I have a question regarding premium freight and the understanding of what TS requires.

During our TS2 audit we discussed the tracking of premium freight in length. The situation is this. We are a service provider, if we have issues that cause a premium freight issue to happen we track that. However, if our customer calls and wants their product faster that our promised delivery date, and they pay for the expediting why would we need to track this? Is this not premium freight for the customer to track not us. We incure no cost associated with this.

I could see the benefit of tracking this if we could communicate to the customer the number of times they do this in the event that they do not track it and maybe an adjustment to the schedule can be made on a permanant basis.

TS defines preimum freight as "extra costs or charges incurred additional to contracted delivery".

I could see the benefit of tracking this if we could communicate to the customer the number of times they do this in the event that they do not track it and maybe an adjustment to the schedule can be made on a permanant basis.

This is perhaps a good reason for tracking premium freight caused by the customer. In the long run, it could benefit both you and the customer.

This is perhaps a good reason for tracking premium freight caused by the customer. In the long run, it could benefit both you and the customer.

Yes I would agree with you that it could be good for them, it would also help if the customer actually accepted our feedback. Many believe in the saying "The customer is always right." When in fact this is sometimes the opposite, especilly in the service industry (heat treat / plating / etc).

The example is one of our customers sends a cab over every 6 hours to pick up the parts that are ready. We also deliver twice a day. In fact the cab comes one hour prior to each regular delivery we are scheduled to make. The customer is paying all fees associated with this. I beleive this is mostly caused by the end of the year orders stokepilling inventroy, especially with the recent contracts with the UAW. The customer also recently embarked on JIT processing and I think it is coming back to bite them.

You must track ALL premium freight, regardless of who caused it - that's the requirement. While the following is NOT a requirement, you'd be wise to identify who IS responsible, IMO, for precisely the reasons you and db discussed - you never know when info like that could result in an improvement opportunity.

On another note, IMO the customer is NOT always right - but the customer always has something I want, namely money. :)

DW

I would state that tracking premium freight that you have no control over or cost incurred is a non-value added activity. Not good for business, but one would only hope that the customer is tracking this. As long as they are paying the bills and satisfied with the quality, the premium freight that they created by not having control on their processing is not our concern????? :confused:

Yes, We in our recent MRM were discussing the issue of Premium Freight.
As per TS requirement, we were tracking premium freight paid by our suppliers only under sub clause of 7.4 X.XX, But It was pointed out that this excesss should be caluclated in full supply chain that means delievery made by us also should be seen for premium freight. I would like to ask Is it correct. I feel it correct. Just I would like to know your openion.

Manoj Mathur

Yes, We in our recent MRM were discussing the issue of Premium Freight.
As per TS requirement, we were tracking premium freight paid by our suppliers only under sub clause of 7.4 X.XX, But It was pointed out that this excesss should be caluclated in full supply chain that means delievery made by us also should be seen for premium freight. I would like to ask Is it correct. I feel it correct. Just I would like to know your openion.

Manoj Mathur


According to the standard, you need to track all premium freight, for customer and suppliers. My point is that value added tracking is a positive and can lead to improvement projects and ideas, non-value added things are a waste of resources and effort. Tracking your customers premium freight is a resource waste, and the standard does not requrie you to track this. The implied meaning is tracking premium freight that adds cost or charges to your organization beyond the normal delivery charges. IMO.

According to the standard, you need to track all premium freight, for customer and suppliers. My point is that value added tracking is a positive and can lead to improvement projects and ideas, non-value added things are a waste of resources and effort. Tracking your customers premium freight is a resource waste, and the standard does not requrie you to track this. The implied meaning is tracking premium freight that adds cost or charges to your organization beyond the normal delivery charges. IMO.

I think it goes farther than this Tom, the reason premium freight is so important to the OEM is that if you are paying expidited charges, you are close to shipping late. With their JIT systems, any late shippments could result in an assembly line stopping. I think they are more concerned about this than your financial health.

A question, if I may, about semantics. Just what, exactly, is premium freight?

In the example here, sure, sending a cab twice a day seems a little looney. But, if this is the
common practice for that customer, or becomes common practice, it is no longer premium. It is the norm.

If my logic here is correct (is it?) would you still, according to the standard have to track it? At what point is it no longer premium?

OK, more than one question. But I am curious.

Of course, it still would seem wise to try to get the customer to eliminate it.

