Freight-shipping indicators to track and trace

Norman Brouillette, Vice President & General Manager of Technology and Healthcare, Ryder System Inc.

• Total freight cost, per-shipment costs, service levels, and frequency of orders/order patterns are all basic key indicators. The true health of the supply chain typically rests on further indicators by measuring cost-per-cube/pound/unit/mile depending on the customer’s product profile, combined with mode mix, against goals derived from network baseline & design analysis
• Out-of-sphere related costs in networks with many shipping nodes helps identify inventory re-positioning opportunities and reduced transportation costs.
• Normalizing year-over-year costs, regardless of key performance indicators (KPI) monitored, is critical to truly understanding year-over-year cost deltas. If not normalized, KPIs can be skewed depending on shifting network parameters (length of haul, product mix driving changes in weight or cube profiles, customer ordering patterns, etc.)

Melissa Laber, Senior Vice President and General Manager, OptiFreight Logistics, Cardinal Health

• Frequency and quantities of products ordered/shipped — This can have a significant effect on freight expenses. Instead of shipping multiple small parcel shipments more frequently, it is often more cost-efficient to bundle and send in less-frequent larger shipments. It’s important to balance freight expense for frequency of shipments against other supply chain costs (purchasing costs, inventory carrying costs, etc.) to quantify best procedures for your needs.
• Mode and service levels used by suppliers — This also has a huge impact on the freight costs. For example, if a supplier is filling an order for a commodity product that is not critical to patient care, and the health system is ordering with plenty of lead time to get by on safety stock, a supplier should not be selecting costly air/express service options, but ship ground.
• Standard contract language — It is important to review supplier contracts and incorporate language on desired freight terms, specific to product requirements. It is important to then continuously audit the supplier’s shipping habits to ensure they are complying with these terms.

Bill Denbigh, Director, Business Development and Marketing, TECSYS

• In addition to the ones mentioned earlier, I would add “Shipping as a percentage of costs of goods sold.” This data is generally available from the ERP system — how much did the item land for and how much is the pro-rated shipping? It certainly is a core aspect of the TECSYS DMS system.

Gerry Romanelli, Chief Commercial Officer, TRIOSE Inc.

• There are many factors to consider when reviewing a supplier’s freight expense, ultimately it comes down to ordering practices and the type of product the hospital is sourcing.
• One of the biggest drivers of freight expense is physician preference items that are ordered outside of the normal procurement process. Freight Management companies like TRIOSE focus on a few key areas. We are referring to items that are ordered off-contact or rush order, which requires expedited shipping.
• Cost per shipment and service level are good indicators to manage visible supply chain cost but routing compliance, vendor shipping requirements and “free freight’ are ultimate drivers of hidden expense which impact hospitals transportation costs.

Daniel Gagnon, Vice President,
Global Healthcare Logistics Strategy, UPS

• The healthcare sector overall is confronting a wave of disruptive trends. A few that come to mind include pressure to demonstrate positive patient outcomes, declining reimbursement from payers, and an empowered patient with more options. To modernize operations, industry leaders are evaluating new supply chain strategies and equipment.
• Traditional KPIs include total transportation charges, cost per shipment, service level utilization and on-time delivery performance. However, leaders in supply chain are seeking data-driven insights to help improve inventory management, data collection and their regulatory compliance to reduce expense.

Don Carroll, Vice President, Business Development,
Vantage Point Logistics Inc.

• Suppliers have been remarkably consistent in their shipping preferences and methodology. The most significant changes impacting pricing have been occurring on the carrier side. Both FedEx and UPS have been adjusting their non-freight costs; specifically, by altering their dimensional weight calculations and adding to, or changing, their accessorial fee calculations.
• When reviewing total freight costs by supplier we generally look beyond just the delivery service level and weight. We pay particular attention to the size of the boxes being used to ship the product and any additional charges the carriers might be charging that could easily be avoidable by either the buyer or supplier.