The multitude of processes in supply chain industry requires us to pay attention to various factors for the business to run profitably. Lack of strategic planning, practical forecasting, poor visibility of logistics process can result in companies missing delivery targets, over-payment, and incur loss and damage to business.
Transportation, among the many factors, is vital to supply chain industry. Efficient management of transportation can prove to be a cost-effective measure for supply chain companies thereby improving financial performance. Transportation has more than one function in a supply chain environment that involves plying of raw material for production, transporting finished products to the market, or delivering goods to customers. Thus, reduced cost in transportation leads to savings across many peripheral activities in the entire supply chain.
Here are few steps that can help save costs on transportation to a great extent:
- Route optimization: It is a good idea to relook at the route map of your fleet at regular intervals. This will help to efficiently use your fleet and reduce plying of empty trucks leading to optimum vehicle utilization.
- Strategic consolidation of shipments : Area-wise or destination-wise consolidation of shipments will enable to send truckload shipments. This will result in reduction of trucks running empty and will save fuel cost.
- Engage a third-party logistics provider : If your company doesn’t have the in-house expertise to handle the transportation division, then it is wise to engage a professional third-party logistics (3PL) provider. These providers are skilled to optimize your freight in an efficient, cost-effective, and timely manner. As they work with many carriers, they can leverage on multiple carriers for the best deal. They also have the required technology for end-to-end tracking capability.
- Promise realistic service level : If you maintain a realistic service level, for instance 3-day delivery system, then your customer will also expect their orders to reach in three days. In such a scenario, you do not have to overpay to get their shipment within a day.
- Regular tracking of carrier performance : Develop a scorecard including all measurable areas such as on-time delivery, on-time pick up, invoice accuracy, data availability, customer satisfaction, inbound-outbound cost of transportation and the like. These metrics will give you a clear picture of the carriers performance, based on which necessary changes can be made.
- Improve trailer loading : The way contents are loaded in a trailer also has an impact on transportation cost. Employing pallet loading technique can optimize trailer space and more goods can be fit in the available space.
Saving cost on transportation requires strategic as well as innovative thinking. For the overall benefit of the company, it will also require you to invest time to discuss and chalk out an effective and practical cost saving transportation plan.