Just in time delivery works just fine when everything runs according to schedule. But when your customer-whether half-way around the world or a few hours away-has an unexpected spike in sales or changes the order and needs your product now, just-in-time is just not good enough. Neither is business as usual. On-the-fly transactions fill the gap between the two.

“If transportation has been worked out and something happens to disrupt it, you have to look at alternatives,” counsels Sam Slater, COO, North America, for CEVA Logistics. That could necessitate changing carriers, modes, quantities, packaging…virtually anything, to get the service you need. Shipping via your usual carrier may not be possible.

Opportunity

Accommodating those sudden needs can be a headache, but it also has the potential to be a boon because on-the-fly orders give shippers a great opportunity to test new options. For example, carriers are expanding their routes, adding intermodal lines and new hubs that can make it beneficial to ship through other ports or to other regions of the country and thereby speed goods to the customer. Extra services also are being added that can reduce time to market by taking over some of the work that normally would be done in-house. That said, “There’s such a focus on reliability and ensuring that shipments meet the requirements, that it’s not the time to try too much that’s new,” Slater says. He advises selecting an experienced carrier offering multiple options, that’s accustomed to handling specialized shipments.

Before you arrange for shipment, though, there are a few details that must be settled. First, Slater emphasizes, determine exactly what the customer is requesting. “If you’ve optimized your transit channel, it’s a safe assumption that an on-the-fly shipment will have a premium cost.” To minimize that, he says, determine when the shipment must arrive and what modes of transportation can get it there in time. An overnight delivery has one set of options, but an emergency order that’s needed in one week has a different set of options. At the same time, he says, determine whether the customer really needs the entire order at that time or whether part of the order can be expedited and the remainder shipped via a less expensive mode.

Third-party logistics providers are well positioned to help shippers make the most of on-the-fly transactions because they already have networks in place to handle a wide variety of cargo nationally and internationally. As such, surprise shipments generally can be absorbed within a 3PL’s existing contracts.

LeanLogistics is a case in point. Its Private Transportation Network is a spot market that matches need to capacity. The system uses a software as a service (SaaS) platform to link its shipping clients to thousands of carriers. As Chris Timmer, VP of sales and marketing, elaborates, “Shippers can go to the network and solicit bids on the spot or on a strategic basis.” Requests may be based on carriers, lanes, availability or any other permutation and go to all carriers or to subsets of the network. The Private Transportation Network includes truckload, less-than-truckload, intermodal and rail carriers currently, and will include ocean carriers within the next 12 months. This service resolves the issues that result from short lead times or capacity constraints by helping shippers access the capabilities of a very broad range of carriers.

The benefits of greater visibility to those carriers, Timmer says, include reduced costs, increased efficiency and timeliness. By accessing additional carriers, shippers can improve their own levels of service to their customers by leveraging the lanes, capacity and additional services of a broad carrier network. Broadening the competition also tends to reduce costs. Timmer notes that requests for quotations can take the form of broadcast tenders sent to all carriers or be narrowed to those fitting certain parameters or even to a few preferred carriers.  That process is more efficient than phoning preferred companies for bid, he adds.

“We coach our clients not to do an eBAY style reverse auction, in which the last bid to arrive is the lowest cost.” Instead, Timmer encourages shippers to set a price, and “when they meet your price, accept it.” He says that provides an incentive for carriers to give their best price early.

It's all about options

The distinction between carriers and 3PLs is blurring, too, as carriers add services that are transforming them into logistics companies capable of handling inventory control, quality assurance, merge-in-transit, store-sell-ship and other options. “There’s been a good amount of consolidation among logistics companies,” Bob Gahagen, director for operations at Menlo Worldwide Logistics. “Menlo and its Con-way subsidiaries, for example, are working across multiple organizations to deliver more rounded-out solutions,” he says. Menlo has made a heavy investment in technology to shorten lead times and to guarantee delivery times. It also embraces the lean principle established by Toyota decades ago for continuous process improvement.

Crowley Logistics, Inc. is an example of the direction many firms are heading. Crowley specializes in textiles and has noticed that retailers are interested in getting materials faster. They prefer more, but smaller, shipments, according to Miguel Artiga, VP for Central America. Therefore, its capabilities are growing, as it increases its access to trucking in Central America and its warehouse space, and adds services. Some Crowley facilities even offer quality assurance inspections for customers’ products. That gives shippers on a tight deadline an alternative that may speed shipping.

Prepositioning merchandise in warehouses nearer to the customer also can help speed on-the-fly shipments. For example, internationally, contracting with a carrier or 3PL to store and ship goods from an export distribution center in a free trade zone gets the goods closer to the customer, reducing the transit time that can be particularly problematic for international on-the-fly shipments. To better serve good customers with erratic ordering habits, it may be worthwhile to work with a warehouse or distribution center in the client’s country, so goods can be shipped directly, already having cleared customs.

