The goal of every business is to generate revenue from the production and exchange of a product or service. As such, the businesses which sell tangible goods must find a way to transport that product from production to consumption in the most time and cost effective way possible.
Here’s the rub, transportation isn’t cheap. In 2017, U.S. companies spent a record $1.5 trillion on logistics costs alone, a 6.2% increase from 2016. These days, many companies can find themselves devoting a significant part of their annual budget to transportation costs; additionally, interest rates are on the rise, tariffs continue to be imposed on a growing number of goods, and fuel prices are increasing. In this economic climate it looks like companies may just have to brace for impact.How can your company plan for the future in these uncertain times? What are practices your company can implement right now that will significantly reduce transportation costs?
Here are 7 practical ways your company can reduce its transportation spend; therefore, freeing up money for future business endeavors:
1. Outsource Labor Intensive Jobs
There are a lot of moving parts and a lot of man hours in getting a product from point A to point B. All the time and resources your company uses to ship your product could very well be freed up by outsourcing labor-intensive jobs to firms specializing in those areas.
For example: all the time your employees spend processing invoices, contacting carriers, filing claims, and so on could be used doing other things that help to generate revenue. By outsourcing jobs to firms that have extensive resources and experience in areas your company does not, you will find yourself with freed up time and resources to generate revenue for your company than ever before.
2. Leverage a 3PL for Rate Negotiations
Many companies underestimate themselves in the leverage they have regarding their freight rates. It is true, the smaller your company, the less negotiation power you have. But a company with less negotiation power can still have a say in the rates they receive from their carrier. Most companies will find that with careful deliberation and tactful negotiation, they too can lower their freight rates.
Make the most of your resources: Data on past rates, current trends, and even the invoices you receive from your carrier. Study the invoices you get and make sure the numbers are right. Trust us, one small miscalculation can quickly turn $100 invoice into a $300 invoice; it happens all the time, and companies lose thousands of dollars every quarter.
Better yet, leverage a 3PL to make those negotiations. By leveraging the experience and connections a quality 3PL has, your company will begin experiencing year-over-year savings through the practice of negotiating rates with carriers. It can be frustrating but it is worth the time.
3. Use A TMS
In this age of digital advancement, the advantages of using a TMS cannot be emphasized enough. Using a TMS will decrease the amount of labor required in creating a shipment and optimize the visibility of the whole processing of transporting your product. Do you want to keep your inventory manageable and simplify the shipping process? Invest in a TMS. Do you need an interface specific to your company and complete visibility for every shipment? Invest in a TMS
By going digital with order planning and shipment implementation, your company can reduce paperwork, stay organized, and keep everyone in your logistics chain on the same page with every shipment. When considering the benefits of using a TMS, it becomes evident why every large business uses one and why every small business needs to begin using one.
4. Consolidate Shipments
By not paying close enough attention, your company could accidentally be sending out half empty trucks that could have been full, or sending multiple shipments to a similar location in multiple trucks instead of one truck. It is unbelievable the amount of money companies lose by not consolidating shipments.
Where could your company reduce costs in this area? Take note of the shipments going out which could be consolidated with other shipments. Minimize the number of trucks coming in and leaving your dock while still moving the same amount of freight.
By creating an organizational structure for how and when shipments are sent out, you will mitigate costs in fuel surcharges, accessorials, labor, and dock time. No company can consolidate all shipments; however, finding the areas where consolidation is possible will definitely cut costs.
5. Improved Modal Management
Knowing best practices for shipping freight is invaluable. Is your product being packaged correctly? A 1” difference in one package can increase or decrease your shipping costs dramatically. Should the shipment be shipped dry van, flat bed, LTL, rail, intermodal, or air? Should it arrive by 8:00am or can it wait until 3:00pm?
Asking these questions will dramatically reduce your company’s transportation spend on a daily basis. Remember to stay up to date in on what is happening in transportation and make decisions based on trends and new regulations. The world of logistics is constantly changing and the company that makes those day by day changes to their modal management practices will be far ahead of the competition.
6. Gather Transportation Data
Hundreds of thousands of shipments are being made and delivered every day. As such there are thousands of terabytes of data being collected by producers and carriers every year.
Keep your company’s data organized and consolidated. Organizing and storing shipping data will greatly affect the bottom-line of your company. Stored transportation data provides leverage to attain better rates with carriers, and provide a history for your company’s logistics finances and industry trends.
Make the best use of collected data and your company will stand above the rest. Logistics spend becomes quantifiable and provides data for setting future budgets and implementing continuous improvement processes.
7. Find the Best Carriers
Along the same line as rate negotiations, finding the best carrier or group of carriers to transport your product can make a huge difference in the amount your company spends on transportation.
Are you using more carriers than you should? Using fewer carriers can result in better freight negotiations and less time spent on invoices and various other paperwork.
Are your carriers properly equipped to meet your company’s specifications? All carriers have their different capabilities. Do they specialize in LTL or Truckload? What regions do they generally service? Where are their distribution centers located? Your carrier may be contracting interline freight carriers to ship your products. You want to have as much control and visibility as possible when choosing a carrier. Don’t allow yourself to be blindsided to the practices of your carriers
Many companies outsource a freight broker or 3PL to find carriers who are best suited for their transportation needs. Make sure your company is using the carriers best suited to your needs and that the carrier has your best interests in mind.
Conclusion
By incorporating these 7 tips into your company’s business practices your logistics spending will drastically decrease. Always be proactive in making decisions that will save money. Putting your transportation practices on auto-pilot is detrimental to your company’s overall performance. Look into every way your company can save on logistics and transportation spend.
Begin by asking yourself, “Where are we spending the most money, and what are ways we could reduce that spending?” You will be surprised at what you find.
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