"Freight Management Basics" From a Finance Functional Approach Apr 2010

1. LPS Logistics & Procurement Services, LLC
INSTITUTE OF MANAGEMENT
ACCOUNTS
“Freight Management”
4-22-10
Presented By: Steven C. Hogan, President
Logistics & Procurement Services, LLC (d/b/a “LPS”)
“Your Transportation & Logistics Experts”
LPS2010SM
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2. LPS Logistics & Procurement Services, LLC
Objective
IMA Mission Statement:
“To empower accountants and financial professionals to
become “trusted business advisors” “playing a driving role” in
their organizations’ business success and advancing their
careers.”
(http://www.imanet.org/about_mission.asp (© 1997-2008)
LPS Session Goals:
Honor IMA Mission Statement By Providing Information On
Freight Cost Management, Challenges, and Approaches
Through An Interactive Presentation Approach.
“Your Transportation & Logistics Experts”
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3. LPS Logistics & Procurement Services, LLC
Agenda:
 Brief Overview LPS
 How Do You Measure Freight Cost?
 Who Has Responsibility For Freight Costs?
 Basic – Challenges To Freight Costs Management
 Options To Manage Freight Costs
 Key Considerations
 Case Studies
Q & A
“Your Transportation & Logistics Experts”
LPS2010SM
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4. LPS Logistics & Procurement Services, LLC
Logistics & Procurement
Services “LPS”
Who we are:
We are a management service company that provides procurement
expertise, consulting, and solutions to help our customers establish
and manage supplier contracts that deliver better pricing, value and
services.
What we are not:
A carrier, broker, intermediary, or transportation capacity
provider… “Your Transportation & Logistics Experts”
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5. LPS Logistics & Procurement Services, LLC
LPS Service Mission
 “To be our customers independent, transparent, staff experts
at securing the best costs and services for their supply chain
operations.”
 “Provide 10-30%+ operating cash savings for our Customers
through our expertise in operations & procurement of
transportation, supply chain, and 3PL provider services.”
“Your Transportation & Logistics Experts”
LPS2010SM 5

6. LPS Logistics & Procurement Services, LLC
Our Service & Approach
 We fully oversee and manage the process of selecting, negotiating,
contracting, and monitoring of these services to strength our
customers existing functions or implement new solutions.
“Your Transportation & Logistics Experts” 6
LPS2010SM

7. LPS Logistics & Procurement Services, LLC
Our Expertise:
“Service-Providers” “Service-Providers” Methods & Administration
Less Than Truckload Intermodal -Technologies
Truckload USPS/Mail / Consolidation Transportation Mgt
Parcel Private Fleet & Dedicated Supply Chain Visibility
Rail Courier -Freight Audit / Payment
Intermodal Expedite -Freight Terms
Forwarder / US Customs Warehousing -Shipping & Handling
Ocean Distribution Revenue
Air / Expedite 3PL -Consolidation; Pooling; X-
Rail Outsourcing Dock
-Vendor Compliance
-Routing Guides
-Claims
-Packaging
“Your Transportation & Logistics Experts”
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8. LPS Logistics & Procurement Services, LLC
LPS Customers Include:
• Fortune 100 – 1000
• Manufacturing
• Retail
• Services
“Your Transportation & Logistics Experts”
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9. LPS Logistics & Procurement Services, LLC
How Do You Manage Freight
Costs? (COB)
 C – Level Visibility Management Information
 Purchase “% $’s; Unit; Weight; Sale; Factors”
 Sales /Period “
 Customer / Market “
 O – Operational Level- “Responsible/Authority”
 Responsible/Stake Holder C Level + Services
 Authority “COB”
 Provider Base Rate; Accessorial; Fuel;
Service (s); Distance; Volume;
 Balance Sheet
 Purchase & Sale Terms
 F.O.B.-Covington, KY – “Freight Collect”
– “Freight Prepaid”
– “PPD & Add” etc 9

