Shippers are continuously looking for ways to reduce their transportation costs. Yet, transportation doesn’t lack when it comes to complexity with its many moving parts. Add in the need for smart resources, strong industry experience and quality skills needed to ensure that transportation networks are optimized, and inefficiencies can easily creep in. By looking holistically at a transportation network across an enterprise, shippers may find that unexplored areas can bring about unexpected savings. Likewise, inefficiencies through common practices may also be brought to light and therefore given the opportunity to be corrected and improved.
Unsure where to start? Here are a few steps a shipper can take to begin to maximizing transportation operation efficiencies, and possibly uncover potential cost savings:
- Gain a complete view of your transportation management: Take a step back and holistically view your enterprise-wide network of freight flows (inbound, outbound and interfacility) for all modes. You may elect to opt-out on certain modes in the optimization scenarios, but get a clear view of the big picture first, before making that decision.
- Switching the focus: Optimizing transportation networks doesn’t mean controlling every piece of freight on every lane. Rather it is aimed at the best overall solution for improving supply chain performance and reducing total landed cost. Often this may mean actively and continuously collaborating with vendors and suppliers to pick the right mode and carriers.
- Tune into “Expressive Competition”: Superior operating performance, service and cost characteristics are achieved by mapping the flows of freight you can identify in your own network and overlaying that with available carrier capacity. The only way this can effectively and efficiently be done is through “Expressive Competition,” which is achieved by exposing your freight flows to the population of carriers with available capacity. Those carriers will tell you – by their selling behavior – what lanes and volumes that fit into their networks. This amplifies operating efficiency and reduces costs for everyone.
- Turn data into information: Compile a baseline of what your costs are “as-is” today, and then what they could be in the “to-be” model through redesigning and restructuring the network. This is the core of transportation portfolio management.
In addition, avoid common pitfalls such as sub-optimizing specific modes of transportation, which can cause missed opportunities for savings. Lastly, upper management should take into consideration the overall network impact of the margin versus the impact of sales which, pending the commodity, could easily double or triple.
Watch the video below to hear Brooks Bentz, President of Supply Chain Consulting at Transplace, expand on the steps above and how to take a more nuanced perspective when viewing the big picture of transportation management to maximize shipper savings.
Click here to learn more about Transplace Supply Chain Consulting and managing transportation networks.
Which factors do you find most challenging in optimizing your supply chain network?