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. Did you know that most companies, according to the DOT do not ship trucks full? By optimizing truckloads, you can save money and reduce freight rates. The median weight capacity on shipping loads is more than 47,000 lbs. It is rare that companies achieve this weight. Procter & Gamble, one of the best run supply chains in the CPG business, improved its loads using a system called AutoVLB from Transportation l Warehouse Optimization. P & G also pocketed a 7% savings.
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. Audit activities and renegotiate freight rates when there is an opportunity and lock the rates in for multiple years. Check on your freight payments and evaluate your competitiveness by going to the market often. But, when you think you have a good thing, lock the rates in with some form of indexing over the next few years.
5. Keep your options open. One way of doing this is to have the right mix of operations. This can include a mix of private fleet, dedicated trucks, capacity, and market (spot) purchases. Use your private fleet for your high service customer deliveries. Dedicated trucks can be more cost-effective, but you still have to keep them on the move, and dedicated capacity offers some guarantee of the number of trucks that you can provide on any day. It offers both shipment security and good supply chain management.
The best way to reduce freight rates is to cut waste and work with the right partner.
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.
1. Did you know that most companies, according to the DOT do not ship trucks full? By optimizing truckloads, you can save money and reduce freight rates. The median weight capacity on shipping loads is more than 47,000 lbs. It is rare that companies achieve this weight. Procter & Gamble, one of the best run supply chains in the CPG business, improved its loads using a system called AutoVLB from Transportation l Warehouse Optimization. P & G also pocketed a 7% savings.
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. Audit activities and renegotiate freight rates when there is an opportunity and lock the rates in for multiple years. Check on your freight payments and evaluate your competitiveness by going to the market often. But, when you think you have a good thing, lock the rates in with some form of indexing over the next few years.
5. Keep your options open. One way of doing this is to have the right mix of operations. This can include a mix of private fleet, dedicated trucks, capacity, and market (spot) purchases. Use your private fleet for your high service customer deliveries. Dedicated trucks can be more cost-effective, but you still have to keep them on the move, and dedicated capacity offers some guarantee of the number of trucks that you can provide on any day. It offers both shipment security and good supply chain management.
The best way to reduce freight rates is to cut waste and work with the right partner.
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.
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.
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