10. LPS Logistics & Procurement Services, LLC
Who Is “Responsible” & Who
Has “Authority” For Freight?
 What Drives Your Company?
 Sales / Marketing / Customer Service
 Procurement / Supply Chain
 Manufacturing / Distribution
 Customer Service
 Who Is Your Internal “Authority” On Freight?
 Shipping / Receiving
 Fleet / Transportation Manager
 Transportation Operations / Procurement
?
“Your Transportation & Logistics Experts”
LPS2010SM 10

11. LPS Logistics & Procurement Services, LLC
Basics – Freight
Management Challenges
 What Information Do You Have?
 Metric (s) – Aligned To Primary Business Driver?
 Where Can You Get Them
 How Can You Improve Them
 Discrete Transaction Detail / Profiles To Support Metric Evaluation
 Service Level
 Requirements
 Volume
 Stable / Standard Freight Cost Basis
 Formalized Rates & Contract
 Internal / External Technology Capture
 Defined Service Levels
“Your Transportation & Logistics Experts” 11
LPS2010SM

12. LPS Logistics & Procurement Services, LLC
Options To Manage
Freight Costs
 Resources – Reward – Balance Paradigm
Internal
Expertise External
Ability Resource Cost
Time & Expertise
Internal
Resource
Expertise &
External Availability
Capabilities
Cost
Strategy
“Your Transportation & Logistics Experts”
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13. Customer Case Study Discussion:
Status Quo” Customer—- Legacy services and costs with primary focus on daily operations and execution,
limited internal expertise in transportation and logistics and poor internal information to recognize and implement
improvements. Costs are generally rising and unknowingly absorbed or passed on.
“Routine” Customer—-Services and costs are updated to a schedule more reactively based on service changes,
price increases, or internal events effecting operations, locations, and customers. Internal expertise exists without
work tools, planning, or depth of knowledge and leadership visibility to achieve more than cost containment.
“Challenged” Customer—-Services and costs are updated with specific internal expertise however the
resources are used in a more formalized project mentality causing trade-off and completion challenges. Leadership
visibility is good, cross-functional strength is poor or specific expertise to address larger scale improvements in
process, policies, organization, technologies, network, and services leaving significant cost and service
improvements unrealized.
“Your Transportation & Logistics Experts”
LPS2010SM
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14. Customer Case
Study Discussion: LPS Logistics & Procurement Services, LLC
Customer Case Studies
Building Materials Holding Com-
pany “CFO” Seeks Fleet Cost &
Transportation Savings
CUSTOMER:
Vertically Integrated Manufacturer Windows, Doors,
Columns, And Extrusions
• 6 Business Units
• 11 Locations (12 U.S. Plants, 1 Plant In Ch ina)
• 120 Tractors; 290 Trailers
• Sales > $650M
MARKET:
LPS Multi Mode Transportation Building Materia ls
Improvements Save $2.9M In Pur-
chased Transportation Costs SITUATION: “ROUTINE”
• Rapidly Rising F leet Transportation Costs
• Legacy Driver Routes, Processes, & Use of One
Way Transportation
• Decentralized Transportation Spend and Man -
agement “Within” SBU
• Limited Senior Management Visib ility To Costs
“Your Transportation & Logistics Experts” & Service Options Across SBU’s
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15. Customer Case
Study Discussion: LPS Logistics & Procurement Services, LLC
Customer Case Studies
Building Materials Holding Com-
pany “CFO” Seeks Fleet Cost &
Transportation Savings
LPS Multi Mode Transportation
CRITICAL SUCCESS FACTORS:
Improvements Save $2.9M In Pur- • Establish Transportation Council Approach
