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October 1 2018

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10 The Journal of Commerce | October 1 2018 www.joc.com Cover Story By Ari Ashe and William B. Cassidy FOLLOWING A YEAR when US surface transportation budgets were not just blown, but shredded and burnt, lo- gistics managers are ripping up their playbooks and looking for new ways to control costs, if not cut them. They're working cheek-to-cheek with truckers and logistics compa- nies to eliminate ine ciencies while placating impatient CEOs, CFOs and procurement o cers. If not, they're likely hoping to fi nish rewriting their resumes before being kicked o the dock and onto the curb. Double-digit increas- es in transportation costs, especially for-hire trucking rates, shook some of the largest publicly owned US retailers and manufacturers this year, sending shudders through fi nancial markets and raising fears of consumer price infl ation. "Missing on the (transportation) budget has been brought up on almost every earnings call this year," said a manager of domestic logistics at a Midwest retailer. "Everybody is struggling with it. But as we roll into 2019, CFOs will expect us to fi nd a way to manage costs better." In other words, don't expect "it's the market, boss," to fl y next year. With transportation costs in the crosshairs, logistics managers must really, truly collaborate with carriers and logistics operators and also dig into their own operations to eliminate waste and save dollars and cents. Rates aren't falling any time soon, so that means turning over as many rocks as possible in search of savings, both inside and outside transportation, sources said. Shippers also need to do a better job communicating with their CFOs and CEOs, and educating sales personnel, procurement executives, and others who make decisions that a ect the supply chain and trans- portation budget — for example, the sales executive who promises next- day delivery without realizing the length of haul makes that promise impossible to keep. "Your savior is not going to be found outside your own organiza- tion," said Andrew Lynch, president of Zipline Logistics. "You know your costs are going to be infl ated over last year, and those costs were 20 to 30 percent higher than in 2017," he said. "What are you doing internally to put yourself into a position to buy better? And it's not all 'shipper-of- choice' stu ." Re-evaluate services Logistics managers need to take a "more granular" look at operations in order to "buy capacity better," said Lynch, whose Columbus, Ohio, third-party logistics fi rm works with consumer packaged goods compa- nies. "Think of the nuts and bolts of dealing with customers," he said, consignees who may demand freight be delivered on a Saturday or Sunday. "There were times when sales folks were told to just say 'yes' to de- mands like that, but those are things that need to be re-evaluated." What's needed is a more detailed, realistic discussion of costs between not just carriers and shippers but shippers and consignees, who need to know the cost of demands such as Saturday morning delivery, or a last-minute freight tender. The logistics manager at one Midwestern parts manufacturer said she has spent more time this year explaining the reasons for tight truck capacity and higher rates to her company's salesforce than ever before, and those conversations have paid dividends. "Those salespeople didn't understand the impact of the electronic logging device (ELD) man- date," she said. A better educated salesforce can provide relief for stressed-out logistics managers who spend half the day fi elding phone calls from irate customers wanting to know why a shipment wasn't delivered overnight or is a two-day haul. That education requires placing the supply chain directly at the heart of a company's operations and long-term strategy. "Are we starting to re-evaluate Don't expect "it's the market, boss," to fly next year.

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