The following opportunities 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.
The above is excerpted from KOM Practice Leader in Transportation Dan Goodwill’s blog http://blogdg.ctl.ca/
April 20th, 2010
Transportation management software applications typically consist of several related modules that cover the following tasks:
Outbound delivery network. Planning and routing of deliveries from the warehouse to the stores. This portion would interface with the warehouse’s order management system, which has information about the size and number of pallets or cartons to be delivered to each store.
Evaluation. Tracks the history of what actually happened on the delivery route in order to make improvements in the future. Information would include departure and arrival times at each store, route taken, waiting time, time to unload and reasons for any delays.
Backhaul. Schedule of backhaul pickups, what is to be picked up, schedules and the transportation costs and documentation involved.
Inbound. Database of approved third-party carriers and their rates and conditions, along with the status, location and arrival times of scheduled inbound deliveries. Inbound modules will list the contents of the load and what the delivery costs total.
Yard management. Location and contents of trailers parked in the yard and the status of the trailers.
Fleet management. Fuel cost tracking, along with data about the condition of the trucking fleet and major components like engines, tires and trailers. Module typically includes a maintenance history and dates for future scheduled maintenance.
Compliance. Drive times for operators by trip to document that they have not exceeded the prescribed daily hours.
While the major focus of the applications has been on the outbound side - route optimization and fleet management from warehouse to stores- the big potential for savings in the future will be on the inbound side.
Typically, the inbound cost of freight is buried in the price of goods, and that price can be inflated as much as 30%. The challenge is to get manufacturers to break out the freight costs separately, and that has to be done, realistically, at the time merchandise price is negotiated; otherwise vendors may grossly underestimate transportation costs.
The cost saving for the retailer or wholesaler on the inbound side comes from using the company’s own trucks to pick up merchandise or contracting with a third-party carrier to do it for less than the manufacturer charges.
A Package or a Menu
While some software vendors provide transportation management as one module within a highly integrated supply chain package, others sell specific applications, such as dock scheduling, route optimization, inbound freight and yard management.
Most transportation management software packages, even the integrated ones, are bought piecemeal. This is not necessarily a bad thing, as it allows companies to figure out exactly what they need and buy just that module.
For example, not every company needs yard management software, especially those with 30 or fewer trailers sitting around the yard at any given time.
Taking small steps also make sense because vendors often understate the costs of implementation, including the management time and effort it takes to get buy-in for new programs from many different departments.
The mix-and-match approach allows companies to select the best software for every application. Integration of individual applications into an existing supply chain management program is usually not a major problem because all vendors supply interfaces between their individual modules and those of other major software applications.
An alternative to buying a specific transportation management application for use on a company’s own computers is to buy an on-demand service like route management from a third party. These Internet-based programs are growing in popularity. The downside here is that some on-demand systems tend to be cookie-cutter and lack functionality.
While many retailers cherry-pick specific transportation applications from different vendors, there is an argument to be made for sticking with a single vendor for supply chain software. One vendor equals one set of upgrades, which is easier than depending on various sources to upgrade interfaces on a timely basis. There are also compatibility issues that companies do not need to face when they are dealing with one company’s integrated package.
Transportation decisions will have a major impact on warehouse operations and, as a result, how warehouse management software is used.
Picking to the Route
Outbound load planning, a part of the software, determines what sequence of store deliveries will result in the most efficient and cost-effective routing. This information, fed back into warehouse management software, will determine the picking sequence for store orders and even the way the warehouse is organized.
For example, if a wholesaler has large and small store orders mixed on a single delivery route, this may affect how it organizes the pick lines. The same issue comes up if non-pallet-size orders of private label products are included. The reason, in these instances, is that a small mom & pop store order will include many different items on the same pallet, as opposed to larger store orders where individual products are palletized. To complete the small orders, pickers need to range through many more aisles, which increases both time and cost.
The interface of two functions - warehouse operations and transportation management - creates an efficiency dilemma that is not easily resolved. The software program for each is set up to produce the most cost-efficient path within the application, but when the applications meet at the loading dock, management has to decide where to adjust. Should managers try to optimize transportation efficiency, even if it means higher labor costs in the warehouse, or should they sacrifice routing efficiency to hold down labor costs for picking?
The answer is that management decisions on this and many other issues need to be built into the planning process from the beginning. The key is to get to know the software very well, look at every function and demo it using your own data.
December 8th, 2009
Many companies approach freight bids on a lane-by-lane or ad hoc basis; however, many of our clients are seeing 5-10% savings in their transportation spend after undertaking comprehensive freight bids on their entire transportation activities. The process is intense, but generates payback in less than 2 months on the cost of running the comprehensive freight bid project.
Conducting a comprehensive freight bid begins with a request for proposal issued to qualified carriers for all inbound and outbound shipping lanes. Carriers bid on the lanes of their choice, and provide their price and capacity per lane (frequency of deliveries per day or week, number of trucks, truck size, etc…). This data is compiled and each carrier is ranked by shipping lane. The carriers are then informed of their ranking and relative distance behind the top ranked bid.
In a second bidding round, all carriers have the opportunity to tighten pricing in order to increase their chance of winning lanes. The number of rounds conducted is determined by the needs of each individual client; however 2-4 is usually sufficient.
Once the rankings are finalized, a routing guide, by shipping lane, is generated. Weekly tracking reports going forward ensure that transportation managers adhere to the routing guides and that carriers are delivering the promised capacities.
June 16th, 2009
The Good
There are many clever things being done by companies to control fuel costs and this weekend’s edition of Parade Magazine contains one such example from UPS. UPS decided to change its delivery routing system such that it develops truck routes that minimize left turns. There is a safety benefit here, since minimizing left turns minimizes the number of times a truck must cross on-coming traffic. But minimizing left turns generates significant fuel savings due to reduced idle time at intersections. UPS engineers figured the company eliminated 3 million gallons of gas last year from making the change. It’s an idea worth exploring for any company that has alot of routes in urban areas.
The Bad
That said, operators must be cautioned not to become fuel price obsessed. Conferences across the continent are devoting huge amounts of time to highlight ways to cope in a high-fuel price environment - often getting down to brass tacks (like retrofitting trucks with equipment to make them more aerodynamic). Of course, the soaring price of fuel makes it difficult, if not dangerous, to ignore. However, we must always look at the total cost of a solution and not focus exclusively on minimizing the cost of one aspect of the supply chain: minimizing the total cost of getting product in your customer’s hands does not result from minimizing the costs of each distinct segment in your supply chain. When cost savings programs are proposed, the impacts on other departments cannot be ignored.
April 8th, 2008