When buying organizations negotiate business terms and conditions with their suppliers, one of the areas discussed is the coordination, ownership and payment of freight. There are varying types of freight terms such as Collect, Prepaid, Prepaid and Chargeback or Collect and Allowed. The Collect part of the Freight terms indicates that the buyer is responsible for the coordination and payment of the shipping charges for the merchandise. Prepaid indicates that the seller is responsible.
The process without the use of EDI, the Supplier's fulfillment systems will build out the shipping information through the creation of a Bill of Lading document. This document is then either called in, faxed, mailed or email to the carrier of choice, requesting the load be tendered. Alternately information is sent to the retailer requesting them to arrange for the pickup. When EDI is used, the type or size of the load and who is working with the carrier, will determine which EDI document is to be used and to whom the information is exchanged.
Why this is important now, is the move for many retailers to work with their partners to switch away from prepaid to collect freight terms. To do this the retailer must have a process in place to manage these shipments. For some this means an investment in a TMS (Transportation Management System) which is used to calculate the scheduled inbound shipments and build out a trailer. For others this may mean contracting with a Logistics provider to manage these loads instead. Below are the processes I’ve seen implemented to support the movement of shipments.
Carrier shipments - LTL and Full Truck Load -
When the Suppliers arrange for their own freight going to a Retailer, they will send a 204 (Bill of Lading) or 211 (Consolidated BOL) to the carrier of choice. When the Carrier accepts the "load tender", they confirm with a 990.
When the Retailer arranges for the freight from the supplier to their location, with versions of EDI standards of 4030 or higher, the suppliers send a 753 (request for routing) to the Retailer, or if the retailer has a logistic/transportation department that builds shipment loads the 753 can be transmitted to them. During the load building process the Retailer or their 3PL/4PL will send a 204 (Bill of Lading) or 211 (Consolidated BOL) to the carrier of choice.
Similar to the process explained for the supplier managed shipments, when the Carrier accepts the "load tender", they confirm with a 990. Once the supplier shipment is included in a "carrier load", the Retailer or their 3PL/4PL will send a 754 (Routing Instruction transaction) indicating which carrier will be picking up the supplier's shipment, and the date and time of the pickup (Appointment).
Regardless of which party is arranging the freight routing, once the carrier has picked up the load from the supplier, the supplier sends an 856 (Advance Ship Notice) to the Retailer confirming the carrier routing the shipment, and details about the shipment such as PO number, Carton or Pallet tracking numbers and Items, and their quantities within those cartons or pallets.
As the load is being transported, the carrier can provide a 214 (Shipment Status Message) indicating the status of the retailer's order to either the Supplier, Retailer or both, or to the 3rd Party Logistics company. It should be noted that 204/211 or 753 EDI transactions are not required for the Carriers to still provide the 214 data to those parties interested in the information that this transaction provides, however to ensure that the data within the 214 is as accurate as possible, Carriers do recommend that a 204/211 are used to start the process.
These statuses can be provided in varying increments based on the needs of any party and their capabilities. Many carriers will provide a 214 each time that the status of the shipment changes. For example, when it’s picked up, when the trailer arrives and then departs from their terminal(s), each indicating expected delivery time, with the final 214 being sent when the delivery has been successful. With other carriers you may see an 214 about the pickup, and then final delivery. It should also be noted that many carriers will provide information within a status message about delays and the reason for those delays.
Lastly, once the delivery has been completed, the Carrier invoices either the Supplier, Retailer or 3rd Party Logistic Company for the freight, using a 210 transaction.
There are cases where the Retailer may be willing to pick up the supplier's shipment using their own fleet. Many retailers refer to this process as a “Backhaul”. This is the same as the retailer managing the freight so the process as indicated above (notification of the supplier shipment ready for pickup). In this scenario; depending on whether the supplier has adjusted the unit price of the products to account for the freight or not, some suppliers may offer an allowance off invoice for the Freight.
Carrier shipments – Small Package –
Regardless of whether the Freight Terms are collect or Prepaid, when the shipment is a small number of cartons and the weight of the products is manageable, shipping with Small Package carriers such as UPS, FEDEX, DHL etc., the Shipper (Supplier) arranges the routing of the shipment. For some relationships between the Retailer and the supplier, the Retailer may prefer to have the suppliers charge the freight expected against the Retailer's 3rd Party account number. This information is either provided within the PO (850/875) or another method.
A Supplier may have a standing pickup scheduled with a small package carrier so they simply apply the Carrier's shipping label to the cartons and stage the shipment until the product is picked up. Some suppliers have systems in place whereby the creation of the Carrier's label also triggers the carrier to arrange for a pickup.
As mentioned above, once the carrier has picked up the load from the supplier, the supplier sends an 856 (Advance Ship Notice) to the Retailer. And similar to the LTL shipments, as the load is being transported, the carrier can provide a 214 (Shipment Status Message) for each these types of shipments indicating the status of the retailer's order to either the Supplier or Retailer.
When it comes to the billing portion, unless the shipment is billed against the retailers 3rd Party Account Number, the Carrier typically invoices the Shipper for the freight using a 210. This can be one 210 per shipment or a consolidated 210 containing many shipments. Depending on the freight terms with the retailer, if the terms are Collect or Prepaid/Chargeback, Suppliers typically bill the retailer for the freight expense on the Suppliers invoice. This is the EDI 810 transaction.
Good luck with your transportation initiatives in the balance of 2011 or throughout 2012.
