otm sourcing module - lessons learned

OTM Sourcing Module Lessons Learned

August 13, 2012 Gary Bolen

Transportation Analyst

Family Dollar Sourcing Module Usage

Used for all Inbound Truckload and Intermodal Bid Projects 8 Bid Projects completed using Sourcing Module since

2006 Not currently used for Ocean Freight or LTL Bid

Projects

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Family Dollar Network Characteristics

Over 55,000 Truckload & Intermodal Shipments Over 900 Truckload & Intermodal Lanes 10 Distribution Centers 2 Import Distribution Centers Core Carrier Base of 46 partner carriers Over 1,000 Collect Vendors

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Family Dollar Network Map

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Bid Phases

1. Pre-Bid Phase

2. Bid Phase

3. Bid Optimization Phase

4. Post-Bid Phase

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Pre-Bid Phase Activities Determine scope of Bid Project

Create Bid Project Timeline

Query and scrub historical data

Build Shipment Set & Lane Summary

Fine tune Lane Summary through Action Utilities

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Mini Bid – Lanes from specific origin markets Address new vendor openings, add capacity to existing

lanes, replace carriers not meeting expectations

DC Bid – focuses on new DC openings All vendor to DC lanes for specific destination DC

Network Bid – includes the entire inbound vendor

to DC lane network All vendor to DC lanes for the entire transportation

network

Determine Scope of Bid Project

Network Bid Timeline

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Network Bid Timeline Continued

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Bid Project Team Members

Required Project Team Members 1. Transportation Manager 2. Transportation Analysts (2)

Supplemental Project Team Members

1. IT Support / OTM Super Users 2. Transportation Planners / Routers 3. DC Transportation Site Managers 4. Freight Payment Provider

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Preparing Historical Lane Data

Historical data using previous calendar year or fiscal year can be queried from the OTM database

Data for new DCs can be mocked up using geographically close existing DCs

Populating P_SHIPMENT table using CSV upload template allows an easy way to exclude lanes that have shipment volume too low to go out to bid and to preserve existing lane naming conventions

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Shipment Set

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Houses all OTM historical shipments within given date parameters

Presenter

Presentation Notes

Data scrubbing is easier and less confusing if data is broken up into individual destination DC’s. However when CSV templates are used to populate the P_SHIPMENT_SET_D table you must ensure that all shipment data is on one CSV upload template

Lane Summary

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Uses Shipment Set data to build lane ID’s that can later be put out to bid.

Presenter

Presentation Notes

Autocombine and Combine lanes tools are a great way to fine tune your lane summary and create more attractive lanes for carriers to bid on. OTM will assign a randomly generated number as the lane ID for any new manually combined or autocombined lanes. This number will be the basis of the lane ID in the carrier response template and future rate geo gid. Ensure that lanes with custom naming conventions that are not to be combined are saved in the do not combine field

Lane Summary Statistics Helpful To Carriers

Percent of Stop-offs Average Distance Total Annual Shipments Max Weekly Shipments Primary Vendor Source Postal Code Lane Attributes No refrigerated trailers Drop trailers required Seasonal summer lane

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Presenter

Presentation Notes

HOS considerations have made carriers very sensitive to multi-stop shipments. Shippers such as Family Dollar rely heavily on multi-stop pickups as a means to reduce cost by reducing LTL spend and getting better load fill on truckload shipments. Average distance will help determine the rate per mile necessary to service the lane. If bidding a zone lane it is important to the carrier understands that average distance is an average of all the lane distance on the lane for the past year and that actual lane distance could be lesser or greater that posted average distance. Total Annual shipments – the more consistent the lanes with round volumes command more attractive the bid rates. Origins with vendors in close proximity can be combined into zone lanes to create more consistent lane volumes (examples Chicago zone, Atlanta zone, Los Angeles Zone, Saint Louis Zone, Dallas Fort Worth Zone. Max weekly shipments – if lanes experience volume spikes max weekly shipments will help a carrier determine if they can handle all of the volume in a given week. If they cannot they can reduce the requested percentage Primary Vendor – Helps carrier operations teams make better decisions about accepting lane awards. Carriers doing business with the vendor already can drive operational efficiencies by increasing volume or will know what to expect from a pickup standpoint Source Postal Code – Very important if rating is zip driven that the carrier understands that the rate the are submitting covers the entire zone zip 3 or multiple zip 3 zone.

Zone Lanes & Autocombine Utility

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Niles, IL – 50 Shipments

Chicago, IL – 75 Shipments

Aurora, IL – 100 Shipments

Chicago Zone Lane – 225 Shipments

Carrollton, TX – 50 Shipments

Garland, TX – 25 Shipments

Dallas, TX 75 Shipments

Arlington, TX – 50 Shipments

Dallas Zone Lane – 200 Shipments

Seasonality of lanes

Try to group a seasonal vendor with a year round vendor to create lanes with annual volume.

