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. Optimize modes. Conventional tractor-trailer shipments or even inter-modal 53 ft containers are not always the most economical way to ship. Steamship lines are often desperate to get their 40 ft containers back to port. While the load size is diminished, the savings can more than make up for that apparent inefficiency. Shipping even a few containers will reduce freight rates and increase cost savings.
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. Create the right mix of private fleet, dedicated trucks, dedicated capacity and spot-market purchases. The right mix can provide the right level of shipment security and be very good supply chain management. Use private fleet for high-service customer deliveries where back hauls are available or the length of haul is short. Dedicated trucks can be more cost effective - but you need to keep them moving too. Dedicated capacity is just that - some guarantee of the number of trucks that the carrier guarantees to provide on any day.
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.
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. Optimize modes. Conventional tractor-trailer shipments or even inter-modal 53 ft containers are not always the most economical way to ship. Steamship lines are often desperate to get their 40 ft containers back to port. While the load size is diminished, the savings can more than make up for that apparent inefficiency. Shipping even a few containers will reduce freight rates and increase cost savings.
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. Create the right mix of private fleet, dedicated trucks, dedicated capacity and spot-market purchases. The right mix can provide the right level of shipment security and be very good supply chain management. Use private fleet for high-service customer deliveries where back hauls are available or the length of haul is short. Dedicated trucks can be more cost effective - but you need to keep them moving too. Dedicated capacity is just that - some guarantee of the number of trucks that the carrier guarantees to provide on any day.
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.
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 works with companies such as Procter and Gamble and BP and many other Fortune 500 companies. They can help you reduce freight rates and save money.
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