Managing Freight Spend and LTL Shipping Process to Attain “Best In Class” Shipper Status
We continue our series on what makes up a "Best in Class" shipper by taking a deeper dive into #4 and #5 of the 10 areas that "Best in Class" Shippers must master: Freight Spend Management and a focus on LTL Shipping Process. In the second post we covered the first 3 areas: Data Capture, Knowledge of Carrier's Business, and Organization. In the last post of the series we will cover the final areas. Our goal is to help shippers spend less, be more efficient, and continue to improve their LTL shipping ability so they may stay competitive and also keep customers happy.
Managing Freight Spend and LTL Shipping Process
When an item is currently in-transit, it’s safe to assume the shipping providers have an established rate, a planned time of delivery, and an expected cost of completing the delivery. However, shipments may be transferred between modes, such as between truckload and less-than-truckload (LTL). Additionally, shipments may miss connections at given points, experience delays due to mishandling, the weather, or construction, and have tracking problems. Unfortunately, in-transit delays and problems translate into problems with the delivery of merchandise, which may include damaged items, inaccurate delivery estimates, improper preparation for delivery, and filing associated freight claims. These aspects of LTL shipping can drastically impact a shipper’s budget. Let’s take a look at how freight spending management and managed processes can prevent these issues from occurring.
What Is Freight Spend Management?
Freight spend management is basically how much a given shipper pays for the shipment and how this figure correlates to the overall revenue of the business. Depending on business size, the costs for shipping may run into the hundreds of thousands of dollars, if not more.
Budgeting Freight Spend Management and In-Transit Problems
When a shipper choses a method of shipping, packaging requirements, and speed of delivery, they are actually impacting the company’s budget for freight transportation. In order for a shipper to gain “Best in Class Shipper” status, the shipper needs to understand how per shipment costs affect the overall budget. Furthermore, they must understand that some costs, such as fuel surcharges, weather delays, and regulation requirements, may impact the cost of the shipment.
One of the best ways to manage these unforeseen costs remains budgeting for them prior to pick up. For example, a shipper should consider fuel cost forecasts when creating a budget for LTL transport. He should also consider how natural and manmade disasters may affect route access, such as closed interstates as hurricanes approach land. However, budgeting is not the only means of mitigating risks to in-transit and delivery. Freight spend management is not always easy, so if you do not have those resources in-house, you may want to consider outsourcing to a focused 3PL who gets proper budgeting and offers expert freight spend management.
Ultimately, the supply chain is reflection of hundreds of processes that work together for a common purpose, or the transport of goods and materials from Location A to Location B. However, process management needs to address several process categories to reduce in-transit and delivery problems.
Management of Incoming Freight
Many shippers often forget how important incoming freight is to the success of their clients. For example, a manufacturer is unable to produce products without raw materials. Furthermore, when a shipper manages the inbound shipments, as well as the outbound, it can improve the relationship between client and shipper. As a result, the shipper gains a higher volume of business with the clients, which allows for more round trips per client, less empty space in LTL shipments, and reduced costs for all parties.
Planning of Shipments
For LTL shipments, the planning of shipments is crucial to the successful transport and delivery of products. This requires an understanding of where trucks are located, when they will arrive at distribution centers, delivery sites, and transfer terminals, and how the shipment needs to be packed. Furthermore, planning out LTL shipments allows shippers to reduce their costs of intermodal shipping processes. If you consider how shipment planning affects route selection, “Best in Class Shippers” understand the need to identify possible problems and alternate routes for drivers prior to departure. If an event arises while in-transit, the shipper needs to have a means of locating the driver and altering the planned course. This will be discussed in greater detail in “Part IV” of this series. Ultimately, shipment planning is looking for the best and fastest way to complete a shipment without developing problems.
Selecting a carrier as a shipping partner is also involved in the process aspects of a shipper. Recall our discussion in “Part II” of how partnering with other carriers can save smaller shippers money and allow multi-size businesses to compete in LTL shipping sector.
Effective Transportation Management
Transportation management closely mirrors the planning of shipments. However, transportation management often involves the use of technology to ensure all items are delivered and picked up on time, appointments are kept, shipments are consolidated to more efficient LTL shipments, and all paperwork is correct. By closely monitoring every aspect of LTL shipping processes, shippers can make sure all of their fleet is operating at capacity, with respect to driver shortages and availability.
Managing shipments while in-transit sounds difficult and unnecessary. However, problems may occur when a shipment is in-transit and upon delivery. In some cases, such as severe weather and disasters, problems are more likely to affect the shipping time frame when an item is in-transit. Furthermore, some items may be undeliverable in poor weather conditions. Since every possible problem has a negative impact on the financial stability of a given shipper, a strong, flexible shipping budget through good freight spend management needs to be in place. Rather than planning for the best, “Best in Class Shippers” know to prepare for the worst. When considering how process monitoring affects in-transit and delivery problems, you must also think about the impact of technology on shipping processes, which we will discuss in “Part IV” of this series.