Mike Wagner is the founder and CEO of Pittsburgh-based Target Freight Management, a third-party logistics company that leverages proprietary technology (including density analytics and other software) to help customers better manage their freight costs.
The LTL carriers had a knee-jerk reaction and started charging excessive length charges at eight feet. If you were shipping 10-foot freight and not getting charged, now your freight charges are going up. All of a sudden the whole market has changed.
Q. What has been the impact of Walmart’s requirements for must arrive by date (MABD) and on-time in-full (OTIF) requirements?
A lot of customers ship to Walmart and other big retailers, and previously they had a four-day MABD. We had a large customer shipping to Walmart, and they were regularly getting $180,000 a year in fines for MABD. We came in and cleaned it up, and the first two years after that they didn’t get any fines.
Then they changed the MABD from four days to one or two days, depending on type of freight you have. This particular customer was in medical, and that changed to a one-day MABD. All of a sudden they had mapped out all of their inventory and shipping processes to get in compliance 95 percent on-time with Walmart, and now they have a one-day MABD and they are completely dependent on a third-party carrier to make that happen. Those carriers charge a surcharge to guarantee the MABD, so now they have to pay to guarantee it.
Q. Your company does a lot of work in density analytics. What problems does that solve?
Years ago, density wasn’t a huge issue. Most products had a definitive class and rate. Now carriers are changing their pricing models to pound per cubic foot class. Our solutions are designed around those changes, and we’ve built software to accommodate changes related to the density rate of products.
We had a customer selling classic autobody parts that was affected by this. By capturing their dimensional weight and pounds per cubic foot, we found if they could shrink their pallets by a few inches on each side they could reduce those charges. Their packaging was bulky, so by shrinking those features we were able to take their freight down from a class 250 or 300 to a class 150.
We capture that data on every single piece of freight that moves through each carrier for our customers, and we leverage that information to keep the carriers honest.
Q. What are some upcoming challenges you think will have a big impact on freight and logistics?
The density thing is only going to get worse. What I’m developing now is an application that will measure the freight on site at the customer location to fight off any claims issues. Carriers are getting smarter and smarter, and investing in more dimensioning systems. If you are just doing this with a tape measurer, you will continue to have problems.
Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.
