Far East & Indian sub-cont westbound (import) rates/space/equipment – Carriers are now announcing winter schedules as demand slackens off towards Christmas and the  Grand Alliance has withdrawn its Loop D sailings until further notice on the Asia to Europe trade. Maersk have introduced a new daily sailing product with late cut-off times at origin ports aimed at improving transportation times at Europe’s main ports of Rotterdam, Bremerhaven and Felixstowe. Whilst this new daily service has slower transit times deliveries can be any day of the week. The service is supported with money-back guarantee of up to US$300 per container depending on the number of days late. This new daily service is being studied to assess the benefits to clients.

Flooding in Bangkok, Thailand has badly affected the Old Port. Clients are advised to deliver their cargo to Laem Chabang until the flood waters recede.

Supply still exceeds demand and this downward pressure is forcing further rate reductions in November that are adding to losses reported by the shipping lines in quarters 3 and 4, 2011.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low. Whilst there has been an increase in exports of scrap products (metals, plastics and paper) most containers are being returned empty.

UK Terminal Handling charges – generally £120 per container except Maersk and SafMarine (£131), Hanjin and MSC (£125) and K-Line (£122).

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge is applied by all lines but only on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container. NB. This charge is not included in all-inclusive rates.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU). This charge is not included in all-inclusive rates.

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the continuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue for the foreseeable future and means that we have reasonable airfreight rate stability. Fuel and security surcharge are:

Hong Kong     HK$8.40 (combined) per Kg

Shanghai       CNY9.20 (combined) per Kg.

Kevin Fryer 11^th November 2011.

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Far East & Indian sub-cont westbound (import) rates/space/equipment –

A provisional notice has been issued on a 14-day notice period of the plan to introduce a PSS of $200 to $300 per TEU in expectation of further increases in volumes ahead China closing down for the ‘Golden Week’ (1^st to 7^th October).

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low and equipment re-positioning remains and issue.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container. Hanjin and MSC have increased THC to £125 and K-Line to £122 per container.

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the contuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong     HK$9.20 (combined) per kg reduces to HK$8.40 on 15/9/11.

Shanghai remains at CNY9.20 (combined) per kg.

Kevin Fryer 9^th September 2011.

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If this affected you, the latest long-range forecast from respected forecaster James Madden may cause you concern. His key conclusion is:

“I therefore expect the 2011-2012 winter to follow a similar pattern in terms of how November and December was in 2010 for the vast majority of this winter.  It will be exceptionally cold and snowy with well below average temperatures.  I fully expect to see records broken with the highlands of Scotland being once again particularly hard hit.  It is therefore vital to start preparing now in terms of high energy bills and raising awareness amongst the most vulnerable and elderly people of society.

James Madden (UK Long Range Forecaster)

www.ExactaWeather.com   Published: 18th June 2011 (21:29) BST”

(Full forecast at http://www.exactaweather.com/uploads/mainswinter1.pdf )

Even today, heating-oils at wholesale level are trading at a premium of circa 25% above prices at the beginning of November 2010. However, once the weather turned wintry last year, final delivered prices were running at nearly double wholesale prices in some cases.

Fortunately although existing clients of Expense Reduction Analysts endured the impact of world wholesale prices, they avoided the pain of the increased costs associated with the delivered prices being charged to non-contracrt customers in the UK.

If you are a heating-oil user, perhaps now would be a good time to undertake a review with Expense Reduction Analysts to achieve some immediate cost savings whilst obtaining protection against opportunistic pricing when the weather turns as bad as Mr Madden has forecast.

Ken Rogers.

August 2011

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Management consultancy firms have lost more than £800 million in revenues during the past year as the government has slashed public contracts and renegotiated far lower fees.

Industry insiders said that the sector, which has been charging government departments up to £2,500 per consultant, was “falling off a cliff”. Firms were being forced to agree exceptionally low terms with government departments and PwC (one of the big four consultancy firms) is rumored to have lost £70 million this year.

Francis Maude, the Cabinet Office Minister, disclosed yesterday that the central government consultancy bill has been halved from £1.6 billion to £800 million this year. He also said that departments could no longer hire consultants to advise on procurement contracts and daily rates of £1,600 to £2,500 were no longer acceptable.

“Consultants were being regularly hired on daily rates by departments to run the procurement process,” Mr Maude said. “Not surprisingly the negotiations were very protracted and very expensive.”

This experience is one that has been shared by many of Expense Reduction Analysts’ clients in the past, and is often quoted as a key driver in their decision to work with them. The fact that the majority of procurement projects are delivered on a contingency fee basis, i.e. ‘no savings, no fee’, means that clients are able to avoid the pain of high day rate charges.

