Routing Guides: Inside the Matrix
Successful implementation of a routing guide feeds off constant communication among vendors, carriers, and consignees. Find out how you can help foster better shipping compliance among your supply chain partners with a dynamic routing guide.
Seven years ago, Inbound Logistics conducted a "fax poll" among readers to solicit advice on how to create the perfect routing guide.
Some suggestions—"spell out compliance performance" and "make it easy to read"—are still germane; others, such as "make guide attractive," and "make it easy to revise" have been dated by more practical technological applications. A web portal, for example, that provides a downloadable state-to-state routing matrix with embedded links to carrier information has more potential than a static print version.
But despite this new medium, routing guides are only as good as the information they provide. Ensuring that directives are clear, easy to understand, and actionable is vital to successful vendor compliance.
To provide some insight into the varying dynamics and construction of routing guides, and to help you foster better shipping compliance among your supply chain partners, Inbound Logistics took a sampling from a variety of companies—retail, pharmaceutical, electronics—large, medium, and small. As dynamic as the companies they represent, routing guides vary greatly in detail, scope, and depth. But they all share a common goal: to simplify and establish a small base of carriers to support an inbound logistics program.
Successful implementation of a routing guide feeds off constant communication among vendors, carriers, and consignees. This information sharing is even more critical today given the tenuous economy, safety and security concerns, and the ongoing challenge to drive down transportation costs.
"We use our routing guide to standardize instructions to vendors," says Tom Stedman, director of corporate transportation, Walgreens. "It is becoming more important in today's economy to measure vendor compliance and make sure they are shipping products correctly.
"We want our vendors to ship on time, in the right quantities, with the right carriers and we are constantly working on improving this," he says.
Rob Long, LTL services manager and routing guide author for Lowe's, similarly perceives the routing guide as a critical component in a successful buyer/seller partnership.
"We ask for active involvement from our carriers and vendor partners. The guide is an instrument for communicating how we want our product to be routed and more importantly unitized," he says.
Aside from fostering effective partnerships, ensuring routing compliance makes good business sense. Companies that can competitively negotiate with carriers for different lanes, then specify to vendors what carriers they should use, can greatly enhance inbound inventory efficiency, unclog supply chain bottlenecks, streamline accounting processes, and ultimately reduce costs. Vendors, for their part, can also tap into these cost reductions and perhaps grow their business relationship with that partner.
"The routing guide has to be all-encompassing," says Stedman. "It should answer every question that a shipper might come up with."
Deciding how much information a guide should include, and in what detail, depends on the company's demands and needs. Routing guides can range from one to two pages, upwards of 40. This discrepancy can be justified by the fact that every company is different and some are more specific about carrier preferences and shipment handling than others.
That said, according to Long, a routing guide should incorporate three essential functions. "It should present a clear choice of carriers, a clear direction on how to use those carriers, and a clear understanding of who to contact if a problem arises," he says.
Routing guide must-haves
Perhaps the most critical component of a routing guide is ensuring that there is a point of contact for all transportation queries. If something goes awry, this person should be able to point the vendor in the right direction. Information should include contact person's name, physical and email address, phone and fax number.
"Ship To" Location
The routing guide should clearly identify where and to whom shipments are to be sent.
To avoid confusion and needless lost time, it is important to indicate where commercial invoices and transportation invoices should be sent.
Routing instructions should specify the date a shipment is expected to be delivered—not just shipped. Directions should also indicate how the shipment is to be paid—prepaid, collect, prepaid freight, and third-party billing,—as well as specific packaging requirements. Products that require special care, such as hazmat, refrigerated, and fragile cargo, should also have detailed instructions.
Companies often have specific label requirements that help facilitate movement through distribution facilities. To this end, packing slips may similarly require additional information such as "number of shipments," "net weight," and an itemized list of contents.
It is important that vendors acknowledge when they receive purchase orders. Depending on type of product, companies may specify whether the vendor should consolidate purchase orders or ship separately.
New orders, for example, may require specific delivery arrangements and arrive only at a specified delivery time. New item orders that arrive after the due date can result in a stock out, causing a halt in production. Deadlines must be clearly stated and kept.
Rules & Penalties
Failure to conform with a company's routing directive will generally result in penalties. If, for example, a supplier uses a carrier other than specified in the routing guide, or does not ship according to the freight terms, a chargeback should be calculated by subtracting specified carrier freight charges from the actual carrier freight charges plus an administrative fee. These rules should be spelled out in the routing guide to eliminate confusion.
Specifying what carriers should be used in what lanes and for what types of shipments is the "meat and potatoes" of any routing guide. Routing matrices may vary in detail—state-to-state, ZIP code to ZIP code—but they typically follow a similar paradigm.
A transportation routing matrix is broken down by weight restrictions and type of shipment (parcel, LTL, TL, bulk, hazmat). There is generally a preferred core carrier (or carriers) designated for a specific lane, as well as a secondary carrier. Each routing matrix should include the specified carrier for each lane, a contact phone and fax number for each carrier, as well as an approximate time of delivery.
If a shipment requires specialized or expedited service—by order of the consignee—specific instructions should detail what the vendor should do. Often the consignee will require the vendor to contact the transportation department for instructions. In these types of circumstances it is imperative that the routing guide clearly indicates how the shipper should proceed.
To ensure compliance, most routing guides require some form of notice from the vendor to acknowledge that it has received the directive. This can be sent in the form of letter, fax, and/or e-mail with an electronic signature. It's critical that both the shipper and the consignee are on the same page—only when you have something in writing can you verify accountability.
Routing guides have evolved into much more than their name indicates. In our survey of guides we came across maps of facilities, detailed directions, a glossary of terms, a vendor questionnaire, a detailed catalog of preferred partners, and sample letters to vendors.
Some companies have created web portals for their business partners that include private accounts, downloadable routing guides and bill of lading forms, account and billing information, links to core carriers, as well as real-time weather monitoring information. The easier a web portal is to navigate, the more a shipper will use it.