We pick up with part 2 of our series on how to reduce freight rates and save money. In our conclusion, we discuss the next 5 key tips on how to save money on transportation costs.
1. Optimize load size - always ship really full trucks (not nominally full loads). Most companies claim to ship full trucks but data obtained from the DOT, weighing more than a quarter of a million empty trucks, showed the median weight capacity is more than 47,000 lbs. Very few companies achieve anything near that weight. There are systems out there for optimizing shipment size and container loading. Procter & Gamble claimed a 7% savings by using a system called AutoVLB from Transportation | Warehouse Optimization.
2. Simplifying assumptions often lead to unnecessary or wasteful moves, and that can cost money. You can overcome this with enhancements to the order management system that dynamically defines ship point for any order based on cost and fill rates. This is an enhancement because most order management systems use a deterministic approach: if, for example, you are a customer in Indiana, you will always be shipped from Chicago. You don't want to ship loads unnecessarily. Here is how it works. In a deterministic order system, a customer in Indianapolis would receive a load from its supply point in Chicago regardless if the entire product was made and in stock in Nashville. Eliminating the unnecessary shipments to Chicago and then back to Indianapolis saves transportation costs.
3. Be aware of what is going on in the industry. Sometimes the traditional method of shipping may not be the most economical. For example, if exports are high, you can get great deals from the ocean carriers. They are desperate to get their 40 ft containers back to port. Granted, it is not your typical 53 ft container, but the deal you can make will more than make up the lack of container space and you can reduce freight rates dramatically.
4. Sometimes negotiating and locking in the freight rates for multiple years makes sense. Of course, it depends upon market conditions. You have to audit and benchmark freight payments to determine if there are billing errors and evaluate your competitiveness. Determining how good your rates are can also be achieved by checking the market often. Sometimes you may have a good thing going and locking in the rates with some form of indexed adjustment makes sense.
5. Expand your base. You have to have the right combination of private fleet, dedicated trucks, dedicated capacity, and spot-market level purchases. Not only does this provide you with shipment security but also it can be very good supply chain management. This gives you good coverage for your high service customers with your private fleet on the short turnarounds, and any other thing that comes up. You have to manage it, but if run well, it can reduce freight rates.
As you look at truckload freight rates, keep in mind that to truly cut costs, you need to eliminate waste and work with the right partners.
Test your skills and see how efficient you are at managing costs by loading a truck. Visit www.TransportationOptimization.com. While there, request a call back with one of the premier transportation consultants in the industry from Transportation | Warehouse Optimization. Working for many companies in the top Fortune 50 like Procter & Gamble, Nestle, Kraft, and BP, they understand your unique problems and can help you to solve them. - 15478
1. Optimize load size - always ship really full trucks (not nominally full loads). Most companies claim to ship full trucks but data obtained from the DOT, weighing more than a quarter of a million empty trucks, showed the median weight capacity is more than 47,000 lbs. Very few companies achieve anything near that weight. There are systems out there for optimizing shipment size and container loading. Procter & Gamble claimed a 7% savings by using a system called AutoVLB from Transportation | Warehouse Optimization.
2. Simplifying assumptions often lead to unnecessary or wasteful moves, and that can cost money. You can overcome this with enhancements to the order management system that dynamically defines ship point for any order based on cost and fill rates. This is an enhancement because most order management systems use a deterministic approach: if, for example, you are a customer in Indiana, you will always be shipped from Chicago. You don't want to ship loads unnecessarily. Here is how it works. In a deterministic order system, a customer in Indianapolis would receive a load from its supply point in Chicago regardless if the entire product was made and in stock in Nashville. Eliminating the unnecessary shipments to Chicago and then back to Indianapolis saves transportation costs.
3. Be aware of what is going on in the industry. Sometimes the traditional method of shipping may not be the most economical. For example, if exports are high, you can get great deals from the ocean carriers. They are desperate to get their 40 ft containers back to port. Granted, it is not your typical 53 ft container, but the deal you can make will more than make up the lack of container space and you can reduce freight rates dramatically.
4. Sometimes negotiating and locking in the freight rates for multiple years makes sense. Of course, it depends upon market conditions. You have to audit and benchmark freight payments to determine if there are billing errors and evaluate your competitiveness. Determining how good your rates are can also be achieved by checking the market often. Sometimes you may have a good thing going and locking in the rates with some form of indexed adjustment makes sense.
5. Expand your base. You have to have the right combination of private fleet, dedicated trucks, dedicated capacity, and spot-market level purchases. Not only does this provide you with shipment security but also it can be very good supply chain management. This gives you good coverage for your high service customers with your private fleet on the short turnarounds, and any other thing that comes up. You have to manage it, but if run well, it can reduce freight rates.
As you look at truckload freight rates, keep in mind that to truly cut costs, you need to eliminate waste and work with the right partners.
Test your skills and see how efficient you are at managing costs by loading a truck. Visit www.TransportationOptimization.com. While there, request a call back with one of the premier transportation consultants in the industry from Transportation | Warehouse Optimization. Working for many companies in the top Fortune 50 like Procter & Gamble, Nestle, Kraft, and BP, they understand your unique problems and can help you to solve them. - 15478
About the Author:
Tom Moore and his associates at Transportation l Warehouse Optimization will help you reduce freight rates and save you money. Transportation l Warehouse Optimization consults with companies such as Procter & Gamble and BP and many other CPG companies. They can help you reduce freight costs and save money.
