801-110 National Logistics Management capabilities and relationships developed at TopFlite,he co-founded a 3PL named Artisan to handle specialty product shipments and logistics for Ford,General Motors(GM)and Chrysler(now Daimler Chrysler).As such,he was familiar with the trucking,3PL,and auto industry operations. While working with one of The Big Three automobile manufacturers,Taylor identified an opportunity to improve its handling of premium freight-shipments that needed expediting to reach a destination on time.10 While the automaker had not found close scrutiny of premium freight to be a cost-effective use of its managers'time,Taylor believed that he could build a business that would make such oversight cost-effective. The Premium Freight Opportunity Like many other large manufacturing companies,the automaker had contracted with its suppliers to deliver parts and supplies that would be needed at a specific place at a specific time.When shipments were delivered too early,the automaker was forced to assume inventory-carrying costs and to forgo use of the space for a higher-valued,revenue-generating activity.When parts were delivered too late,the manufacturing process could be either delayed or stopped completely until that shipment arrived.These delays could cost from $20,000 to $50,000 per minute.As a high-volume producer of automobiles,the automaker often defined its parameters of "early"and "late"(or protect time")within a 15-minute time window. For standard supply shipments,large automobile manufacturers scheduled carriers in advance. Because of the volume shipped,the Big Three automakers could negotiate extremely favorable contracts with logistics and transportation carriers-regardless of whether the supplier or the automaker was actually "paying the bill."Large,asset-based 3PLs,such as a Penske,typically handled much of this standard work,scheduling truckload deliveries to plants and establishing"milk runs"in which a driver would make a predefined set of stops on a regular basis,picking up a series of LTL shipments that suppliers knew the automaker would need. Most of the time(on average 90%)this standard process worked smoothly.For the remaining 10% the process did not work as planned.A supplier would be late in finishing the parts for shipment,an assembly line would break,or any one of a number of other unplanned events would occur.In these cases,the shipment would become "premium"freight,in need of expediting to reach the destination on time. Since premium freight was a comparatively small component of transportation costs,either the parts supplier or a plant manager often decided which carrier to use.Typically,a manager would place a telephone call to the carrier of their choice,whether that was due to a long-standing professional relationship,close geographic proximity,or simply the ease of reaching the carrier. Premium freight was also not subjected to contractual routing procedures and policies,which provided even greater discretion to local managers.In some cases this ad hoc approach would yield the lowest-cost,highest-quality carrier for a particular shipment,but this was often a coincidence. Typically automakers made hundreds of premium freight shipments per day,a substantial percentage of which were less than 18,000 pounds.This type of shipment fit well with NLM's existing capabilities and Taylor was convinced that he could create a profitable business with the one automaker and then expand the business as he built scale. 10 The name of the automaker has been kept confidential at the request of NLM. 6 This document is authorized for use only in Logistics Managment by Chung-Li Tseng from July 2011 to January 2012.801-110 National Logistics Management 6 capabilities and relationships developed at TopFlite, he co-founded a 3PL named Artisan to handle specialty product shipments and logistics for Ford, General Motors (GM) and Chrysler (now Daimler Chrysler). As such, he was familiar with the trucking, 3PL, and auto industry operations. While working with one of The Big Three automobile manufacturers, Taylor identified an opportunity to improve its handling of premium freight—shipments that needed expediting to reach a destination on time.10 While the automaker had not found close scrutiny of premium freight to be a cost-effective use of its managers’ time, Taylor believed that he could build a business that would make such oversight cost-effective. The Premium Freight Opportunity Like many other large manufacturing companies, the automaker had contracted with its suppliers to deliver parts and supplies that would be needed at a specific place at a specific time. When shipments were delivered too early, the automaker was forced to assume inventory-carrying costs and to forgo use of the space for a higher-valued, revenue-generating activity. When parts were delivered too late, the manufacturing process could be either delayed or stopped completely until that shipment arrived. These delays could cost from $20,000 to $50,000 per minute. As a high-volume producer of automobiles, the automaker often defined its parameters of “early” and “late” (or “protect time”) within a 15-minute time window. For standard supply shipments, large automobile manufacturers scheduled carriers in advance. Because of the volume shipped, the Big Three automakers could negotiate extremely favorable contracts with logistics and transportation carriers—regardless of whether the supplier or the automaker was actually “paying the bill.” Large, asset-based 3PLs, such as a Penske, typically handled much of this standard work, scheduling truckload deliveries to plants and establishing “milk runs” in which a driver would make a predefined set of stops on a regular basis, picking up a series of LTL shipments that suppliers knew the automaker would need. Most of the time (on average 90%) this standard process worked smoothly. For the remaining 10% the process did not work as planned. A supplier would be late in finishing the parts for shipment, an assembly line would break, or any one of a number of other unplanned events would occur. In these cases, the shipment would become “premium” freight, in need of expediting to reach the destination on time. Since premium freight was a comparatively small component of transportation costs, either the parts supplier or a plant manager often decided which carrier to use. Typically, a manager would place a telephone call to the carrier of their choice, whether that was due to a long-standing professional relationship, close geographic proximity, or simply the ease of reaching the carrier. Premium freight was also not subjected to contractual routing procedures and policies, which provided even greater discretion to local managers. In some cases this ad hoc approach would yield the lowest-cost, highest- quality carrier for a particular shipment, but this was often a coincidence. Typically automakers made hundreds of premium freight shipments per day, a substantial percentage of which were less than 18,000 pounds. This type of shipment fit well with NLM’s existing capabilities and Taylor was convinced that he could create a profitable business with the one automaker and then expand the business as he built scale. 10 The name of the automaker has been kept confidential at the request of NLM. This document is authorized for use only in Logistics Managment by Chung-Li Tseng from July 2011 to January 2012