Expense Reduction Analysts are leaders in cost, purchase and supplier management and welcome the opportunity to discuss how their services can add value to clients’ operations. Please call 01303 298344, or e-mail r.stearn@erauk.net to arrange an exploratory meeting.

1.     Standardise and document procurement processes

Align procurement with enterprise goals, assess what stages are currently involved in your purchasing process and why they are being taken, then determine whether each of these is necessary and make sure the same stages apply to all procurement. Pre-negotiated early payment discounts were 32% higher for respondents with standardised processes while they also achieved supplier on-time delivery on 5% more shipments.

2.     Introduce employee incentives

Formalised processes will not produce the desired results unless they are being adhered to. It seems that in organisations which have tied their staff’s compensation to some extent to the attainment of set goals, the buyers have identified 18% higher savings than their non-incentivised peers. The study, nevertheless, cautions that non-conformance may be a result of deficient policies rather than unmotivated personnel.

3.     Seek external guidance

Trade associations and professional publications are great starting points to begin the learning process. Alternatively, the use of external consultants reported a 76% better budgetary performance (6% under budget vs. 3.4%).

4.     Automate the approval process

Eliminate paper where possible. Assuming that the necessary data is available electronically (i.e. inventory checks, application of approval thresholds), considerable time savings of up to 19% can be achieved for the cycle from the initial needs identification to the final supplier selection and negotiation.

5.     Increase internal collaboration

There is much to be gained from inter-departmental information and data sharing, whether that be with finance to provide visibility into upcoming cash needs or accounts payable to maximise discount capture. Organisations with cross-functional collaboration have been found by the study to report 34% higher savings than its non-collaborating peers.

6.     Improve compliance monitoring

The Aberdeen Group research interestingly also found that of all the metrics regularly assessed, supplier price and delivery compliance were generally the least likely to be measured. Hence, once the internal fundamentals are in place, it is time to look at supplier relationships and ensuring compliance with agreements.

7.     Efficiency improvements in Accounts Payable

Another study by the Aberdeen Group carried out in 2009 has found that an automated accounts payable process improved invoice processing times by a staggering 37%, leading to prompter payments and, thus, reinforcing a virtuous circle where a supplier who has his invoices paid on time will be more inclined to grant a prompt payment concession.

8.     Improve data quality

Procurement leaders will rely on sets of painstakingly accumulated and cleansed transaction data, allowing them to make informed decisions. As this benchmarking process can be time consuming, external consultants such as Expense Reduction Analysts can assist with the necessary tools and expertise to collect as well as analyse the information.

9.     Provide executives with spend information

The procurement function is only gradually making its voice heard in the Boardroom. However, executives will need accurate and comprehensive data to plan for all eventualities. In this respect, the purchasing function has an increasingly important role to fulfil, not only with regard to maximising value for money from its suppliers, but also as far as the provision of meaningful data to the executive is concerned.

Expense Reduction Analysts are leaders in the field of procurement and cost management advice with some £350 million of expenditure being negotiated on our clients’ behalf every year. Our experts cover some 100 areas of spend and offer our clients completely supplier independent advice. Moreover, we carry out the benchmarking and RFP process on our clients’ behalf, allowing their staff to focus on the core task of running their operations.

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In its recently published survey ‘Managing in a Downturn: Responding to life after the Comprehensive Spending Review’, PricewaterhouseCoopers, the Charity Finance Directors’ Group and the Institute of Fundraising establish that the impact of the economic downturn is likely to affect the third sector for the foreseeable future, with 78% of respondents indicating that they expect to be negatively affected by the CSR while a further 11% of participants are unsure of its impact. At the same time, 39% of charities report an increase in the level of demand for their services since the start of the economic downturn, while 56% of respondents expect a rise in their costs over the coming year, with half of these organisations expecting such a hike to be in the region of 2% to 6%. And as one third of charities expect the VAT increase to have a ‘major’ or ‘significant’ impact on their finances, one cannot help wondering whether the third sector is facing a perfect storm.

On a positive note, however, the sector is aware of the looming threats and is taking action: The survey revealed that 83% of participating organisations plan to increase their fundraising activities to address the reduction in available public funding, while 40.4% state that they will cut back on services with a similar percentage (38.3%) advising of looming redundancies.

