Cost Reduction for Your Bottom Line; Better Service for Your Customers
People keep asking me why I am such a fan of a total transportation evaluation.
Simple. Would you rather reduce supply chain costs by $50,000 a year or $1 million? Even more?
In a few weeks, you could evaluate your entire transportation cost, not just a bit here or a piece there. The answer could point your team toward examining $36.5 million worth of supply chain costs instead of $750,000. That’s a massive opportunity for cost reduction.
Beyond that, your team can discover opportunities to:
- Consolidate or deconsolidate as needed.
- Mode shift.
- Reduce inventory (excess inventory can be quite a problem).
- Ensure inventory is in the right place.
- Ensure your distribution centers are in the right locations.
- Identify savings in softs costs as well as hard costs.
Freight Forwarding: Evaluate Everything
A total transportation evaluation gauges your total supply chain costs, services, reliability and how you compare to market. A good freight forwarder manages your transportation process and gets your shipments to right place at the right time. A great freight forwarder can evaluate your entire supply chain for savings and efficiency.
Such an evaluation examines, cleanses and normalizes all your data from across your supply chain. This boots-on-the-ground operation analyzes more than 20 items. Get complete visibility into your enterprise’s historical data, costs, routing, suppliers, lead times, locations, origin/destination base pairs and more. You get extensive metrics for decision-making, visibility, trend analysis and forecasting.
Driving Down Supply Chain Costs
A complete evaluation will diagnose inefficiencies, bottlenecks and areas for improvement. This current state assessment serves as the foundation for effective supply chain management and continuous improvement.
The evaluation merges all data sources into single a repository. The evaluation gives your supply chain team an easy-to-digest graphical dashboard.
Supply chain leaders can make informed decisions and implement strategic changes. You can optimize supply chain operations, reduce costs, enhance customer satisfaction and stay competitive in a dynamic business environment.
The Knowledge and Solutions for the Right Supply Chain Strategies
Your team will know:
- Where your costs are high.
- When to consolidate less-than-container loads into full container loads.
- What is the best routing for your containers.
- Where you can consolidate LTL into truckload.
- Where you can mode shift from LTL to truckload.
- Where you need to contract with regional LTLs.
- Where you need to contract with national LTL carriers.
- Whether your distribution centers are in the right locations.
Solutions could include:
- A managed transportation solution.
- Distribution center network redesign.
- Broker use analysis (rationalization, master broker across all types of lanes, price to market.
- Tail freight bundling (one-off lanes packaged together for one provider/broker to handle.
- Sole lane ownership (assign ownership to a lane only).
- Expand or reduce your carrier network.
- Dedicated fleets versus one-off dispatches for high-volume lanes.
- Surgical quick hit versus network wide RFPs.
- Inbound material freight terms conversion (shipper taking control of inbound routing for materials)
Talk About That Million-Dollar Cost Reduction Strategy Again?
Let’s go back to the example I used in the beginning.
Take a manufacturing supply chain that ships 500 containers a year.
How much does it cost to contract for a shipping container now? Let’s say $1,500, although you can find cheaper. That logistics cost is $750,000 annually. Your manufacturing supply chain management team negotiates a discount of $100 per container to save $50,000 a year.
Yippee. You can pocket the savings or hire another warehouse person.
However, your enterprise’s inventory carrying costs total $100,000 a day – $36.5 million a year. What if you can take five to seven days out of every cycle? With skyrocketing interest rates, those savings are meaningful, easily topping six figures. Even a 3% cost reduction saves more than $1 million.
For example, freight forwarders handle multiple less-than-container (LCL) load shipments from various suppliers. Many of those share a common origin and common destination. Combining those LCLs into full container loads saves costs, mitigates risk and speeds up transit times.
Add in some process design through automation, and cost reductions grow. You start paying much less for storage and can avoid unplanned expenses like detention and demurrage.
Now that’s a real cost reduction strategy.
Soft Costs Vs. Hard Costs
Saving that kind of money is nice. But a total transportation evaluation can give you a future state design with best practices from a process standpoint. Instead of chasing suppliers and shipments, your team could conduct strategic planning, work with other functions, tackle inventory levels, give better customer service.
In other words, you can look to improve growth instead of tactical shipment tracking. One large consumer-packaged goods company repurposed 22 people. They were all doing the same function – chasing stuff.
The Right Approach. The Right Results
Many supply chain and logistics teams put all their costs into one bucket. That approach makes it difficult to identify the cost reductions outlined above.
A total transportation evaluation can help you understand your entire supply chain. The process can be a one-off that gives your team guidance to cut costs and improve your supply chain’s overall financial situation.
It could also begin a long-term relationship. In the professional services world, the right freight forwarder will understand your supply chain. They will become a strategic extension of your team.
Combine the two, and you have operations built to suit your needs, not a vendor who tries to shoehorn your problems into their toolkit.
This is true supply chain leadership. I would love to discuss a better approach with you. Reach out and let’s talk.
Tompkins Ventures CEO Mike Royster has over 30 years’ experience managing Logistics and Distribution on a global basis for companies like Ingersoll Rand/Trane, Eaton Corporation and XPO Logistics.
Chief Operating Officer Mike Royster has over 30 years’ experience managing Logistics and Distribution on a global basis for companies like Ingersoll Rand/Trane, Eaton Corporation, and XPO Logistics. Mike now leads Tompkins Ventures’ global logistics and consulting practices. Reach him at [email protected].