Consider removing lanes that only ship for 1-2 months out of the year from the bid.

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Bid Phase Activities

Create Bid Project / Bid Round.

Invite carriers to Bid, provide bid documentation, and specify constraint sets.

Allow carriers to submit bids.

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Clearly Communicate Nature of Bid Project

Number of Bid Rounds Planned Implementation

Date For New Rates Rates Contract Term Factors considered to

make bid awards Service Level Price Incumbency Financial Stability

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Supplemental Bid Documents For Carriers

Generated In OTM Carrier Response

Template Generated Outside OTM Bid Introduction

Document SWAT Lane Analysis

Spreadsheet Bid Package SOP Bid Upload and Validation

SOP 19

SWAT Analysis

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Presenter

Presentation Notes

Lane Attributes had been helpful to Family Dollar to identify seasonal lanes and lane with drop trailer requirements Lane Stats such as Max Shipments help carriers understand higher weekly volume lanes

Look For These Challenges From Carrier Partners

Submitting under-competitive bids in multi-round bids and holding best rates until later bid rounds

Submitting incorrect bid information Wrong RPM / Wrong requested award percent / bids

on lanes carrier does not intend to service Submitting rates without adequate reloading

options at destination or pickup capacity at origin Submitting bids based on non-asset capacity

without communicating that bids are based on non-asset capacity

Trying to increase a bid rate in later bid rounds

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Network Bid Record Growth

0

5,000

10,000

15,000

20,000

25,000

30,000

2009 2010 2011 2012

Bids

Bids

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Ensuring Bid Stays On Track

Use Sourcing Module Tools to determine how many carriers have bid.

Send reminders to carriers that have not bid mid way through the bid round.

Place phone calls to carriers that have not the day prior to the bid closing to determine if they need more time or clarification.

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Bid Optimization Phase

• Create Sourcing Rule Set ID required parameters

• Include and Commit bids to be considered by the Solver

• Solve Scenario (Scenarios)

• Analyze solver output

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Making sense of multiple bid records

Weigh criteria other than cost that are most important to your business unit.

Build Sourcing Rule Set IDs that consider other important factors in awarding lanes

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Tailoring the Solution

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Sourcing Rule Set ID Parameters

Solve Scenario

Multiple Bid Rounds Low Cost Solution Blended Solution One on one carrier

negotiations

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Solution Table Rank Order By % Of Total Spend

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Presenter

Presentation Notes

Microsoft Queries can be used to pull the results from the solution table. Results can be refreshed for different scenarios. (low cost / blended etc) Multi-modal carriers can be grouped together to show combined revenue and total awarded shipments

Post-Bid Phase

• Finalize awards on each lane

• Set the awarded bid status

• Use Build Rates Action to make new rates available in OTM core product

• Communicate lane awards to Carriers through new rate sheets

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Building Rate Records Select template rate offering considering naming

convention.

Example: SCNN_TOP_0212_31407_9990

Select contract term effective and expiration date for new

rates. Test that new rates are performing as expected and have

them available in OTM at least a week prior to new rates’ effective date.

Send rates to Freight Payment Provider.

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Rate Offering Lane ID

Rate Record

Presenter

Presentation Notes

Having results in the OTM core product at least one-week prior to the effective date will help prevent shipments from being tendered under the wrong rate records. Sourcing module in 6.1 forces the user to input contract start and end dates for new rates

Post Bid Functions

Communicate lane awards and rate sheets to carriers

Load Commitment Allocations via CSV template to manage split lane awards

Add accessorials to all new rate offerings Keep rate offerings for new service providers

inactive if they are not finished with the contract process

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OTM 6.1.2 Issues

Carriers unable to upload single carrier response with over 900 bid records

Unable to use carrier response analysis to check bid round status

Unable to Build Rates from scenarios with over 900 solution ID records into new rate records

Unable to delete a lane ID through the OTM user interface

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OTM 6.1.2 Sourcing Module Work-Arounds Used

Split Carrier Response Template into 2 separate upload files.

Use SQL to check bid round status

Build rate CSV upload templates for scenarios with over 900 solution records

Use Delete Statement to Delete Lane ID’s from Lane Summary

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Sourcing Module Benefits To Your Organization

Leverage Lane Volumes Interface to receive carrier bid data Analyze Bids More Quickly Using Discounts &

Penalties Awarded Rates Immediately Available In Core

Product

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Presenter

Presentation Notes

records available much sooner for new tenders.

Celebrate the Completion of your Bid Project

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Question and Answer

Thank You

otm sourcing module - lessons learned

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