But more fund raising activities come at an additional cost for extra marketing and third party fulfilment services, irrespective of how much additional funding can be generated. At the same time, private donors in particular will also have to cope with increased costs for Utilities and VAT, making 2011 a challenging year for many households. A reduction in service levels provided, on the other hand, will potentially damage a charity’s image within its community, as will redundancies. The authors of the survey, therefore, quite rightly state: We would encourage those charities expecting an increase to review critically their cost base to understand whether further savings can be made if necessary.

Many charities may think that, if they are part of a buying group, they may be getting value for money. Unfortunately, with spend profiles often very different even between similar organisations, there is no guarantee that a bulk deal will offer best value for money to each and every single one of its participants. And while some trustees may find comfort in the thought that their deal, if not better, certainly is not worse than what other members get, many Finance Directors will quite possibly find in coming months that this is no longer enough to stabilise their charitable trusts’ finances.

There are a number of ways for charities to lower their costs: Shared service agreements with other charities may make sense under certain circumstances, as will proactive benchmarking and supplier negotiations. The drawback, however, is that both of them require a high degree of supply market expertise and staff time.  While your own team may be apt at negotiating general and low value supplies such as office consumables, your in-house capabilities may be stretched when it comes to re-negotiate your vehicle leases, your insurance deals or, for charities which accept donations over the phone or online, the most competitive merchant card deals. Suppliers will very quickly establish whether their clients have the necessary supply market knowledge to drive a good bargain. And in most spend categories there exist well practised smoke and mirror techniques, which may make a rather uncompetitive deal look very compelling to the untrained eye. Equally, with demand for services on the up, existing staff will have to deliver more as far as the provision and administration of core services are concerned – leaving them with less time to benchmark costs and service levels as well as conduct supplier negotiations and tenders.

Help is at hand in the form of Expense Reduction Analysts’ supply market knowledge and contacts, aggregate negotiating influence and category experts. Moreover, our work does not stop with the initial contract negotiations, but we will make our detailed market intelligence available to your staff over the full period of our engagement, making sure that your organisation benefits from value for money not only now but at all times. While more fund raising activities are likely to result in an increase in marketing and fulfilment expenditure, did you know, for example, that you are probably paying over the odds for your marketing deliverables if you let the creative agency select the printer? And how do you measure that the fulfilment house is charging you a fair rate?

Our detailed benchmarking, negotiating and auditing process will satisfy your trustees as well as your providers of statutory funding that you are obtaining best value for money for the financial support secured. We offer a number of cost effective solutions to charities and would be happy to discuss your needs with you in more detail.

(For more frequent cost reduction and procurement advice follow me – FrankMWeber – on Twitter)

Admittedly, it is quite possible that both Serco and the Royal Mail have been paying over the odds for the goods and services sourced from the suppliers in question. Were this to be the case, an attempt to lower its cost base would certainly not go amiss. The problem, however, is in the way some organisations are flexing their muscle to extract from their supplier base a concession by force rather than consensus.

It is quite likely that you and your team would have developed your key supplier relationships over many years. But a great deal of painstaking effort would have been invested by your suppliers’ management team as well as staff to make sure that you, the client, are delighted with the product quality and service levels provided. After all, considering the high cost of acquiring new clients, repeat business from your existing customers is the safest way not only to stay in business, but also keep growing. As Peter Drucker, the management guru, used to say: The purpose of business is to create and keep a customer.

Here are the 3 principles which will help you achieve long-lasting, healthy and mutually beneficial relationships with your suppliers:

1.     Don’t chase the cheapest deal

You want your supplier to be around for many years to come? This means that he will need your help! While Expense Reduction Analysts are advocating the value for money notion, we also appreciate that, in order to be sustainable, each business needs to make an adequate level of profits. Constructive supplier negotiations will take into consideration that a higher level of quality and service will be more costly to provide. While chasing the best deal may result in a very short-lived cost advantage, it will also prevent you from developing long-term supply chain relationships based on trust.

2.     Involve your suppliers in your own planning processes

Where you are buying-in from a third party provider a key component of your own product or service offering, it is vital that you involve your supplier in your own planning processes at a very early stage. Not only will this further enhance the trusting relationship you have with them, it will also allow your supplier to take early action with his own supply chain find a solution which is acceptable to all parties involved. Moreover, this dialogue is also likely to give you early indications of future developments in your own supply chain, allowing you to plan ahead and, hopefully, secure a valuable competitive advantage.

3.     Regularly review your own needs

In order to reduce your own cost base, you should regularly revisit your own expectations: Do you really need all the ‘bells and whistles’ you may have negotiated with your supplier at the outset? Your own market research with your own customers may already have highlighted a change in their needs? This, together with market intelligence on what your competitors are changing, could open up new and unexpected opportunities. Maybe a less expensive, stripped-down version of the product or service may still meet your target market’s requirements? Frequently challenge the status quo, including your own and your staff’s preconceptions of what your clients want.