chased Transportation Costs Across SBU’s To Manage Changes & Improve
Team Approach
• Reduce Fleet & Transportation Costs Through
SOLUTION:
• LPS LogproTM Leverage of SBU spend and services.
• Truckload Bid-Contract • Establish Go Forward Sen ior Leadership Con-
• LTL Bid-Contract trols & Management Scorecards
• Ocean Bid-Contract
KEY BENEFITS:
• Network Analysis
• Reduced Total Supply Chain Costs $6.5M, Elimi-
• Route Utilization
nated 25% Of F leet Assets
• Decreased Purchased Truck load, L TL, & Ocean
Transportation Costs 22%
SERVICE DESCRIPTION:
• Contracted To Source Fleet • Rationalized Plant To Cu stomer Market Service
Tractor & Tra iler Equip ment & Area, Reduced Total Miles 8 %
Services • Decreased Empty Fleet Miles 18%
• Contracted Source Truckload • Established Strategic 3 Year SC Plan Consoli-
Transportation dating 2 Plant Locations
• Contracted To Source Import
Ocean Transportation
• Contracted To Provide Network
Analysis, Route Rationa lization,
& Transportation Technology
“Your Transportation & Logistics Experts”
Solution
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16. Customer Case
Study Discussion:
LPS Logistics & Procurement Services, LLC
Customer Case Studies
Automotive Supplier & Industrial
Power Systems “COO” Cost Reduction
Initiative—International Freight
CUSTOMER:
Multi National Automotive and Industria l Power Sys-
tems Manufacturing Holding Company
• 12 SBU
• 28 Locations (North America, Asia, Europe)
• Sales > $1B
LPS Consolidates International Ocean MARKET:
And Air Spend Across Diverse SBU Automotive
Requirements Industrial Power Syste ms
SITUATION: “ROUTINE”
• Decentralized Import/Export Transportation
Spend And Contracting Across SBUs
• Limited Resources, No Specific International
Ocean & Brokerage Expertise
• Poor Executive Visib ility of Spend And Service
“Your Transportation & Logistics Experts” Data Between SBUs
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17. Customer Case
Study Discussion: LPS Logistics & Procurement Services, LLC
Customer Case Studies
Automotive Supplier & Industrial
Power Systems “COO” Cost Reduc-
tion Initiative—International
Freight
LPS Consolidates International Ocean
And Air Spend Across Diverse SBU CRITICAL SUCCESS FACTORS:
Requirements • Implement Inter Division and Suppler Routings
• Establish Over 20 % Cost Reduction And SBU
Participation So lution
SOLUTION:
• LPS Managed Services
RESULTS:
• Project Management
♦ Over 24% Reduction Of Ocean Transportation
• LogproTM - Ocean/Brokerage
And U.S. Customs Brokerage Costs
• LogproTM - Import Intelligence
♦ 31% Reduction Air & Charter Service Costs
♦ Established Visibility So lution L inked To Master
Planning And Inbound/Outbound ERP L ine Item
SERVICE DESCRIPTION:
Status
• Contracted to source Import
Ocean, Air Freight, And U.S. Cus- ♦ Established Vendor Co mpliance Routing & Re-
toms Brokerage Services lease Controls
• Contracted Provide Logprotm –
“Your Transportation & Logistics Experts”
“Import Intelligence Services”
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18. LPS Logistics & Procurement Services, LLC
Key Freight Management
Considerations
 “COB” – Can You Measure & Report Sufficiently: C-Level; Operational?
 Who has “Responsibility” and “Authority” For Freight Management?
 Do You Have The Right Resources?
 Can You Identify Your Reward to Resource Balance?
“Your Transportation & Logistics Experts”
LPS2010SM 18

19. LPS Logistics & Procurement Services, LLC
Thank You !
Questions & Answers
Contact Us:
Steven C. Hogan
President
Logistics & Procurement Services, LLC
P.O. Box 271
Verona, KY 41092
E-mail: shogan@logproservices.com
Mobile: 859.630.6944
Office: 859.485.6994
“Your Transportation & Logistics Experts”
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