OTM Sourcing Module Lessons Learned

OTM Sourcing ModuleLessons LearnedAugust 13, 2012Gary BolenTransportation Analyst

Family Dollar Sourcing Module Usage• Used for all Inbound Truckload and IntermodalBid Projects• 8 Bid Projects completed using Sourcing Module since2006• Not currently used for Ocean Freight or LTL BidProjects2

Family Dollar Network Characteristics• Over 55,000 Truckload & Intermodal Shipments• Over 900 Truckload & Intermodal Lanes• 10 Distribution Centers• 2 Import Distribution Centers• Core Carrier Base of 46 partner carriers• Over 1,000 Collect Vendors3

4Family Dollar Network Map

Pre-Bid Phase Activities• Determine scope of Bid Project• Create Bid Project Timeline• Query and scrub historical data• Build Shipment Set & Lane Summary• Fine tune Lane Summary through Action Utilities6

Determine Scope of Bid Project• Mini Bid – Lanes from specific origin markets• Address new vendor openings, add capacity to existinglanes, replace carriers not meeting expectations• DC Bid – focuses on new DC openings• All vendor to DC lanes for specific destination DC• Network Bid – includes the entire inbound vendorto DC lane network• All vendor to DC lanes for the entire transportationnetwork7

8Network Bid Timeline

9Network Bid Timeline Continued

Bid Project Team Members• Required Project Team Members1. Transportation Manager2. Transportation Analysts (2)• Supplemental Project Team Members1. IT Support / OTM Super Users2. Transportation Planners / Routers3. DC Transportation Site Managers4. Freight Payment Provider10

Preparing Historical Lane Data• Historical data using previous calendar year orfiscal year can be queried from the OTMdatabase• Data for new DCs can be mocked up usinggeographically close existing DCs• Populating P_SHIPMENT table using CSV uploadtemplate allows an easy way to exclude lanesthat have shipment volume too low to go out tobid and to preserve existing lane namingconventions11

Shipment Set• Houses all OTM historical shipments within given date parameters12

Lane Summary• Uses Shipment Set data to build lane ID’s that can later be put out to bid.13

Lane Summary Statistics Helpful To Carriers• Percent of Stop-offs• Average Distance• Total Annual Shipments• Max Weekly Shipments• Primary Vendor• Source Postal Code• Lane Attributes• No refrigerated trailers• Drop trailers required• Seasonal summer lane14

Zone Lanes & Autocombine UtilityNiles, IL – 50 ShipmentsChicago, IL – 75 ShipmentsAurora, IL – 100 ShipmentsChicago Zone Lane – 225 ShipmentsCarrollton, TX – 50 ShipmentsGarland, TX – 25 ShipmentsDallas, TX 75 ShipmentsArlington, TX – 50 ShipmentsDallas Zone Lane – 200 Shipments15

Seasonality of lanes• Try to group a seasonalvendor with a year roundvendor to create laneswith annual volume.• Consider removing lanesthat only ship for 1-2months out of the yearfrom the bid.16

Bid Phase Activities• Create Bid Project / Bid Round.• Invite carriers to Bid, provide bid documentation,and specify constraint sets.• Allow carriers to submit bids.17

Clearly Communicate Nature of Bid Project• Number of Bid Rounds• Planned ImplementationDate For New Rates• Rates Contract Term• Factors considered tomake bid awards• Service Level• Price• Incumbency• Financial Stability18

Supplemental Bid Documents For Carriers• Generated In OTM• Carrier ResponseTemplate• Generated Outside OTM• Bid IntroductionDocument• SWAT Lane AnalysisSpreadsheet• Bid Package SOP• Bid Upload and ValidationSOP19

20SWAT Analysis

Look For These Challenges From Carrier Partners• Submitting under-competitive bids in multi-roundbids and holding best rates until later bid rounds• Submitting incorrect bid information• Wrong RPM / Wrong requested award percent / bidson lanes carrier does not intend to service• Submitting rates without adequate reloadingoptions at destination or pickup capacity at origin• Submitting bids based on non-asset capacitywithout communicating that bids are based onnon-asset capacity• Trying to increase a bid rate in later bid rounds21

Network Bid Record Growth30,000Bids25,00020,00015,000Bids10,0005,00002009 2010 2011 201222

Ensuring Bid Stays On Track• Use Sourcing Module Tools to determine howmany carriers have bid.• Send reminders to carriers that have not bid midway through the bid round.• Place phone calls to carriers that have not theday prior to the bid closing to determine if theyneed more time or clarification.23

Bid Optimization Phase• Create Sourcing Rule Set ID required parameters• Include and Commit bids to be considered by theSolver• Solve Scenario (Scenarios)• Analyze solver output24

Making sense of multiple bid records• Weigh criteria otherthan cost that aremost important toyour business unit.• Build Sourcing RuleSet IDs that considerother importantfactors in awardinglanes25

Tailoring the SolutionSourcing Rule Set ID Parameters26

Solve Scenario• Multiple Bid Rounds• Low Cost Solution• Blended Solution• One on one carriernegotiations27

Solution Table Rank Order By % Of Total Spend28

Post-Bid Phase• Finalize awards on each lane• Set the awarded bid status• Use Build Rates Action to make new rates availablein OTM core product• Communicate lane awards to Carriers through newrate sheets29

Building Rate Records• Select template rate offering considering namingconvention.• Example: SCNN_TOP_0212_31407_9990Rate OfferingRate RecordLane ID• Select contract term effective and expiration date for newrates.• Test that new rates are performing as expected and havethem available in OTM at least a week prior to new rates’effective date.• Send rates to Freight Payment Provider.30

Post Bid Functions• Communicate lane awards and rate sheets tocarriers• Load Commitment Allocations via CSV templateto manage split lane awards• Add accessorials to all new rate offerings• Keep rate offerings for new service providersinactive if they are not finished with the contractprocess31

OTM 6.1.2 Issues• Carriers unable to upload single carrier responsewith over 900 bid records• Unable to use carrier response analysis to checkbid round status• Unable to Build Rates from scenarios with over900 solution ID records into new rate records• Unable to delete a lane ID through the OTM userinterface32

OTM 6.1.2 Sourcing Module Work-Arounds Used• Split Carrier Response Template into 2 separateupload files.• Use SQL to check bid round status• Build rate CSV upload templates for scenarioswith over 900 solution records• Use Delete Statement to Delete Lane ID’s fromLane Summary33

Sourcing Module Benefits To Your Organization• Leverage Lane Volumes• Interface to receive carrier bid data• Analyze Bids More Quickly Using Discounts &Penalties• Awarded Rates Immediately Available In CoreProduct34

Celebrate the Completion of your Bid Project35

Thank YouQuestion and Answer