Tracking Premium Freight - Service Provider - Requires tracking INCIDENTS vs. $?

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".

Tom W said:

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.

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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.

db said:

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.

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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.

Premium Freight Tracking

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?????

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

Manoj Mathur said:

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

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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.

Tom W said:

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.

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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

db said:

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.

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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:
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).