carrier selection process includes the activities of identifying and procuring the best modes, the best carrier for each mode and best rates (Younkin, 2006). Companies tend to have a carrier mix like combination of aircrafts and road vehicles to order to have smooth operations, speed delivery at a low cost. Fed EX has a great air-and-ground network which facilitates the quick delivery of time sensitive shipments that deliver the shipment in one to two days with guaranteed delivery time. Its transports approximately 4 million packages and 11 million pounds of freight daily. For smooth functioning and fast delivery across the globe FedEx has mix of air and delivery fleet which consists of 650 aircrafts and 48000 motorized vehicles. FedEx has collaborated with more than 375 airports worldwide for the landing of its aircrafts without any difficulty. In October 2013, FedEx added first new Boeing 767-300 freighter in its air fleet. This is a major step in company’s strategic aircraft fleet modernization program as it is a more efficient and lower emission aircraft. 767 replaced MD 10 aircraft and is 30 percent more fuel efficient and incur 20 percent less unit operating cost (FedEx, 2014a). FedEx also provided a customized carrier to transport the skeleton of Wankel T-Rex dinosaur. In that customized lorry temperature was kept at 22C and each crate of bone was surrounded by invisible electric fence. FedEx lorries carried another unusual shipment; more than 15,000 sea turtle eggs were moved to Florida in FedEx lorries in 2009 (OBrien, 2014). To provide superior services than its competitors, FedEx is also committed to providing the innovative carrier solution and services to its customers. One of its innovative solutions is SenseAware (a multi-sensor device with a web-based shipment monitoring and collaboration equipment. Customers can monitor the shipments in real time along with the information such as temperature, location and exposure to light with the help of SenseAware (FedEx, 2014b). In order to reduce costs and improve, services transportation plans are made with respect to load planning and optimization. For that transportation management system (TMS) is used. With the optimization capability of TMS, the best option for shipment is selected which depends on preset criteria of cost, transit time and overall mode (Younkin, 2006). For optimal plans to work properly, effective operation in the shipping offices is required. FedEx ensures flawless planning for getting the right shipment on the right carrier truck at the right time. Documentation: Domestic and international transportation of goods requires proper relevant documentation. If the shipment is to be sent abroad then, the amount of documents will be different from the domestic shipment. FedEx provides complete information on documents that are required for the transportation service. The destination of the shipment is important deciding what documents will be required and what duties and taxes will be paid on the shipment. All documents are required to have a full address and contact details of the final recipient. FedEx requires its customers to give the accurate and detailed description of the shipment otherwise it would face custom delays. The documents that FedEx requires from its customers for international shipment are: international Air waybill (AWB) is required with the full address ant contact details of the final receiver along with the full details of goods being shipped. Sender’s full address and contact details are also required along with correct payer information, declared value and the type of service that is required. Another important document is a commercial invoice, which is required by customs authorities to clear non-document shipments. The requirement of commercial invoice change market to market, and also considers commodity type, value and quantity, so such information should be included in detail. A packing list is also required if customer is using one AWB for sending more than one package, or if the weight of the shipment is more than 100 kgs. However, this requirement differs depending on the market and goods being shipped. The list must include the correct description of the commodities, quantity and weight. Special license or another documentation is required for certain commodities at the origin or the destination for clearance procedure. According to destination country law, additional documentation is required if goods are shipped to some destination like USA or China. FedEx requires its customers to complete all the relevant documents accurately so that customs authorities process the shipment more efficiently. FedEx provides Global Trade Manager on its website that helps customers find necessary documents and regulatory information specific to their shipment needs. FedEx customer service team also helps customers about the necessary documentation and customs clearance procedures for a specific market or commodity. Shipper-carrier relationship: It is important for firms to have a close relationship with the carriers to improve transportation performance. In most of the logistics literature there has been focus on supplier-customer dyad, whereas Gentry (1993), says that study should