Look at your business rules if you're serious about reducing your freight costs!
Apr 10, 2019
Uh-oh! I got myself into bit of a predicament the other day. I was speaking to a group of senior logistics and supply chain executives, and I’m almost sure I said that “a lot of shippers need to re-examine their approach to managing their freight costs.” I say I’m “almost sure” because apparently, based on the follow-up questions I received, I think some heard me say that shippers are “looking at the wrong things when it comes to managing their freight costs”.
I sensed that some of these executives might have been a bit defensive, so I channeled Dale Carnegie’s “How to Win Friends” lessons and shared some attributes of companies I’ve seen who are very good at managing their freight costs. They’ve proven that shippers can still reduce their overall freight expense - even in an environment where carriers are taking rate increases.
In response to a question about how companies are doing this, I replied that these companies have one thing in common: They know and understand how their business rules and policies affect their freight costs. So even with higher rates, they can still reduce their transportation expenses by changing those rules and policies.
And when one executive asked for examples of these types of business rules, I encouraged them to look at how their inbound freight is being managed, or whether they had a comprehensive supplier management program. And that was just for starters. We could have just as easily had lengthy discussions about how their sales policies, inventory issues, or a whole host of other rules affect their freight costs.
After my talk, I was relieved when one executive came up and said, “I get it! We need to focus on the things we can control, and most of those things are based on decisions we make inside of our company.”I couldn’t have said it better myself!
If you are wondering “How do we get started?” may we offer some suggestions:
First, if you haven’t already, listen to the interview with former Walmart SVPs Tracy Rosser and Bryan Boudreaux as they share their insights about how Walmart, arguably one of the best in the business, used their transportation and supply chain to achieve a sustainable competitive advantage.
Second, take a look at our Transportation Spend Management eBook where we offer tips and tools for evaluating your business rules and operations.
Third, give us a call or send us an email to set up a rapid assessment where we can help you identify the business rules that are impacting your freight costs and help you implement changes that will drive profit directly to your bottom line!