Craig

I think it goes farther than this Tom, the reason premium freight is so important to the OEM is that if you are paying expidited charges, you are close to shipping late. With their JIT systems, any late shippments could result in an assembly line stopping. I think they are more concerned about this than your financial health.

I agree with you, however if the quote for the part number states a turn around time of three days and the customer goes for a few years with that, then because of their half-hearted attempt at JIT, they become close to shutting down their customer, they expidite the parts from us. We process them the same way, we even ship them the same way. Our customer is causing the premium freight and they are paying for it directly. We see no increased costs involved in the delivery, so by definition it is not premium freight (for us). Our customer should be tracking this to improve their system of processing.

Tracking your customers' premium freight was never the intention of TS nor should it be. The organization must track their premium freight charges, not their customers.

QUOTE:
A question, if I may, about semantics. Just what, exactly, is premium freight?

In the example here, sure, sending a cab twice a day seems a little looney. But, if this is the
common practice for that customer, or becomes common practice, it is no longer premium. It is the norm.

If my logic here is correct (is it?) would you still, according to the standard have to track it? At what point is it no longer premium?

OK, more than one question. But I am curious.

Of course, it still would seem wise to try to get the customer to eliminate it.

Craig
Craig, good point, however in this case we have a quote that states an agreed three day turn around. That three day turn around has changed into 12 hour turn around, with the customer paying the additional charges for overtime and such. It has not increased our operating costs above the billed costs. We have dedicated equipment for this customer and the hours are available. It is a cycle, when they fall behind, they increase the demand. But they pay for it. We are not incurring any additional charges associated with delivery, which is what premium freight is defined as. (But boy let me tell you, they sure are incurring more cost. If I was their customer I would be watching this close).

I agree with Don Wood. ALL premmium freight should be tracked, regardless of who is responsible. Reason being, any request for delivery outside the scope of what you have planned puts a burden on manufacturing. This will result in a negative impact for other deliveries.

I agree with Don Wood. ALL premmium freight should be tracked, regardless of who is responsible. Reason being, any request for delivery outside the scope of what you have planned puts a burden on manufacturing. This will result in a negative impact for other deliveries.
Question: Well you have convinced me that tracking premium freight, reguardless of who pays for it MIGHT be a good idea. I still struggle with the interpretation that an organization should track premium freight even if they might not be aware of it. If our customer incurrs premium freight isn't that their responsibility to track it? Is there a company out there today that has the resources to track their customer's premium freight? Again we are limiting this to additional charges or costs for delivery above the original agreed delivery only. Not addition operating costs.

Question: Well you have convinced me that tracking premium freight, reguardless of who pays for it MIGHT be a good idea. I still struggle with the interpretation that an organization should track premium freight even if they might not be aware of it. If our customer incurrs premium freight isn't that their responsibility to track it? Is there a company out there today that has the resources to track their customer's premium freight? Again we are limiting this to additional charges or costs for delivery above the original agreed delivery only. Not addition operating costs.

If the customer is responsible then he should also be keeping track. I am only concerned with the affect premium freight has on our company. And if I have customers that are requesting overnight deliveries after the order has been placed and planned then it's going to upset my Mfg cycle.
I track who the customers are and at least with that infomation I will know that I will have to make adjustments ahead of time.

Thanks for all your replies. I can see clearly now the rain is gone.

We are currently debating how to address this within my company. We are QS certified working on TS2 upgrade. Since some time has passed since the last post I'm wondering if anyone who has gone thru a TS2 audit has clarification of this. I read the standard literally -- "all premium freight" -- I don't see where it says "based on your company's interpretation of premium freight" ;)

As some previous posters stated, there's no value in tracking all premium freight for our company, but I can name plenty of other areas of TS2 that don't add value either but I guarantee if we don't address it, it will result in a nonconformance.

But here's a twist our Acct Dept brought up -- if we ship premium freight to a customer and it's collect, how do we know the $$$$ of the shipping charge?

UGH UGH UGH ... anyone have anything clearer to add? :bonk:

Karin

:thanx:

1. The minimum requirement requires tracking INCIDENTS of premium freight, not dollars. You don't have to worry about tracking collect shipment costs, or ANY premium shipment costs, unless you want to. Obviously, there can be some value in putting $ on premium freight, but between collect shipments and delays between incurring a charge and receiving a bill, the IAOB decided it was less burdensome on suppliers to just track incidents at a minimum.