Trusting supply chain relationships will take time to build and will need to be nurtured. In return, you can be assured that your suppliers will only very reluctantly pass-on cost increases to you, while being more than happy to offer their own advice and expertise when it comes to helping you reduce your costs or make best use of the goods and services provided.

The one approach which is unlikely to work is trying to coerce concessions from your supply chain. While you may obtain the necessary rebates, your suppliers will need to reduce the impact on their own bottom line. While they may be able to extract similar allowances from their own providers, over time you may well experience a deterioration in product quality and service levels and future negotiations are likely to be fraught with resentment.    

Expense Reduction Analysts’ category experts benefit from a wealth of industry knowledge and supply market contacts and firmly believe in the above principles. This ensures that all our supply negotiations are carried-out with the best interest of both our clients and their suppliers in mind, leading to and re-enforcing strong client-supplier relationships.

No carrier should have imposed any Peak Season Surcharge (PSS) and this position should continue up to the New Year at least.

Ocean freight rates for November have also reduced from October levels. However, carriers continue to withdraw vessels from service to match supply with demand. As examples of this the ‘Grand Alliance has only two-weekly sailing on ‘Loop D’ and Maersk has removed its ‘AE Loop.’

Slow steaming in both directions continues to be a feature adding 5 to 10 days to previous transit times. Several carriers have announced plans to increase ocean freight rates from 1st January 2011 by $250 $300 per TEU and if space becomes an issue then PSS may be re-instated.

In an effort assist in budgeting, it is thought that oil prices and thus fuel/bunker charges will remain much as they have been during most of 2010.

Far East & Indian sub-continent eastbound rates/space/equipment update (exports)

Exports rates have reduced during October and represent good value.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC remains @ £126 per container.

Heavyweight Container Surcharges – continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium – This charge continues to be applied by all lines on containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU).

Gulf of Aden Emergency Risk Surcharge – generally $45 per TEU except MSC ($55 per TEU).

20ft Equipment Imbalance Surcharge – MSC has suspended this surcharge from 1st August 2010.

UK Fuel Surcharge – remains at 18.5% on most published indices. However, fuel prices are increasing again and thus an increase in fuel surcharge is likely.

Airfreight – fuel/security surcharges are expected to continue at the present relatively low levels well into 2011:

Hong Kong + 5.80HK$ (combined) per kg (down).
Shanghai + 9.20CNY (combined) per kg.

Kevin Fryer 7th November 2010.

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Diesel fuel now represents up to 40% of the cost of operating transport fleets, and should therefore be an area attracting serious attention to anybody responsible for the costs of such an operation. However, there remains very little understanding of how the fuel markets actually work, and therefore establishing whether best prices are being achieved.

Nevertheless, the largest part of the cost is in duty, and nobody has yet successfully negotiated a decrease with the Chancellor of the Exchequer! After allowing for the net price of diesel being set on international markets (Rotterdam) and duty, the net sums available on which to base negotiations with fuel suppliers are limited. Typically, the pump price in the UK averages at about 6 pence per litre over the Rotterdam price. Whilst a couple of pence price reduction can be significant in absolute terms, in percentages, it has only a small effect on that 40% !

Some managers (probably a minority) have invested more time in investigating the potential to achieve reductions in actual consumption. In many cases, such attention has resulted in short term initiatives, for example in trying alternative fuels, or driver training programmes. Very few have however, been matched to long-term management and monitoring programmes with continued actions to ensure that short term gains are maintained. There almost needs to be a leap of faith in investing up-front in more expensive fuels or intensive driver training such as the SAFED programme, without any guarantee of long term gain.

It is easy to measure short term improvements on the same day that a driver is trained, but what is really happening 6 months down the road, when other priorities are demanding management attention at the operational level. The Freight Best Practice Programme has identified that a typical 10% consumption saving on the training day can have disappeared within half a year unless there is a rigorous programme of monitoring and appropriate intervention. But how many companies have the operational commitment or the in-house expertise to do this effectively ? Nevertheless, with a 10% long term savings goal, who can afford not to be doing so.

Fortunately, Expense Reduction Analysts are now able to include a review of fuel consumption in road transport fuel projects. This means that we can create an accurate benchmark of current consumption to give a firm basis on which to measure any future savings. Our objective  market expertise means that we can give an independent view of what is on offer and facilitate and monitor  the effective implementation of any consumption project.

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