The bad news: Tight capacity and higher freight rates are the new normal. The good news: There are ways to handle the impacts far better than your competition.
Aside from securing reduced freight rates from your carriers, here’s how you can cut freight expense while improving service:
- Coordinate business intelligence
- Improve load planning
- Provide carriers more notice of scheduled shipments
- Explore shipping priority
- Evaluate alternative warehousing options
- Improve invoice processing
- Automate dispatch
- Consolidate carriers
- Consolidate loads to ship more weight less frequently
- Engage a full-service third-party logistics provider that offers low- or no-cost options to review your supply chain
Look At Other Areas
In the sweat and worry about costs, some companies overlook the overall business plan. Review how you are doing business with your largest customers. For example:
- Ask your team if the proximity of customers to your ship locations has changed over the past year.
- How has your product mix changed? Are carriers still well suited for each product line?
- How has your customer and supplier footprint changed?
- Can IT/connectivity opportunities with your customers/suppliers bring efficiencies?
- Are all commitments to customers and suppliers still relevant and critical?
- Are inventory replenishment and stocking strategies built to optimize current customer order flow?
- Do you incent customers to build orders to reduce transportation costs?
- Are pricing strategies driving customer behaviors that create supply chain inefficiencies?
- What are the trends in landed cost-per-unit over time? How can this trend be positively impacted?
- Do different business units have different freight characteristics or requirements? If so, are there ways to minimize the number of carriers moving the less attractive freight, improving the operating costs of carriers hauling your better freight?
Answering these questions gives you great data that is the key starting point to pivot in a constrained capacity economy. These analytics help you understand what you can and cannot change across pricing, billing, purchasing, packaging, and sales.
Nearly all shippers’ businesses look different today in terms of customer footprint, density, and average shipment size and weight, yet they haven’t reviewed supply chain data and optimization approaches in ages. It might be time for a fresh look.
Many good transportation management systems have access to the key data and can offer an initial analysis. Alternatively, third-party firms can offer solid technology at little or no additional cost to the transportation spend. Either way, it’s prime time to examine every internal process that could impact order size, order frequency, inventory management, and transportation decisions.
Andrew Berke, Vice President, Strategic Ventures
Charles Boesch, Vice President, Strategic Ventures Sales