by Jerrod Slaughter, Corporate Transportation Manager

What does a shipper really want? Simple … 1.Reliability 2.Flexibility 3.Market competitive rate

Know the Mode Ocean service contracts and service agreements What is important? Have a Strategy for alignment Get Stakeholders involved to help a line with needs Supply Chain Line vs. NVOCC Request for Quotation Best Practices On Boarding KPI / Evaluation

Understanding Ocean …

Rates CY, IPI, Door? Surcharges Bunker (Fuel) Peak Season (PSS) General Rate Increase (GRI) MQC Volume Detention Demurrage KPI and Space Guarantees Container Rates Type of delivery is needed Container Size Container Routing Essential Accessorial Terms Surcharges Bunker (Fuel) Peak Season Surcharge (PSS) General Rate Increase (GRI) Essential Service Terms Space Guarantees Minimum Quantity Commitment (MQC) Detention & Demurrage Delay In Transit (DIT) Performance levels / KPI Bookings Transit times

What type of delivery is needed? Container Yard (CY) Inland Port Intact (IPI) Store Door Delivery (SDD) Container Size 20 FT (TEU), 40 FT (FEU), 40 FT High Cube and 45 FT Routing All Water Service (AWS) Landbridge (Not through Panama Canal) Rates

Surcharges Advance Manifest Fee (AMS) Chassis Usage Surcharge (CUS) Document Fee (DOC) Terminal Handling Fee (THC) War Risk Surcharge (WRS) Etc. (See 40+ other terms) Bunker (Fuel) Floating schedule Peak Season (PSS) Typically June 1 st through October 31 st General Rate Increase (GRI) / Rate Restoration (RRI) Any time based on Carrier / Alliance

Space Guarantees Hong Kong to Los Angeles – X FEU? Minimum Quantity Commitment (MQC) How many FEUs a year? What is the right number? Detention (out gate)& Demurrage (in gate at Port) Agreed days known as Free Time Days (calendar or working) Delay In Transit (DIT) Key Performance Indicator (KPI) Booking acceptance Service Strings / Port to Port On-Time

If you dont have contracts today or do find undesirable terms then evolve … One step at a time! Partner with internal Legal Counsel Seek help on boilerplate by mode Include terms with Request For Quotations (RFQ) How will incumbents react? Dont surprise your vendors. Discuss with internal stakeholders. Understand that terms can cause lengthy negotiations and potentially impact rates. Careful not to overbuy! Best Practice! Add terms to RFQs

Understand Ocean Line vs. NVOCC

OCEAN LINE (DIRECT BCO) NVOCC NON VESSEL OPERATING COMMON CARRIER The Positive Direct relationship with Line Leverage MQC FEU volumes directly to secure terms/rate/service Assigned allocation can lead to consistent service string transit time Strong long term partnerships can assist during industry challenges The Challenge More complex i.e. FMC requirements Provide forecast of trade lane volumes Manage MQC volumes Resources and bench strength to manage multiple Ocean carriers Challenging to make changes The Positive Flexibility with little to no commitment Less complex to manage No FMC required for shipper No MQC requirement No long term commitment Ability to chase rate Much closer to the market rates The Challenge Subject to volatility of market Susceptible to surcharge GRI / RRI PSS No direct relationship with Ocean carrier Possible less predictable transit times

Selecting an International Partner …

Define Supply Chain Strategy & Needs Request for Quote (RFQ) Know the Market Document shipper characteristics Identify and include Stakeholders Define service expectations Boilerplate Stakeholders provide suggested carrier RFQ pool Container Rate and Surcharge template Understand service string and transit offering Cost Analysis on 80%-95% volume lanes Selection On Boarding Performance Evaluation

Operational readiness Define Whos who Detailed Standard Operating Procedure (SOP) Escalation path Limited volume at startup Slowly turn on the Valve! Deming Wheel approach Plan, Do, Check, Act

Shipper provided FEU forecast by lane Best practice: 3 month rolling forecast Keep it simple! Communicate Origin Performance Is cargo getting booked and COB as expected? Any rolls, delays, etc.? Be engaged and ask for feedback

KPI agreement Reporting requirements Quarterly or Bi-annual business review Measure transit expect vs. actual Cargo Claims Billing Issues Service Review Booking performance Space guarantees Transit time metrics

Relevant field definitions: Target Transit Time: transit time expectation per lane from contract negotiations. Transit Time for 95% Of Shipments: Denotes the transit time by lane (or carrier) for which 95% of shipments were equal to or less than. On-Time %: Percentage of shipments per lane (or carrier) that were equal to or less than the target transit time. % Within +/- 1 Day of Target: Percentage of shipments per lane (or carrier) that were within one day of targeted transit time. The higher the percentage, the more consistent the transit times are. Transit Time Range (Days): This the range in days between shortest transit time and longest transit time per lane or carrier. Avg Variance (Actual vs Target): Per lane or carrier, this is the average variance in days between actual transit time and target transit time. The lower the number, the more consistent the transit times are.

CARRIEROrigin - Destination Total Shipments Per Carrier Target Transit Time Transit Time for 95% Of Shipments On- Time % % Within +/- 1 Day of Target Transit Time Range (Days) Avg Variance: Target vs Actual AA Ships HAIPHONG – LOS ANGELES, CA %69%203 HAIPHONG - Zeebruggee %31%304 HO CHI MINH CITY – LOS ANGELES, CA %18%193

International Air Freight Forwarding

Rates by route Port-Door, Port-Port, etc. Recommend add gateway to door as option Add Service levels that fit your need – Exp, Std, Def Add tier level weight break Know your sweet spots!! Include transit days by service by lane Define service commitments Define Fuel surcharge Peak Season ?? Liability and cargo claims

Full service forwarder vs. niche regional forwarder Carrier service area Forwarders usually handle all major lanes A full service forwarder may compliment a Shippers needs as supply chain becomes more complex Dont underestimate the value of regional niche forwarders Experts in specific geographies Forwarders seek different freight mixes to support trade lane Rates and very drastically between competing forwarders Shop around for best rate