Many of today’s shippers feel something like a load of palletized cartons that is packed too tightly squeezed between pressure from carriers who want to raise their prices, and corporate demands to keep costs down to preserve margins.
To deal with this squeeze, shippers need to focus on four aspects of their business. In all four cases, part of the answer lies in information technology.
While being up to speed on technology is important for shippers who handle their own logistics, it is also important for those who outsource it to be sure that they are getting the best possible service in this competitive field.
1. Keeping tariffs current
One of the challenges of the transportation sector is the sheer complexity of the service itself. This comes from the range of means by which a load travels from origin to destination, using the equipment and facilities of more than one company. Often the most straightforward route is not the least-cost route.
The complexity of carriers’ prices, depending on the type of shipment, type of equipment, routing and speed of delivery needed, plus frequent changes, make it challenging for shippers to come up with the best choices. Using printed price lists, wall boards and the old standbys of maps and string is simply not competitive in today’s environment.
Carriers need to take full advantage of what technology offers, either through maintaining in-house expertise or through using technologically-advanced carriers who can offer this competitive edge.
However, like any IT system, the rule of thumb is "GIGO" "garbage in, garbage out." Information is good only if it is entered into the system accurately and is kept up to date. Whether they keep this task in-house or outsource, shippers need to be sure that the information they are working with is current.
2. Be sure loads are optimized
Shippers need to get the best possible value per litre of fuel, hour of equipment use and per hour of operator time. If they do not do this, they risk losing out in the race against competitors who do.
Like planning routes, optimizing loads needs to take in a huge range of factors, particularly if going LTL. Calculating which classes of cargo can go with which other classes and the need to balance the load on each axle, plus the total weight per truck, container or railcar, is often a challenge to the most experienced shipper. This, plus the need to meet time requirements while not paying for more rapid delivery than is needed, is a problem tailor-made for an effective transportation management system.
Shippers can calculate the financial and time costs of having to hand-bomb a load, and configure the loads for optimal delivery and axle balancing.
3. Optimize your routes
Many shippers have long wanted to get the full cost benefits available through backhauling, but it was too difficult to discover these opportunities. Savings through indirect routing were also difficult to access. A good transportation management system, however, makes these savings much more accessible.
It is also easier to discover the savings opportunities available through changing a shipping date perhaps through shipping a day later or earlier, a load can be combined with another for greater savings.
Accessing these savings is one of the greatest under-utilized sources of savings on shipping costs.
4. Minimize administration time
A fourth area of possible savings through IT comes from reduced administrative time. Organizations find it increasingly important to match costs to revenues so they can determine which are their most profitable products and lines of business. To do this, they need to factor in the totality of their shipping costs.
When waybills often refer to various products and shipments, it becomes an administrative nightmare to keep all those costs straight. Electronic waybills and other records allow the shipper to match transportation costs to individual shipments and products.
Keeping this information electronic also allows the shipper to verify that the costs charged by the carrier equal the costs posted in the tariff. Even with the best of intentions, mistakes happen, and a system able to provide easy verification can result in significant savings over time. With staff freed from checking waybills manually, they are able to focus on other tasks, such as reconciling any discrepancies that are discovered.
Most important is ensuring that the transportation management system electronically links all information to and from your operational and financial systems.
Business Process Optimization
Boosting your company’s expertise in transportation management through the use of an effective Information Technology system can be a lengthy and challenging process.
While effective technology solutions provide the "tools" to be more effective, without changing the processes, the new "tools" will just make the old processes more effective. One needs to look at redefining how technology is being used. The goal of each organization should be to redefine work that does not add value to the customer typically filing, rubber stamping, alphabetizing and data entry.
The result of this redefinition is to positively impact all the stakeholders including customers, employees, organization and shareholders. For example, by reviewing the business process that a transportation administrator does on a daily basis, the administrators can be more focused on providing valuable client interaction through better service, and be less focused on the administrative tasks.
In some previous "re-engineering" projects, the goal was all too often to get rid of the position-holder as well as the position. To have the change more accepted, however, it is best to allow the current staff to be more effective and to impact the business bottom line, because the drudgework is reduced or eliminated. The company is able to grow its capacity and its business without adding to its human resource, capacity, or operational costs.
When redefining and qualifying "how" the organization does business there is often dislocation and disruption, and some people will be concerned about their continued employment. The key to dealing with this is to involve staff members every step of the way and in every decision. Their involvement means that they learn about the issues facing the organization, have a voice in the decisions that are made, and are able to contribute their understanding of how the organization works. Fear of the future is replaced by knowledge.
The result is a smoothly-running transportation management process that is driven by people doing interesting work, meeting customer needs effectively.
Hazel Mealey is a Partner at Mintz & Partners Financial Services, where she advises clients on ways to gain business results through optimization and technology. She can be reached at tel. 416.644.4370; email@example.com.
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