Positioning goods nearer the customer is becoming increasingly popular within the U.S., too, Gilmore says. Following that trend can be particularly handy for servicing customers who frequently place orders. At some point, “It helps to sit down with professions in your area,” Feldman says, to discuss your specific needs and carriers options. “The big guys may not have the time to do that,” he opines.

Terms

Don’t assume that terms for on-the-fly shipments are the same as for your regularly scheduled shipments. They typically have a premium price. Also, because they are hurried, documentation may be flawed, slowing delivery. Feldman advises working with someone who will ensure that documentation is correct and that the terms are reasonable.

Misunderstandings are common regarding letters of credit, Feldman says. They are issued by banks, with differing terms and formats, so it pays to investigate them carefully. A letter of credit basically holds funds in escrow until the terms of the contract have been met. Such letters are common in international business, but include a bank charge. Unfortunately, “many Americans don’t understand what’s involved,” and are surprised by bank charges sometimes in excess of $200, he says. That can be particularly unpleasant when it accrues because of a small order from an occasional customer.

Packaging

An on-the-fly order may require packaging that differs from a customer’s given norms. “The contours of a passenger airliner are different than those of a truck,” Slater points out, and the cargo hold may not be able to handle the usual-size pallets. Likewise, doors of smaller jets may not accommodate shipments’ usual widths and may require pallets to be broken down, which increases handling and the chance of damage. Packaging designed for a tightly packed truck probably will be insufficient to protect a less than truckload delivery or goods in a cargo plane. The reason, he explains, is that cargo density changes according to mode, and decreased density allows shifting during transit, which increases the potential for damage.

One of the secrets of the shipping industry is that packagers don’t necessarily offer the best packaging. They provide what the customer requests, and if the customer doesn’t ask for something particular, even reputable packagers may not tell the customer that it’s available. Products typically are packaged the same way for transit to Afghanistan as they are to Oklahoma City, notes Ron Cruse, president and CEO of Logenix International. The reasons range from unfamiliarity with new products and simple inertia-this is the way it’s always been done-to cost-the old method may be more expensive or labor intensive and so makes more money for the packaging firm than a newer, more protective method. From a shipper’s perspective, it pays to ask about recommended packaging options and to do some research on your own, too.

Packaging is particularly important for ocean freight, Feldman says. “Make sure it’s secure and watertight,” he advises.  Note, however, that “watertight” packaging does not necessarily protect against corrosion, because the corrosive gases are airborne. For that protection, seek out anti-corrosive packaging. Several options are available, and some of the newer methods are more protective, faster to apply and to remove and less expensive than the standard methods. An on-the-fly shipment may offer a good field test of the new capabilities.

During the past year, some shippers have reported container shortages. Pilot is building its own containers to offer to customers and also works with third parties to help ensure that containers are available for its customers. One year ago, ocean freight line APL introduced deep-sea 53-foot containers designed for the rigors of the transpacific route to help its customers leverage big box economics. The benefits include lower container expenses and less container handling, which improves efficiency and, therefore, time to market.

“Nobody is too small to have a contract,” according to Bob Feldman, director of international transportation for Pilot Freight Services. Pilot negotiates contracts with steam ship lines, ocean carriers and intermodal carriers to arrange terms that allow for increase in traffic based on their own estimates for the lanes involved.

Working outside the box

Sometimes, of course, the need for on-the-fly shipments is triggered by natural disasters or the consequences of warfare, both of which disrupt the receiving end. Carriers need to be able to respond nimbly.

Ron Cruse, president and CEO of Logenix international specializes in development world infrastructure programs, shipping rebar, backhoes, tires and other equipment needed to build-or rebuild-societies. Shipments were in transit to Armenia when Russia invaded Georgia, requiring him to reroute shipments from the Black Sea port of Poti. To handle such situations, shippers need partners who can work outside the box. Likewise, holidays-like Christmas in the West or Ramadan in the Middle East-can substantially slow shipments, so on-the-fly shipments may not travel through affected ports in a timely fashion. Mitigate the slowdown by air shipping part of the order or by rerouting through unaffected ports, Cruse comments.

“I’m stunned at how little the people in the worldwide shipping operations know about moving freight worldwide,” Cruse says. They tend to execute according to standard operating procedures, which makes it difficult to troubleshoot or override the system when necessary. “That’s not what they do,” he emphasizes.

One of the biggest hurdles in getting goods into those foreign locations lies in not knowing the export control classification number, Cruse says. Not only do shippers often not know these numbers, but even U.S. Customs is sometime stymied by whether a shipment to a particular nation is permitted under export controls. “Government to government shipments (such as those to the U.S. military in a foreign nation) are exceptions,” he says, while shipments to government contractors working abroad are not.

What works best for on-the-fly shipments varies with the special requirements of each shipment, and often depends at least in part upon what the normal situation, Slater reiterates. When “normal” shipping arrangements are built for flexibility, the disruption of special shipments may be lessened. Also, a bit of research now into the options for on-the-fly shipments can streamline the process of going outside the usual arrangements.  wt



Contributing Editor Gail Dutton specializes in transportation logistics.