As we move into a period of economic uncertainty it is more important than ever, that companies look to reduce costs across their business. In some cases it is a matter of the very survival of the business to take significant cost out. What would a 20% savings in your transport spend do to your business? At 3T we consistently help companies reduce their cost and increase their efficiency by these kind of figures. We help struggling companies transition from loss making business to profitable concerns, and we help high achieving businesses improve their EBITDA and their market share and increase their value.
1. Measurement
The old adage says, if you can’t measure it, you can’t manage it and this is also true for transport spend. An accurate process for measuring your cost can not only be used for strategic cost saving review, it can also highlight excess cost which can instantly be dealt with.
2. Carrier selection
Ensuring that you work with the right carrier for the right activity, including different mode of transport and different geographic regions based on their expertise, capability and volume will save you money. Working exclusively with 1 carrier, while simplifying your process will invariably add costs as this carrier will subcontract, peak volumes, inefficient routes and parcel or small pallet deliveries.
3. Tariff interrogation
Make sure you understand the rates and how they are applied, whether they are applied as a full load or per pallet activity.
Transport rates can come in various shapes and sizes, they can be applied per load, one way, day rates, per pallet or cost plus. Some tariffs provide benefit through filling the vehicles as much as possible, other are consignment based and the risk of utilisation is with the carrier.
Understanding the surcharges and when they are applied, making sure that you take as much time negotiating these as the standard tariffs as they can incur a hefty additional cost and for some carriers this is seen as an effective way of increasing their rates.
4. Regular tenders
The transport market changes over time and not always in the direction you would expect. Taking advantages of tendering at the right time, when the market is competitive to ensure that you get the very best rates for your business profile, can deliver significant savings.
Undertaking a tender can require a significant investment for a business, but it is essential to avoid rate creep over a period of time. As a very minimum a business should competitively review their top lanes to ensure that they are in line with the market.
5. Contracted carriers
Despite what anybody tells you, contracting business with carriers and securing a fixed 12 month rate schedule is essential for securing a consistent and guaranteed service from your carrier partners as well as competitive rates. The carrier can work with your requirements with some certainty to develop their business to serve your business with greater efficiency. Strong carrier relationships with the right number of carefully selected partners can help you develop excellent customer services as well as running an efficient transport operation.
6. Automation
Introducing a TMS or transport system modules to automate aspects of your transportation process can not only reduce the administration burden it can also give you more time to analyse aspects of your transport spend and implement continuous improvement processes. Automation through a Transport Management system (TMS) enables you to introduce more specialist carriers tailored to the service level, transport modes and geographic locations that you are shipping to. This introduces complexity to your business, but the system manages this complexity, keeping life simple.
7. Product availability
Ensure that your service promise to your customer is achievable by your business, taking into account all elements of the supply chain. Is the product in stock, is there enough capacity and time to manufacture, is there enough storage capacity and is there enough time to consolidate to create an efficient transport plan. A sure way of increasing cost is to ship a single order over 2 separate shipments. You can’t afford to do it properly, but you can afford to do it twice!
8. Planning
Introducing a planning process, which can be largely automated, ensures that you allocate the best cost carrier and create the most efficient multi load route to reduce the total cost of transport for a given requirement. Forward planning, is the process of bringing forward deliveries to create even more efficiency and reducing the cost per unit. This can all be done with the agreement of the end customers, ensuring that your OTIF is still in tact.
9. Process
Make sure you understand the rates and how they are applied, It is best practice to manage transport to a consistent process, ensuring the customer lead time is sufficient and the order receipt cut off times are standardised. Processes can always be broken in exceptional circumstances, but why not manage your business to the 80% rather than the 20% exceptions. Putting in clear and optimised processes, managed in a systemised way will significantly reduce excessive transport spend.
10. Optimisation
Finally, a process of reviewing, analysing your transportation requirements on a regular basis, will ensure that your transportation spend is managed as effectively as possible. A standard universal law is that everything moves towards chaos if it is unmanaged. A regular review of your transportation requirements, your leads times, your delivery profile will ensure that you have the best combination of tariffs, process, automation and carriers in place at any given time. This is how we have delivered savings to organisations continuously over a 10+ year relationship.
About the author
Tim Fawkes is Managing Director at 3T Logistics and Technology Group.
Tim has over 25 years’ experience working with companies from a range of industries, helping them to reduce their transport cost and improve their service.
