When you want to drive down your logistics and transportation spend, the very first thing that you need is freight and transportation data. Without hard data, you can’t take action. When enterprises try to act in the absence of data, they are usually guessing and won’t get the results they need. However, as we’ve noted in a previous post, getting the right data is key as well.
In many different industries, it can be difficult to secure the kind of operational data you need to make a real impact on your spending. Luckily, this isn’t the case for transportation data. With the services of a trusted 3PL and a good transportation management system (TMS), you can glean an abundance of data around activities and practices related to your transportation department.
Accurate freight and transportation data is particularly important. Large shippers can save millions of dollars annually if they obtain and act on this data.
Transportation spending is a perennial target of budget-cutting exercises, and a large, multi-faceted cost center for many companies; some may spend three to six percent of their materials costs on transportation. Seizing control of freight and transportation spend can improve operating income by five to 10 percent, and boost stock prices by 10 to 20 percent, according to an Accenture study, From a Shipper’s Market to a Carrier’s Market.
Improving the ability to analyze and automate true freight spend is a priority for many large shippers and Directors of Transportation at these companies.
Cutting costs is not always easy, but because transportation spending comprises several dimensions, many opportunities are available to control that spend.
One of the most difficult questions for companies to answer is, ‘how much do you spend on transportation?’ Many shippers can identify transportation costs associated with a specific product flow, business unit, or set of contracts, but many hidden costs make an enterprise-wide total difficult to ascertain.
The bundling of production and transportation costs into vendor contracts is one reason behind this difficulty. In the communications, media, and high-tech industries, for example, it’s common for original equipment manufacturers (OEMs) to price goods on a cost-plus basis, with incentives to expedite hot products, such as the latest smartphone. This makes it hard for buyers to maintain visibility and control the transportation portion of a contract, and often requires revisiting contract terms and analyzing which party is best positioned to cost-effectively manage transportation.
With freight costs rising, the task of teasing out hidden costs is becoming increasingly critical. Deconstructing the supply chain to isolate transportation costs is where the opportunity lies.
There is a step-by-step strategy to gain control of transportation spending, starting with the basics and layering on additional capabilities that enable shippers to reap the greatest benefits from that foundation. Those steps include:
Assess the current state of your company’s transportation management. Identify the who, how, and why of all existing transportation choices, and consider all the internal and external assets currently in use.
Work with upstream suppliers to analyze their supply chain—including shipping costs, modes and mode-shifting opportunities, and order frequency—and how it affects your business.
Unbundle those contracts to shed some light on the transportation portion—then start to manage it.
Product lines, business units, or geographies often manage transportation, but pulling transportation management into a single, shared service opens up a host of savings opportunities, reaping a transportation spend savings of 10 to 30%.
These synergies include consolidating carriers, rationalizing service agreements, and deploying internal distribution and transportation assets more efficiently by rebalancing distribution, rerouting, and using augmented line hauls, backhaul, and continuous moves.
These two steps can reap a considerable return on investment. These strategies establish quick wins, driving tangible and short-term savings that enable shippers to capture value in three to six months.
Once visibility and a control infrastructure are in place, shippers need technology support to maximize the benefits. Important enabling functions include the ability to look at order activity and volumes, aggregate capacity needs, plan and tender loads to carriers, and manage order requirements in real time. These functions must integrate easily into current logistics, invoicing, and procurement processes.
Transportation management systems (TMS) can typically handle many of these functions, but maximum transport spending control requires not only TMS, but execution execution and added best practices and functions.
Another requirement is to ensure sufficient customer service levels when the TMS directs the shipper to the lowest-cost carrier for a particular route. Shippers need tracing capabilities, such as order tracking, real-time visibility to shipment status, exception management, and compliance so they can manage across multiple carriers. Such capabilities are commonly part of enterprise resource planning systems, not TMS. Therefore, integration is a must for those shippers looking to gather all the logistics and transportation data they need to tackle trimming transportation costs.
The savings opportunities from this third step are considerable—as much as 30 percent of the cost—particularly for freight that shippers didn’t previously manage.
These three steps represent a development curve for transportation spend management because only a small number of shippers currently have access to these capabilities. Transportation spend management is an emerging capability, and the market has not yet reached a level of maturity to consistently execute these steps. Those that master the ability to harness transportation data to trim your transportation spend are going to have a competitive advantage.
Accurate transportatin data is likely the single most important factor in a sustainable cost reduction plan. Last year we put out a white paper which contains all the transportation data points you can track. We recommend you download that white paper by visiting that blog post here.
When it comes to transportation data, how do you turn it into actionable insights so you can make change? Recently, as we do each quarter, we updated our transportation management system (TMS), we call the Cerasis Rater to provide even more reports using the data you create from shipping activity. This allows our shippers to glean even more from our system and get to cutting their transportation spend continually.
When it comes to our reports the following is possible:
The following are three new types of reports we have made available to shippers within our TMS, and below these three new reports are all the reports shippers can get if they want to get more transportation data:
Carriers Used – Report showing summary of the top ten carriers used by Dollars, Weight, and Shipment count. The summary pages show the breakdown of all carriers, not just the top ten.
Shipments by Zone – Report showing the shipment amount by zones in the US. The US is broken into 6 zones with Canada as zone 7, Mexico and zone 8, and everything else is zone 9. Summary pages show the breakdown by the state or province.
Weight by Class – Report showing class as the percentage used across all shipments and the total weight by class.
Billing Type Compliance
Least Cost Non-Compliance
Invoice Accrual Report
Invoice Records Report
Shipment Incentive Summary
We also provide several shipping activity reports which give more visibility and control to shippers. If you’d like to get a demo of our TMS, the Cerasis Rater, simply fill out a request form on our website here.
How are you currently gathering transportation data at your organization and how are you compiling that data to help trim your transportation spend? Let us know in the comments below!
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