The Defense Logistics Agency (DLA) plans to make big changes in its contractor shipping requirements. The changes will take place in October 2013, so if your business sells products to DLA, now is the time to get ready.
DLA’s new shipping requirements are called First Destination Transportation (FDT), and the new rules apply to the movement of material from suppliers to the first military depot or direct to military customer. In these instances, shipping will change from FOB destination to FOB origin.
- FOB is an abbreviation for free on board. This term is used with the designation of a physical point to determine the responsibility and basis for payment of freight charges and, unless otherwise agreed, the point at which Title for supplies passes to the buyer of consignee. (The policies on designation of contracts as FOB Origin or FOB Destination are set forth in FAR 47.3.)
- Irrespective of whether a contract is designated as FOB Origin or FOB Destination, the government bears the cost of shipping (either as part of the item price under FOB Destination or separately under FOB Origin). An important consideration between the two designations, however, is who bears risk for damage or loss of the item during shipment. Typically, under FOB Destination, the seller bears the risk of loss or damage to the item during shipment. Under FOB Origin, the buyer typically bears the risk of loss or damage to the item during shipment.
Slated to begin with solicitations and awards in late October 2013, DLA’s new FDT rules will require the removal of transportation-related cost from contractor bids. Shipping will be designated FOB Origin, thus contractors need only be concerned with quoting the associated costs of manufacturing their products. Products affected by the October roll-out will be those labeled as Class IX consumables and some Class IV and VII materials to CONUS destinations. Supply Chains included in the FDT initiative are: Aviation, Land and Maritime, Construction and Equipment, and Industrial Hardware.
According to DLA, the new FDT rules mean that geography will no longer play a part in competitive bidding because distance-based shipping expenses will not have to be factored into bids. The drawdown of troops from Afghanistan signals a reduction of necessary parts and supplies to U.S. troops. Contractors who utilize this change in transportation terms, and find additional avenues for cutting costs, will find their reward in additional business opportunities.
In these uncertain budgetary times, DLA is challenged to decrease costs at the same time as being challenged with increased support to the troops in both the U.S. and abroad. It is DLA’s goal to take control of its supply chain by improving in-transit visibility (ITV) and dock productivity as well as safety stock requirements. ITV offers opportunities to consolidate. Loading fewer, fuller trucks increases DLA’s effectiveness and reduces its carbon footprint.
Once the FDT rules become effective, vendors are advised that before submitting a bid (minus the cost of transportation), they will need to Log In and subscribe to DLA’s Vendor Shipment Module (VSM). VSM is the vehicle by which vendors will notify DLA’s transportation team that a shipment is ready for pick up. No matter the size or weight, VSM will assess the information provide by vendors, assign the carrier best suited for the shipment, and notify the vendor of the carrier choice. At that time, VSM will allow each vendor to access its own contract information in order to print a commercial bill of lading, military shipping labels, packing slip, address labels and small parcel carrier labels.
For VSM registration and instruction, please click on the link below. A Help Desk is available and can be reached by email at firstname.lastname@example.org or by phone Monday through Friday, between the hours of 6:00 am and 6:30 pm Eastern Time, at 800-456-5507.
Will you be ready for this change in October 2013? Now is the time to register for VSM: https://vsm.distribution.dla.mil/ Watch for solicitations that use the freight term FOB Origin, and don’t forget to sharpen your pencil!
For more information on FDT, visit: http://www.dla.mil/FDTPI/Pages/default.aspx#transportation.