We did a piece for our On-Target publication this week on the opportunities for reducing expedited freight costs that exist in many companies. That article featured some remarks from my good friend Greg Aimi of AMR Research. (See Getting a Handle on Expedited Freight.)
As is often the case, that piece got me thinking, and I am going to take an unusual angle on this. Generally, in business, people complain about having responsibility with no authority. With expedited freight, it’s generally just the opposite – authority with no responsibility.
Here’s what I mean. Rarely does a foul-up in the logistics organization itself cause the need for freight to be expedited (generally at very high expense). Rather, the forecast was wrong, or production had problems that will cause it to miss a delivery date, or there was an issue at a supplier, etc. All somebody else’s problem.
When this emergency is perceived, transportation is called upon to bail someone out of a jam, usually the cost be damned. Aimi says that in many companies, the policy is to accept the first response from a carrier that can guarantee the shipment getting there when needed, without any real effort to find the lowest cost to do so.
So not only does the transportation department have no responsibility for the underlying cause of the expediting, most of the time, it comes out of it looking like a hero for saving the day and avoiding a line shutting down, the customer canceling the order, etc. High fives all round. Thank you emails from plant managers or account managers. Having pressed what we then called “traffic managers” to bail me out a few times early in my career, I know the feeling.
It’s no surprise then really that the transportation department may not look too hard at identifying the root cause of the need for expediting. And in fairness, of course, there may be little to gain from pointing out the apparent problems in manufacturing scheduling or whatever. “Mind your own business.”
But I think we would be doing our companies well by tracking expediting data much more carefully, and working with supply chain managers and execs to understand the scope of the cost and at least the proximate causes of the need for expediting freight.
Aimi notes that “this most expensive of freight is often the least well managed.”
As we note in the article, some level of expediting may be a fine price to pay for running a very Lean supply chain, and that’s just fine. Supply chain should be about optimizing lowest total cost, and Lean inventories requiring a certain level of expedited freight may be just that.
But the level that is acceptable or that reaches the right balance point is one that should be proactively decided, not left to operational vagaries alone. Let’s collect and organize the data, and let the company decide whether improvements to reduce expediting are prudent or not.
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