While the capacity crunch of 2018 lessened over 2019, high freight demand remains consistent. According to Kristy Knichel, CEO of Knichel Logistics, reports Forbes magazine, regardless of the shift, “one of the reasons for tightened capacity is the ongoing driver shortage. Year after year, older drivers are retiring with fewer younger drivers taking their places. The work is difficult — it involves working long hours, driving long distances, being away from family for long periods of time and less-than-ideal pay.” The trend will continue, and shippers will begin to realize the limits of their current freight strategy. Unfortunately, recognizing these limits is a daunting task, so shippers should look for the following problems in their organizations and recognize the need for better, more efficient systems and strategic value.
A Subpar Freight Strategy Puts Limits on the Accessibility and Application of Data
Failure to access and apply data in freight strategy haunts the minds of shippers. It is easy to “envision self-driving trucks safely and efficiently carrying shipments down US highways. But that’s only part of any product’s journey between manufacturer and customer. How will the new mobility ecosystem handle the whole trip, including the trickiest part of all: last-mile delivery,” says Deloitte.
Retailer software and transportation management systems continue to evolve, yet they lack true, end-to-end visibility. For example, last-mile delivery does have limited ability to generate data. Most shippers and carriers have a perception that the last mile is really the last scan through final delivery, but with the advancement of technology, carriers can collect immensely more data. Using GPS sensors, real-time reporting, and exception management, shippers can collaborate with carriers, keeping customers informed and avoiding potential backlash. Furthermore, failure to apply available data will result in an assumption of maintaining the status quo, and in today’s world, maintaining the status quo does not build competitive advantage or even enable long-term profitability.
The Importance of Freight Accounting Management to Reduce Costs
Poor Collaboration Represents Another Limit of Ineffective Logistics Strategies
Although the industry can embrace various technologies in systems to improve collaboration and reduce costs, it remains to be seen. According to Logistics Management, the biggest issues revolve around investment costs and problems with implementation. The irony of technology as part of the freight strategy is also vastly underrepresented. In the “2016 State of Third-Party Logistics Study,” technology strategy and implementation fell to the lowest position on the list of top concerns. But still, cutting transportation costs was noted by 63% of respondents. Clearly, a disconnect between the use of technology strategy and implementation and the ability to use it to reduce logistics spend exists. A common denominator between the two is the inability to use systems across the supply chain network. Every company has a unique system of record, and if carriers prefer to use system A, what incentive do they have to use the system operated by shipper B? As a result, collaboration declines, and companies are left running transportation management independently, failing to leverage the biggest advantage of all—real-time collaboration.
Manual Exception Management Detracts Workers and Adds to Costs
Any repetitive process will benefit from automation. In supply chain management, exception automation can have a lasting impact. Exception automation refers to the use of advanced computer algorithms, artificial intelligence, machine learning, and basic rule sets to prescribe a set of actions to follow when an adverse event occurs.
For example, if weather reports indicate heavy snowfall on one trade lane, automated systems could trigger a series of alerts to all affected drivers and provide an appropriate route correction to avoid delays. For organizations that continue operating manual exception management, it amounts to higher labor costs, potential errors in judgment, and other problems.
A Poor Freight Strategy Coincides With Poor Accounting Practices
The best-laid plans for transportation management falter without proper transportation accounting. Unfortunately, trusting carriers to correctly invoice is not the best strategy. Mistakes may and often do occur, affecting up to 10% of all invoices. Simple mistakes, such as double billing or incorrect freight classification, add up to millions of dollars in excess spend across an enterprise. So, organizations that continue operating manual, expensive, and in-house auditing and accounting practices should consider the benefits of outsourcing or invest in an automated auditing and accounting system. Moreover, outsourced auditing service providers may only charge a percentage of identified errors in recaptured costs. Therefore, shippers see immediate gains in profitability, and they do not have to sacrifice any investment up front.
Know the Limits of Your Current Strategies
Organizations can have multiple freight strategies, but in an effective strategy, shippers and carriers work harmoniously, data becomes an advantage and basic way of life, automated exception management eliminates the hassle and stress, and better accounting translates into higher profitability. Shippers that experience these issues need to rethink their freight strategy now and seriously consider partnering with an expert in transportation management, such as Cerasis. Reach out to us today to find out more about our transportation management solutions.