Freight premium

The standard requires the supplier to implement a system to monitor the delivery performance of subcontractors with corrective actions taken as appropriate, including tracking incidents of premium freight. 

Delivery advice notes will be needed to match shipments to inventory and to trace problems should the need arise. A shipment notification system similar to that which you need to have with your customer will also be necessary in order to alert you to any shipment difficulties. A simple database to record planned deliveries against actual deliveries and incidents of premium freight usage may suffice. However, you will need to take account of changes in planned deliveries and therefore you will need to link the notification system with the recording system so that the two are compatible at all times. 

How you do track incidents of premium freight use by your subcontractors ... 

The standard requires records of supplier responsible premium freight to be maintained. 

Premium freight was addressed briefly in Part 2 Chapter 3 under Contract review, as it is at the contract negotiation stage that the criteria will be established as to what is premium freight. If you fail to make delivery by the planned means (the means agreed in the contract) you may have no alternative but to choose a faster way of getting the shipment to its intended destination. This may result in additional cost. It is this cost that the customer wishes you to monitor and record. 

SO that the supplier understands when and what type of premium freight should be used. 1 have seen companies spend a tremendous amount of money flying parts in via helicopter to meet the customer s need. By doing this the supplier may be putting their own bnsiness in jeopardy because of the additional costs that are being incurred. This is where companies need to be honest with snppliers and work with them to help keep costs ont of the supply chain. 

Delivery schedule performance (including incidents of premium freight)... 

Intermodal service must improve for corporations that adopted just-in-time inventory in the 1980s and 1990s. Many companies feel that the benefits of keeping minimal stock are worth the premium price paid for faster door-to-door deliveiy by truck, which is a major reason why truck freight revenues remain at more than 80 percent of the country s total freight revenues. 

There are four primary reasons why the mechanical extraction process is still selectively used. First, the mechanical extraction process can be furnished in very small scale, as low as 10 tons per day. The capital cost for small mechanical extraction facilities is considerably less than small solvent extraction facilities. In remote locations, freight differential can compensate for higher operating costs and lower yields. Second, there is a niche, high-value market for natural oils that have not been in contact with solvents or chemicals, requiring the use of mechanical extraction. Third, mechanical extraction can create a high bypass protein meal for ruminant animals that sells at a price premium over solvent extracted meal. Finally, mechanical extraction is often considered more reliable than solvent extraction when processing difficult materials (copra and palm kernel) in hot, tropical climates. 

The product s value also influences its inventory carrying cost and the desirability of premium transportation. Low-value, low-margin grocery products may be shipped by rail car and stored in field warehouses. High-value component parts and products such as high-fashion merchandise may be shipped by air freight to minimize in-transit inventories and reduce inventory carrying costs and markdowns. 

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