The 2:00 Minute Warning

When I have conversations with leaders at all different levels of an organization, their primary interest is, “How do I lower my transportation costs?” These are topics I’ve addressed in our weekly Two Minute Warning series. Everyone wants specifics – especially since their costs are rising under current market conditions. It is impossible to give you those specifics in only two minutes but let me offer you three key pieces of advice to consider as your first steps.

First, you must become a strategic rather than tactical shipper.

Tactical shippers are obsessed with getting the lowest cost on every shipment. That is reactionary and treats transportation as a commodity. It eliminates the potential to negotiate any type of incentive, and realize the related cost savings, for volume and regularity.

Strategic buyers have a different orientation. They make it a priority to build strong partnerships with their carriers, negotiate mutually beneficial contracts based on their volumes and networks, and realize savings for all parties. They gain greater access to capacity when it is tight and realize more favorable rates, especially when rates are spiking. They employ accurate shipment history, carrier performance, and internal analytics to maximize their services levels while minimizing their costs and driving continuous improvement as conditions change. 

I was having a conversation with a CEO a couple of weeks ago, when I gave him a very simple example of how a strategic shipper could realize savings:

It costs a carrier about $140 an hour to operate a truck. When that carrier shows up at your dock, if he waits there for 30 minutes, it costs him $70 just for that time spent waiting. If you are shipping just one pallet, that’s $70 of wait time for that single pallet. If, however, you were shipping 10 pallets, that would be spread and reduced to only $7 per pallet. I then explained how our technology can help make that happen for his company. 

Let’s cut right to the chase. When you think tactically, it can be challenging for logistics professionals to optimize a large number of shipments with an ever-changing network. Consequently, the tendency is to react on a shipment-by-shipment basis. Strategic shippers are always looking for ways to learn more and improve their capabilities!

Second, in order to plan holistically and optimize your rates and service levels, you MUST HAVE quality supply chain data. If you don’t have good data, you can never properly analyze past performance and develop meaningful options for the future. You must ensure your freight audit and payment operations are capturing accurate shipment attributes and true shipment costs. If your company is genuinely committed to lowering its costs and improving its service capabilities, having an accurate and complete shipment history file is essential. 

Third, you must evaluate the technology you’re employing to manage your transportation spend management and operations. Are you sure you have the most effective processes and tools? There's a wide array of options in the marketplace and it can be difficult to evaluate and determine the correct one for your organization. Our Constellation TMS is a great user-friendly option for mid-sized North American shippers. If you're interested in learning more about the best options when it comes to a TMS, freight payment, or other technology, get in touch.

Putting it all together, if you become strategic, data driven, and technology-enabled, you can in fact lower your costs significantly and maximize your service levels – and do so continuously as market conditions change.

In addition to these tips, I have three quick wins you can implement to immediately lower your costs. If you’re interested in hearing these, simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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