Twice within the past month, once from a client and once from a student in York University’s Master’s Certificate in Supply Chain and Logistics program, I was asked the same question. What can you recommend in terms of “quick wins” in the area of transportation cost savings? Quick wins can be defined as cost savings that can be achieved within a very short period of time and at minimal expense. This is an excellent question. I have captured some thoughts on this topic in this blog.
As I have reflected on this question over the past few weeks, it caused me to identify some of the lessons I have learned working with shippers over the past six years.
Lesson #1: There are Quick Wins in Every Company that Ships Goods
There are opportunities to achieve “quick wins” in freight cost savings in almost every organization, irrespective of how well it is managed. Individually and collectively we all possess a subset of the total knowledge on freight transportation. Along the way, we have all missed certain things as we have come up the learning curve.
Lesson #2: Sometimes You Need an Outsider to find the “Quick Wins”
Over time we acquire certain beliefs, experiences and paradigms. These life experiences may cloud our judgement or prevent us from seeing some cost savings opportunities that exist in our own organizations.
Sometimes you need to spend money to save money. A new set of eyes and ears may uncover opportunities that have gone unnoticed for years. There are often certain companies or individuals that possess a specific expertise that may not be available in your organization. For those enlightened companies that are willing to make the investment, the payoff can be considerable.
Lesson #3: A “Quick Win” in one company may be a Medium Term or Long Range Win in Another
Every organization that ships goods is different. Some organizations make decisions quickly and effectively while others do not. Some have developed a culture of change while others do not. The ability to identify “quick win” opportunities and act on them in a timely manner varies from company to company.
Certainly shippers can save significant amounts of money in freight costs if they conduct a freight transportation RFP, change organization structures to improve collaboration between various departments, acquire a TMS system or conduct a network optimization study. Unfortunately, these items may not meet the definition of “quick wins” in most companies. Each of these activities can take 45 or more days to complete and requires some expenditure of money and/or resources.
Here is a list of opportunities that can be classified as “quick wins” in many but not all organizations.
1. Hold freight and ship on Carrier Service Days
Most LTL carriers run on certain schedules. Shipments departing on Monday may arrive at destination on Wednesday or Thursday. Tuesday shipments may arrive on Thursday or Friday. But freight leaving on Wednesdays, Thursdays and Fridays may not be delivered until Monday. An easy way to save money is to convert from moving daily LTL freight to holding the freight and moving it so that it all arrives on scheduled delivery dates. Learning your carriers’ pick up and arrival schedules is an easy way to save money on freight.
2. Consolidate freight and move larger size shipments
Moving larger shipment sizes will reduce freight costs. There are several ways of doing this. Similar to item 1 above, a shipper can plan to ship to certain locations, only on designated days of the week. Another option is to build multi stop truckload shipments whenever possible, if there are blocks of traffic going to specific areas. If you are a Quebec-based LTL shipper bringing in LTL freight from multiple locations in Ontario, consolidate your shipments in Toronto and then load them as a single shipment from Toronto to the designated area in Quebec.
3. Perform Freight Rate Benchmarking
Every shipper wants to know how their rates compare to market rates. Benchmarking allows you to pinpoint those lanes where specific rates are out of line with market levels and then take corrective action (e.g. find carriers with more competitive rates on those lanes).
There are several ways of doing this. The easiest way is to contact a number of carriers and ask them to quote on your business. Truckloadrate.com (http://www.truckloadrate.com/) is another option. For the modest amount of $30 per month, truckload shippers can enter origin and destination points and determine market rates and the range (e.g. minimum and maximum) of rates available. Another more costly option is to conduct a formal benchmarking study. With benchmarking studies, always keep in mind that the market can change quickly. The only way to know precisely what rates your company can obtain in the market on any given day is to conduct a comprehensive RFP.
4. Optimize Loading
No matter which mode of transport one uses, a shipper is paying for the space occupied, the weight and the density of the products shipped. Therefore, it is critical to maximize the space occupied. To excel in this area requires knowledge of several things. It is essential to have a familiarity with all modal options - - multi axle trailers, B-Trains, LCV’s, container capacities, legal weight restrictions by state/province and equipment availabilities.
It also demands an insight into trailer/container loading opportunities. There are logistics trailers within which various sizes of pallets can be loaded. There are false floors that can be used to permit the double stacking of pallets while preventing them from being crushed. A quick win can be achieved by selecting the right type of equipment that permits the optimum type of loading for your company’s freight.
5. Manage Routing Guide Compliance
Every shipper should have some sort of routing guide. The guide should list all of the lanes, the rates charged on each lane and the names of the carriers serving the lanes in rate/service order. But freight management cannot be done on “auto pilot.” This takes time and effort; but it is time very well spent.
Compliance tracking, even if done on an Excel spreadsheet, can highlight a lack of internal discipline (by Traffic Management personnel) and/or a lack of carrier compliance (e.g. load refusals causing your dispatchers to use low ranked or unranked carriers in the routing guide). Preparing and reviewing a weekly tracking report can identify internal or external problems that are resulting in excessive expenditures on freight.
6. Implement Modal Conversions
Many shippers adopt paradigms of thinking based on historical experiences. Some of these paradigms may no longer be valid. On some lanes, intermodal service may be very competitive with truck service. Even if it is a day longer, it may be satisfactory for a particular company’s clients. Periodic market assessments, modal conversions coupled with service level agreements (SLA’s) on some lanes, may produce cost savings.
Where has your organization achieved “quick wins” in freight costs? Please post your experiences on this blog.