|
Reducing freight rates is a thing of the past. Today, with rising demand for transportation and supply restricted by a driver shortage, supply-chain managers can, at best, keep freight-rates in check. We are going to look at the top ten ways to accomplish this goal. 1. Help Carriers be efficient. P&G put this into practice and saved money. They eliminated carrier costs by providing incentives for their customers to eliminate long waits for unloading – P&G’s carriers’ trucks must be turned around in two hours. This resulted in happier drivers, turning the carrier equipment faster and eliminated one of the items drivers hated the most – hours of hand unloading and counting. Formerly wasted carrier time could be turned into productive time and hence better freight rates. 2. Implement continuous moves. Xerox eliminated deadhead miles and carriers rewarded them with low per-mile rates. How did they do it? They used an old trick started in the 1980's called continuous moves. 3. Restructure fuel surcharges. Be fair – but eliminate any bias in fuel surcharge. (Today, most surcharges are favoring the carriers at the expense of shippers.) The surcharge is based on fuel usage (mile per gallon) and cost. With many fleets exceeding 7MPG, large variance in fuel costs both regionally and between “DOT quoted retail”, and what the carrier actually pays, there is generally room here for negotiation. 4. Reduce administration. Use software technology whenever possible to eliminate manual steps in processes that can easily be automated (like tendering freight). Administrative time is a hidden part of the total freight rate. Eliminating administration can therefore reduce freight rates. 5. Improve routing. The rule of thumb is that going from manual routing to system-driven routing will eliminate 10+% of all miles driven. 6. Optimize load size. Always ship really full trucks (not nominally full loads). Most companies claim to ship full trucks but weighing more than a quarter of a million trucks showed more than 50% of all trucks (that were supposedly “full”) had 4-8% of the truck’s capacity available. There are systems out there like AutioO2 (Automatic Order Optimization) for optimizing shipment size and container loading. P&G claimed a 7% savings by using a system called AutoO2 from Transportation Warehouse Optimization. 7. Eliminate unnecessary or wasteful moves. It seems strange that any company would ship a load unnecessarily – but it happens often. For example, one well known ERP system defines the ship point for any customer and then sticks to it. Therefore, a customer in Detroit would receive a load from its supply point in Chicago – even if the entire product was made and in stock in Cleveland. Simplifying assumptions often lead to unnecessary or wasteful moves. Implementing ship-point optimization will often eliminate 2-4% of supply-chain cost. 8. Select non-traditional modes. Convention tractor-trailer shipment or intermodal 53 ft. containers are not always the most economical way to ship. Steamship lines are often desperate to get their 20 and 40 ft. containers back to port. While the load size is diminished, the savings can more than make up for that apparent inefficiency. 9. Manage the campus. As production space expands, it is often at the expense of warehouse space. Rather than one building, plants become campuses and the complexity increases. Often the “simple” thing to do is to push everything to the outside facility – guaranteeing multiple touches and transportation moves. Distribution scheduling can significantly reduce the number of moves – eliminating freight costs. 10. Create the right mix of private fleet, dedicated trucks, dedicated capacity, and market level purchases. The right mix can provide the right level of shipment security and be very profitable. Use private fleet for high-service customer deliveries where backhauls are available or the length of haul is short. Dedicated trucks can be more cost effective – but you need to keep them moving too. Dedicated capacity is just that – contractual assurance of a set number of trucks that the carrier will guarantee to provide on any day. Transportation Warehouse Optimization has worked with the best of the best. Procter & Gamble and other top 50 Fortune 500 companies are among their client list. More importantly, P&G is a long-term client (since 1992). Transportation Warehouse Optimization has saved many large, well-run companies millions of dollars with expert counsel and software solutions. Taking a long-term view, they understand the industry, the market place, and like good consultants do, keep the client as the top priority. Visit them at: http://www.warehouseoptimization.com
Related Articles -
Warehouse Optimization, reducing freight rates,
| 
