Capgemini, the Consulting company, recently shared its list of the top challenges that logistics and shipping managers have to deal with. The list, result of a survey, found the top challenge for cutting transportation costs.
While many shippers just start to look for ways to reduce their rates, there is also a list of optimization tactics logistics managers can employ to help their businesses realize sustainable savings, for a long-term.
Take note of these 10 shipping optimization tactics you can apply:
1. Suppliers Inbound Compliance
Always have consistent processes in place for managing all your inbound freight. Performing an annual audit to measure what percentage of your material purchase orders have “collect” shipping terms versus “prepaid options”. Usually, a buyer should control inbound transportation unless the product the company is buying is extremely expensive or risky to move.
If you allow suppliers to ship freight prepaid, you run the risk of paying 10–40% premiums, which are profitable for the supplier, but expensive for you, the buyer. You may be paying state sales tax on freight charges if they’re buried in the overall product cost, also known as “freight allowed” or “freight included.”
Use a web-based routing guide to instruct your suppliers what carriers to use when shipping to your locations, and add these instructions to your purchase orders. Incorporating vendor routing and compliance guides can help improve transportation service times, control costs, and streamline warehouse operations.
2. Outbound Routing Discipline
You have thousands of carriers to select from to haul your freight. Do you always pick the low-cost option? Or are you choosing a carrier based on convenience? Make sure your process for selecting carriers is consistent across your company.
Use a web-based TMS (transportation management system), with a network of pre-qualified carriers, to provide your team a consistent means to quickly compare carrier rates, transit service, and match the best carrier with your shipment. Utilizing a TMS provides you visibility to all your outbound and inbound freight, so you can make data-driven decisions that drive cost savings for your business.
3. BOL Reductions
Reducing the total number of BOLs (bills of lading) created each day will help lower your freight costs. If your team is responsible for outbound and inbound freight, make it a practice to combine more orders into one shipment, which will create more cost-effective larger volume loads. With more intra-company transparency and connected technology systems, you’ll create significant cost-saving opportunities.
4. Multi-Mode and Mode Shift Combinations
Combining multiple shipments into a single, larger shipment, is called mode shift. This tactic will help you move your shipments into an alternative, less expensive mode. An example of this is combining multiple LTL shipments into a volume LTL, partial truckload or full truckload.
It’s essential to compare ground and air freight options. On any given shipment, air freight might be less expensive than a sprinter van, but sometimes, a two-person driving team in a cargo van or 28-foot box truck might be less expensive than shipping via air.
Leveraging multimodal shipping services and logistics solutions, like combining intermodal with truckload and final-mile, helps reduce your overall costs while mitigating capacity challenges and meeting your customer delivery demands.
5. Accessorial Audits
Take the time to audit your freight invoices from the past 6–12 months to make sure you’re not being charged incorrectly, and identify opportunities where you could eliminate accessorial charges. Administrative accessorials like weight and BOL adjustments can be avoided with proper training. Educating your employees on accessorials, and the importance of properly weighing, measuring, and classing shipments, can help reduce your accessorial fees and overall shipping costs.
6. Get Your Product Closer to Your Customers
As consumers and B2B buyers increasingly expect next day delivery, your fulfillment and logistics strategy is an important part of your customer service equation. When you leverage a nationwide network of warehouses, you reduce the distance between your product and your customers, which can also decrease your cost of transporting your product to market. The overall cost of regional freight shipping from fulfillment centers is usually less expensive than shipping cross country.
7. Increasing Lead Times
The more time your logistics partner has to book a shipment, the more leverage they have to secure the best carrier and equipment for your load and lane, identify efficiency improvements and negotiate rates. An advance shipping notice helps a carrier line up the assets and resources they need to efficiently pick up and deliver. One of the biggest costs for carriers is paying for a trailer that’s sitting idle somewhere, waiting to load. When you plan ahead for pick up, staging, and loading, carriers can reduce idle time, lower costs, and pass savings on to you.
8. Leverage Backhauls
Once carriers complete a delivery, they typically travel back to their home base, or to the next pick-up destination. This trip is often taken unloaded or without any freight onboard. Every minute a truck is empty it incurs expenses. Carriers are most efficient when they are hauling freight instead of an empty truck. Logistics service providers can negotiate backhaul credits or targets to help you save money and meet your delivery demands.
9. About Pool Shipments
Pooling deliveries from different shippers, destined for the same region or distribution networks, results in cost control. Third-party logistics companies like DGL (Dedicated Ground Logistics) can leverage their network of 25,000+ shippers and 30,000+ carriers to coordinate pooling opportunities that combine your shipments with other deliveries and help you save on your overall transportation costs.
10. Drop Trailers
Drop trailers are used at locations that have enough outbound shipping volume to fill a trailer in a week or less. These enable you to load freight when convenient and combine shipments, which might normally go LTL, into one full truckload, so drop trailers also reduce the amount of time drivers sit idle waiting for their truck to be loaded.
In today’s tight capacity market, and with the recent launch of the ELD mandate, carriers and drivers are more conscious of dwell time and lost productivity. Using drop trailers creates flexibility for your dock and warehouse schedule, helps mitigate capacity issues, and enables drivers to quickly pick up your delivery, which in turn helps keep your freight costs down.
Last but Not Least: Create a Freight-Optimization Culture
When you optimize your freight shipments using these tactics, you’ll deliver savings to your company’s bottom-line. Over time, driving these practices into your culture will yield overall freight savings far beyond one-time rate discounts.
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