focus on the services provided carriers to shippers. Over a period there has been a drastic change in shipper-carrier relationships and close relationship are expected in the future as it would be a source of competitive advantage (Gentry 1993). For example, if shipper has a close relationship with the carrier, the carrier may provide capacity to a shipper in times of shortage (Douglas 2006). Carriers are likely to avoid opportunistic behavior with partner shippers and deliver a high level of service to maintain a relationship with the shipper (Douglas 2006). According to Esper and Williams (2003) if there is a high level of collaboration between shippers and carriers then there will be a decline in transaction costs, service performance will improve, and there will be more streamlined supply chain. As explained by Gentry (1993) collaboration with carriers results in better transportation service, improved information sharing, high technology adoption and low risks and costs. Also, Gentry (1996) says that with close shipper-carrier relationship there will be less billing discrepancies, claims and utilization of fewer carriers. For instance, Agile Network is an organization that integrates ERP system to optimize the performance of the Omni Channel. A system is graphically depicted as follows: (Agile Network, 2014) However a study by Zsidisin, Voss and Schlosser (2007), say that there is no effect of close shipper-carrier relationship on on-time performance, but it does affect carrier’s willingness to assign assets for the shipper and takes loads in time of constrained transportation capacity. Similarly disagreement between shipper and carrier can have a negative impact on shipper’s business activities. In 2010, FedEx and UPS announced that they do not want to conduct carrier contract negotiations with third party negotiators (3PNs) anymore. This decision upset the shippers. FedEx wanted asserted to have negotiation solely with shippers with no third party involved. Whereas shippers pointed out that it is their right to engage subject matter experts, and they are going to preserve it. FedEx explained that there are some reasons behind that initiative. This step would provide security to the shipper regarding details of the contract. If 3PNs gets involved so there are chances that they would disclose the contract details to another shipper. So the FedEx prefers direct negotiation with its customers. Conclusion: In short FedEx has a very efficient carrier selection process as it has the right mix of air and ground fleet. It also provides customized carrier for a special type of shipments. With the addition of 767-300 aircraft in its air fleet, it has ensured the low cost per unit of delivery. FedEx also ensures that customers fulfill all documentation requirements by providing extensive information on its website and customer service centers also provide due help to the customers regarding documentation issues. As far as shipper-carrier relationship is concerned, FedEx is required to work more closely on it. If FedEx wants to have sustainable “mutual incentive” then there is a need to change to a new contract model. This new contract model will enable a transparent cost and a minimum base margin and incentives for innovation. This will require abandoning of old procurement-driven method and reverse auctions creating new partnership-building method. References Agile Network. (2014). Manhattan Momentum 2014. Retrieved August 19, 2014 from http://www.agile-network.com/news-conventions-ManhattanMomentum2014.htm Douglas, M. (2006). Carrier Partnerships: A Matter of Trust. Inbound Logistics, 26(1), 161-167. Esper, T. L., & Williams, L. R. (2003). The value of collaborative transportation management (CTM): its relationship to CPFR and information technology. Transportation Journal, 42(4), 55-65. FedEx. (2014a). FedEx First New Boeing 767-300 Freighter: More Efficient, Lower Emission. Retrieved August 19, 2014 from http://www.fedex.com/in/enews/2013/november/air.html FedEx. (2014b). FedEx Innovation. Retrieved August 19, 2014 from http://about.van.fedex.com/innovation FedEx Supply Chain. (2014). Transportation Management Services: Process. Retrieved August 19, 2014 from http://www.fedex.com/us/supplychain/services/tms/process.html Gentry, J.J. (1993). Strategic Alliances in Purchasing: Transportation is the Vital Link. International Journal of Purchasing and Materials Management, 29(3), 11-17. Gentry, J.J. (1996). The Role of Carriers in Buyer-Supplier Strategic Partnerships: A Supply Chain Management Approach. Journal of Business Logistics, 17(2), 35-55. Statistic Brain. (n.d.). FedEx Company Statistics. Retrieved August 19, 2014 from http://www.statisticbrain.com/fedex-company-statistics/ OBrien, J. (2014). How to move a T-Rex dinosaur across the US. BBC, Retrieved August 19, 2014 from http://www.bbc.com/news/magazine-26981943 Younkin, M. (2006). Where Are You on the Transportation Best-Practice Continuum?. Fedex, Retrieved August 19, 2014 from http://www.fedex.com/us/autodistrib/TransBestPracMYounkinMPNovDec06.pdf Zsidisin, G. A., Voss, M. D., & Schlosser, M. (2007). Shipper-carrier relationships and their effect on carrier performance. Transportation Journal, 5-18. Read More