With the new year quickly approaching, all organizations are in planning mode to ensure success. In the supply chain, transportation is a complex, critical, and costly function – making it essential for companies to focus on improvements. With the right people, processes, and technology, you can control the high costs of transportation and improve service levels at the same time. For organizations looking to make strides in 2020, careful examination of the current state of your transportation, strategic planning, and creative thinking can improve your supply chain performance and reduce costs.
Below are the top three factors you should consider when crafting your 2020 transportation plan:
Benchmark Carrier Rates
When mapping out your transportation efforts, it is important to assess your carrier rates. To optimize spending, engage an expert to assess your current carrier rates and provide recommendations for your capacity and procurement strategy. A consultation allows you to improve your position in the market based on expert feedback. To get the best rates, you should also consider leveraging a soft spot market to supplement capacity.
Quantify Internal Policies Which Increase Freight Cost
When looking at your transportation budget, you need to determine what your sales, customer service, and manufacturing policies cost the organization in transportation dollars. For example, backorder, lead time, and lack of minimum order quantity policies are often drivers for incremental transportation costs, which may or may not create value for the client and sales for the shipper. When examining these internal policies, be sure to decide if they are still relevant and consider if the benefits outweigh these costs.
In your planning, ask yourself questions that force you to think outside the box. For example, should your dedicated program include a relay system to place trailers in dense markets to maximize utilization and reduce costs? Do you have the technology required to drive consistent order consolidation and shipment optimization leading to mode shift from less than truckload shipping to truckload? Would your network benefit from positioning high moving SKUs in regional distribution centers which reduces your miles per shipment and transportation costs while increasing the speed to your customers?
Rather than remaining stagnant, evaluate your distribution network to see if it has become obsolete over time. Frequently, new customers, changes in manufacturing locations, or mergers and acquisitions result in an illogical placement of inventory, which drives excessive delivery times and high transportation costs. By working with a 3PL that specializes in network engineering, you can save money and also improve the customer experience. By connecting with a professional logistics partner, you can assess your transportation strategy and set targets to drive action. For example, if the 3PL can achieve a 4% network savings with their proposed solution, then it will be implemented. Otherwise, there is no action, and the partner receives a small consulting fee. This setup is a low risk way to benchmark how you operate with potential for great upside.
If your organization is looking to improve transportation in 2020, be sure to consult with an expert to look at your current carrier rates, take the time to dive into the cost of your internal policies, and ask forward-thinking questions about your transportation approach. With a focus on balancing costs and performance, your supply chain will be able to deliver top-notch service without sending your transportation budget into overdrive.