2. Premium frieght is defined in Section 3 of TS2 on page 3 as "extra costs or charges incurred additional to contracted delivery NOTE This can be caused by method, quantity, unscheduled or late deliveries, etc" In other words, if it's different from you usual method of shipment, and it costs more, track it as either a measure of supplier performance or customer satisfaction.

3. The intent here is to promote effective AND efficient delivery performance, according to the ISO 9000 definitions of "effective" and "efficient". The auto industry feels that, one way or another, THEY will end up paying for premium freight - either on the next contract, or in terms of potential poor quality (including on-time delivery) due to the last minute scrambling that typically accompanies a premium shipment (after all, if organizations or their suppliers weren't running behind, they wouldn't need to ship premium in the first place).

And yes, I know that oftentimes customers do it to organizations by changing schedules late in the game - we ALL know that happens. But there's not much we can do about that, is there? :) It's not right, it's not fair - but it IS automotive.

Hope this helps!
DW

That helps a ton, thanks Don.

Hi all,

We recently had a CAR from a 3rd party audit on this issue and have to get a response in by 9/19/08. So....

My first question is, is this thread still accurate? Have there been any changes in interpretation?

Then next, okay we "track" the premium freight occurrances...then what?
Do you tie it into Management Review?
Do you tie it back to Supplier ratings?
How do you determine how much is good/bad?

It looks to me that the previous interpretations are still correct. As for wht to do with your data; depends on your customer requirements and your own internal needs. Ford, for example, requires you to track and report your QOS data monthly.
We only track premium freight on in-bound shipments and record the dollar value monthly. We meet quarterly to review and prepare a CAR when necessary.

Hi all,

We recently had a CAR from a 3rd party audit on this issue and have to get a response in by 9/19/08. So....

My first question is, is this thread still accurate? Have there been any changes in interpretation?

Then next, okay we "track" the premium freight occurrances...then what?
Do you tie it into Management Review?
Do you tie it back to Supplier ratings?
How do you determine how much is good/bad?

I was sleazing around the IAOB website a couple of weeks ago, and saw no new interpretations or FAQs concerning this requirement.

Anytime TS (or ISO, for that matter) wants you to track something, there's generally an implication that they want you to DO something about it.

Linking to MR and supplier ratings is a good idea. But first, I'd try a common-sense approach. Collect data and trend it, then set priorities. If it is a problem, why? Who are your problem children in the supply base? On the outbound side, what's causing YOU to ship premium? Is it particular customers, or jobs? Is it seasonal, or cyclical in some other way? Each of these trends could drive different corrective actions in your QMS.

If premium freight doesn't seem to be a big problem for your organization, then you shouldn't have to take much action. but you'll need to be able to PROVE it's not much of a problem first, hence the recommendations on data collection and trending. Again, including premium freight metrics as part of MR is a good idea (if you're spending a bunch of money on premium). For me, it's always been a given to include premium freight as part of supplier ratings.

Hope this helps!
DW

It looks to me that the previous interpretations are still correct. As for wht to do with your data; depends on your customer requirements and your own internal needs. Ford, for example, requires you to track and report your QOS data monthly.
We only track premium freight on in-bound shipments and record the dollar value monthly. We meet quarterly to review and prepare a CAR when necessary.

I'm currently reviewing Ford Specs for a new project. Do you know what spec or bulletin references this QOS reporting requirement? I haven't seen it yet.

I'm currently reviewing Ford Specs for a new project. Do you know what spec or bulletin references this QOS reporting requirement? I haven't seen it yet.

Last I saw QOS reporting requirements were incorporated into Ford's TS Customer Specifics, as well as the Q1 requirements. I haven't played in Ford's supply chain in a while, this information may be out of date. There used to be a fairly detailed set of guidelines specific to QOS, but I don't know if that's still the case. Sam would know more than I.

As a starting point, check the current edition of Ford's TS customer-specific requirements (www.iatfglobaloversight.org), and follow the merry chain of references. The current edition of Q1 wouldn't hurt either.

Hope this helps!
DW

I did wander around on the Ford website yesterday and found something in the MMOG. Just a checklist item:

Documented procedures for the follow-up of transportation issues relating to quality (damages), cost (normal, premium freight and detention/demurrage costs), and delivery (ordering and on-time performance) exists.

If anyone knows of anything else, anywhere else, please let me know. Thanks to all for your help.