As JIT plants proliferate, premium expedited freight will continue to play a role in the manufacturing process. Yet while manufacturers generally view these last-minute shipments as costly and unavoidable nuisances, companies can use the services strategically to work for them.

It used to be that shippers who were relying on expedited carriers weren’t doing their job properly. They booked late and thus had to seek out the expeditors, at higher cost, to meet customer demand.

Likewise Just-in-Time manufacturing. While JIT is advantageous when it works properly, it doesn’t always work properly. The supply chain sometimes falls out of sync, so manufacturers find themselves rush shipping freight at the last minute and incurring premium charges in the process.

Yet in today’s market with capacity tight, some experts say expedited freight is becoming the norm, often as a partial measure of on-time shipment performance. In fact, premium freight can be used to manufacturers’ strategic advantage.

Of course, there are late-delivery penalties to consider. Some major retailers are laying some heavy pressure on shippers to either meet their delivery times or pay a costly penalty. As such, shippers and the overall industry are plenty happy to meet customer needs.

Relative to JIT, as customers maintain low inventories, premium expedited shipping has become a more acceptable resource in a company’s supply chain toolkit. Businesses more frequently are looking at expedited as a necessary tool in their “need for precision and speed.”

In the larger scheme of managing inventory, expedited can be more cost effective for the customer, says Chris Baltz, senior vice president of Yield Management and Strategic Development at ABF Freight System, Inc., in a recent World Trade Magazine article.

Manufacturers are being pushed by growing global competition to be more efficient and maintain low costs. Understandably, manufacturers generally view premium freight as a costly and unavoidable nuisance. Then again, they often see these shipments only as a large number of one-time events.

Expedited shipping will always play a role in the manufacturing process. This is a given, especially as JIT plants proliferate. But companies can use the service strategically, to work for them, not only as a series of one-time events. For it to work, though, it should be an integral function of the production process.

Says a recent Inbound Logistics article:

Companies should employ advanced planning that makes premium freight an integral part of the production process. This ensures maintenance of the customer’s schedule and budget, and reduces the cost of expedited shipments.

JIT’s advantages are also its drawbacks, a fact that emphasizes the need for a strategic premium-freight plan. JIT plants operate very lean, so “safety stock” has been reduced. In the case of plants such as these, a worker can no longer head over to the warehouse and grab some extra parts — they can only be accessed as needed.

Enter third-party logistics (3PLs) companies. The emergence of these companies — which are unbiased in their in their choice of carriers, as they use performance data to decide — has “revolutionized the entire process of ordering premium, says Inbound Logistics.

For example, you’ve got 3PLs utilizing contracted groups of pre-qualified carriers, each with a numerical performance rating. Logistics management of this type enables multiple modes of transportation to be ready and waiting. Rates are pre-negotiated, and carriers are responsive within minutes. 3PL providers are using the Web to notify a base of carriers quickly; bids are received immediately; shipments are assigned rather rapidly. Thus, carriers can be linked electronically into the JIT process.

Notes Inbound Logistics:

Suppliers call the 3PL when they need an expedited shipment and provide parameters such as the number of pieces, weight, destination, and deadline. Carriers bid online within 15 minutes, and the best carrier is selected for a specific job. The 3PL takes care of all the back-end billing issues.

So, aside from 3PLs, how do you make premium expedited freight work for you? Here is Inbound Logistics’ broad framework for making last-minute shipping and JIT fit:

1. Flexibility
Premium freight increases flexibility when companies need to make quick decisions, react rapidly to marketplace changes, and launch products speedily. Companies need a supply chain that is equally nimble, with backup logistics.

OEMs have given suppliers the flexibility to use premium freight so that, if the OEM changes its schedule and a supplier can’t meet the contracted price, the OEM often will absorb the shipping costs — if it’s in a controlled environment.

2. Visibility
Pre-planned premium freight actually reduces costs. Visibility of delivery times, reporting techniques, and better negotiated rates all mean the plant does not have to maintain as much inventory and avoids the penalties associated with slowing the line or disrupting the supply chain.

3. Proper Pre-Planning
Global companies find many locations pose barriers to transportation, so they need a good plan in place with a pre-constructed carrier network. By planning ahead and working with a high-tech, dedicated logistics partner, companies can relieve pressure on the supply chain, increase flexibility, cut costs, and make JIT a better fit.

If premium and expedited freight continue to play a role in the manufacturing process due to the proliferation of JIT plants, use the services strategically to make it work for you, not against.

Sources

Premium Freight Makes JIT Fit
by Jim Applegate
Inbound Logistics, February 2006

Executive Overview: What Business Leaders Need To Know About: Trucking Trends
by Amy Zuckerman
World Trade Magazine, May 1, 2006