Resolve to Save on Transportation Costs

This article comes from the December 2007 Supply Chain Link newsletter.

Try to imagine that the jingling you are hearing this time of year is not the sound of holiday bells, but the jingling of change left in your budget. Maybe this year’s New Years resolution should be to reduce your supply chain costs. Every year there is pressure to do it better, faster and cheaper. Finding the right solutions can be hard. GENCO’s purchasing, engineering and transportation management departments have some helpful hints on where to start trimming the fat.

Purchasing: RenegotiateCarrier Contracts

At GENCO we know how time consuming and complicated it can be to get carrier contracts renegotiated. However, the best time to renegotiate is traditionally the end of the fourth quarter into the start of the New Year when freight load volumes are much lower. Here are some of the things to consider in getting the most out of your negotiations.

Establish Baseline Pricing Using Industry Metrics

Have a standardized price on tariffs, mileage and fuel surcharge so it can be used as a starting point in negotiating and allow you to compare carrier cost more realistically. However, there are various pricing models that can create a baseline for lane charges; the hurdle is carriers don’t use the same model. You need someone with expert knowledge of fair market rates and nitch pricing opportunities to facilitate these comparisons and help you achieve the optimal solution.

Service vs. Price

Every company has different base needs for service levels and pricing. Some companies even have different needs depending on the route! The desire to balance these factors in your negotiation is crucial. If you need 98 percent on-time delivery, you may have to pay more for those carriers with higher on-time expectancy. Consider routes where transit time is less critical and the lower price will follow.

Transportation Management System (TMS)

Choose a TMS that gives you the information to make your business more effective. Some TMS solutions use predefined constraints to determine which carriers are eligible to take shipments and then tender them directly to the appropriate carrier. Automated carrier selection and tendering ensures contract compliance across the organization and streamlines the audit process.

The process of renegotiation can be time consuming and costly, and you aren’t assured a better return on your investment. If this all seems like too much to handle; find a knowledgeable partner who can assist you in this process. At GENCO, we have the industry knowledge, opportunities with multiple carriers for leveraged contract negotiations and customized solutions with an unbiased approach to your company’s individualized needs.

Engineering: Analyze the Data

Management of your supply chain is critical and it starts with your transportation and warehousing. It is important to 1) collect supply chain data 2) utilize analytical tools to process this data, and 3) have access to an experienced logistics team to explore the data and continually mine cost savings opportunity.

Effective collection of supply chain data can allow your company to reduce total logistics cost through analysis and continuous improvement. The following table provides some examples of current analytical methodologies and the related tooling that GENCO utilizes to create solutions.

Network Study	Transshipment Optimization Model Rate Benchmarking Tool Parcel, Less than Truckload (LTL) and Truckload (TL) Rating Engines
Freight Consolidation	Rate Benchmarking Tool TMS
Continuous Moves	Freight Allocation Savings Tool (FAST) Rate Benchmarking Tool TMS
Cross-Docking / Zone Skipping	Pooled Distribution Tool (PDT) Rate Benchmarking Tool Parcel, LTL and TL Rating Engines

These are just a few of the opportunities you can use to reduce your supply chain footprint through better utilization of warehouse space and more cost-effective transportation. Data analytics are a hot supply chain topic, and GENCO stresses the importance of staying competitive by collecting, cleansing, and analyzing your data so you always stay informed on your supply chain and its related cost.

Transportation Management: Taking Control of Your Supply Chain

If you have completed the engineering in house or with the aid of a 3PL, it is time to implement those cost saving ideas. If you don’t have the staff to support these operations, the use of a 3PL with a true partnership approach can help. Finding a 3PL that fits your company and has the flexibility to implement wide ranging engineering suggestions can be difficult. Look for a supply chain team that can deliver the following:

Centralized transportation management
Expertise in managing all modes of transportation
Expertise utilizing a web-based TMS that includes: full optimization modules, dock scheduling, fully EDI capable, electronic freight tender and status alerts that go directly to your team or supply chain partners
Expertise in industry best practices.

These tips can help you gain control over your supply chain. If you find that the supply chain expertise lies outside your company, consider partnering with a 3PL. It is a common trend for companies to outsource their logistics needs to a 3PL, leaving more time for them to focus on their core competencies. Rest assured, these solutions are available to reduce your transportation spend next year. Make this year’s New Years resolution something you can stick to.