ROUTING MANAGEMENT AND CONTROL, DRIVING TRANSPORTATION SUCCESS
To be effective, all freight transportation purchasing programs should be represented by a documented “freight transportation purchasing profile”. The “profile” would embrace the “Freight Transportation Purchasing Philosophy”; and at a minimum, would be supported by the operating components presented in: “Knowledge Based Freight Transportation Negotiations”; and “Carrier Selection”. However, to be successful, the freight transportation purchasing program must include “Routing Management and Control”. When positioned correctly, “Routing Management and Control” will add value to the organization and its relationships; affect cost avoidance and make a significant contribution to the bottom line; allow customers to receive and vendors to ship higher quality products more predictably, and appreciably increase the probability for improving customer and vendor satisfaction. Routing Management and Control (RM&C)If you accept the notion that freight transportation represents the “corporate life bloodline to the market place”, then “routing management and control”, is the policy that: 1. Manages the freight, internally and throughout the supply chain 2. Administers the rules of engagement3. And executes the functional tasks RM&C is globally important. Its overall influence on the supply chain is palpable; and when you drill down to the operating components it manages, it should be clear that an effective and efficient RM&C policy plays a mission critical role in driving successful freight transportation practices and relationships. However, because of its importance and overwhelming operational influence, a determination as to who’s RM&C will prevail must be established; it is impossible to have both the consignor and consignee’s RM&C policies co-exist. In our white paper, “Legal Terms Surrounding The Transportation Process That Have Significant Impact On How Business Is Conducted And Where Responsibility Is Assigned” we identified the legal conditions and issues that are used to identify the party with the right to route. Provided that the relevant terms are stated in the appropriate instruments, “the routing party” is easily discernable. Therefore, prior to implementing your RM&C policies and programs that would affect the relationship of customer or vendor, it is imperative that you first determine if you have the “right” to do so. There are, above all, four (4) key components of “routing management and control”: • Mode Selection• Carrier Selection• Routing processes and techniques• Associated and Attendant Operations A freight transportation mode is described as a form or type of conveyance that is used for transporting goods. The four (4) modes of freight transportation generally accepted are: Motor; Water; Air; Rail. Depending upon perspective and time, it could be successfully argued that “Express” is also a transportation mode. Additionally, the various “piggyback” plans, beginning in the 1950’s and more recently the intermodal programs, have begun to blur the modal distinction. However, understanding each mode, its characteristics, attributes, and operational differences remain an important part of the developmental process. Mode selection can be driven by the freight itself. As an example, a manufacturer of steel construction beams would probably not choose air as its mode, but would consider water, truck, or rail. Bulk products such as flour or sugar would also eliminate air as its primary mode. Steel beams as well as sugar and flour would also drive the equipment selection. A carrier might supply a “hopper car” for flour; or if the sugar were liquid a tank vehicle would be appropriate. Pickup and delivery site conditions would also influence mode selection. The existence of a rail siding or the proximity of a team track would influence the modal decision as well. The strong relationship between mode selection and carrier selection may cause these two processes to be performed side by side. Carrier Selection concerns itself with the carriers’ characteristics and idiosyncrasies. The “freight transportation purchasing profile” would identify the shippers’ decision criteria such as: the carriers’ financial condition; the type and availability of equipment; levels of insurance; time-in-transit; operating and claims ratios. Matching these criteria with the carriers’ description is the objective of effective carrier selection. Routing processes and techniques refer to methods and processes used to arrive at a meaningful routing solution. The actual route over which the freight will travel; what freight should be consolidated over what period of time and the methods employed to determine the solution are a few examples that must be addressed during this activity. “The associated and attendant operations” are far more esoteric than the other primary components and in order to be meaningful there must be an understanding and appreciation of what needs to be accomplished and the availability of the resources necessary to satisfy those needs. At the outset, identifying the areas of importance relative to RM&C must be accomplished in order to effectively construct an efficient operating system that is integrated within the overall freight transportation purchasing system. Functions within the existing freight transportation purchasing system may already be capable of satisfying, at least, some of the routing and control functions. Links within the system would also be important to identify because they could serve as adjuncts to routing and control operations. The two overriding objectives of an effective RM&C program are cost and service. Both must be treated equally and where possible the strategy should embrace both collectively.