Reducing transportation costs is a fast and easy way to boost profits, according to a new study released this month by the Chicago-based consulting firm Accenture.
Cutting your transportation costs by as little as 5 to 10 percent can boost earnings by as much as 10 to 20 percent, according to the study called “From a Shipper’s Market to a Carrier’s Market: Building Strategic Advantage through Integrated Transportation Management”.
Three Ways to Reduce Costs
Some of the most effective ways to cut the amount of money companies spend on transportation are to leverage Information Technology, reconsider warehouse processes, and conduct periodic network optimization projects, according to the study’s authors, Jason Cook, Pierre Mawet and Jennifer Seeley.
Choosing a lower cost shipper may also help bring down transportation costs, but companies have to be careful that customer service doesn’t suffer as a result, according to Cook.
“Shippers need tracing capabilities, such as order tracking, real-time visibility to shipment status, exception management, and compliance so they can manage across multiple carriers,” Cook said.
Look at Warehousing Processes
Improving warehouse processes such as how products are packed and loaded, and how they are bundled with other products, can also result in substantial transportation cost savings.
Dan Avila — a partner at Tomkins International, a supply chain consultant based in Raleigh, North Carolina — said simple changes to these warehouse processes can create huge cost savings.
“Some retailers drive improvements simply by loading better,” Avila told Inbound Logistics. “For example, techniques that reduce a slightly-more-than-truckload shipment to one full truckload can reap 25 percent savings.”
Other warehousing strategies include floor loading, in which shippers maximize capacity by hand-packing cartons to the ceiling rather than palletizing them. Another tactic is to use conveyors into trucks and load stands to reach the top of trailers to make floor loading safer and easier. Although hand-loading can add to labor costs, these can be offset by the savings that come with more efficient use of space and lower transportation costs.
Lessons Learned from E-Commerce
Another approach to floor loading is brick loading. This is when boxes are packed left to right to the ceiling, effectively locking them into place. Multi-stop deliveries can be separated by plastic sheeting or load bars and then loaded into trucks in reverse order to accommodate faster and less costly deliveries.
Consolidating orders also is important to reducing costs, a technique that commonly is used in e-commerce, according to Avila. Another e-commerce trick is to use machines that create an envelope or corrugate material around an item for single-item orders. This cuts down on dunnage costs and can even enable companies to use the low-cost US Postal Service for deliveries.
Companies that view transportation as a strategic, manage process with measured inputs and outputs will have lower transportation costs than those that simply look at freight rates and award the delivery contract to the lowest bidder, according to Richard Patenaude, of The Wheels Group, a consulting firm based in Mississauga, Ontario, Canada.
Those are the companies that can substantially add to their bottom line by managing their transportation costs more effectively.