Part 2 of our series on reducing freight rates continues. In this article, we review the next five tips that can save you money.
1. Did you know that most companies, according to the DOT do not ship trucks full? By optimizing truckloads, you can save money and reduce freight rates. The median weight capacity on shipping loads is more than 47,000 lbs. It is rare that companies achieve this weight. Procter & Gamble, one of the best run supply chains in the CPG business, improved its loads using a system called AutoVLB from Transportation l Warehouse Optimization. P & G also pocketed a 7% savings.
2. Simplifying assumptions often lead to unnecessary or wasteful moves, and that can cost money. You can overcome this with enhancements to the order management system that dynamically defines ship point for any order based on cost and fill rates. This is an enhancement because most order management systems use a deterministic approach: if, for example, you are a customer in Indiana, you will always be shipped from Chicago. You don't want to ship loads unnecessarily. Here is how it works. In a deterministic order system, a customer in Indianapolis would receive a load from its supply point in Chicago regardless if the entire product was made and in stock in Nashville. Eliminating the unnecessary shipments to Chicago and then back to Indianapolis saves transportation costs.
3. Optimize modes. Conventional tractor-trailer shipments or even inter-modal 53 ft containers are not always the most economical way to ship. Steamship lines are often desperate to get their 40 ft containers back to port. While the load size is diminished, the savings can more than make up for that apparent inefficiency. Shipping even a few containers will reduce freight rates and increase cost savings.
4. Audit activities and renegotiate freight rates when there is an opportunity and lock the rates in for multiple years. Check on your freight payments and evaluate your competitiveness by going to the market often. But, when you think you have a good thing, lock the rates in with some form of indexing over the next few years.
5. Expand your base. You have to have the right combination of private fleet, dedicated trucks, dedicated capacity, and spot-market level purchases. Not only does this provide you with shipment security but also it can be very good supply chain management. This gives you good coverage for your high service customers with your private fleet on the short turnarounds, and any other thing that comes up. You have to manage it, but if run well, it can reduce freight rates.
The best way to reduce freight rates is to cut waste and work with the right partner.
Test your skills and see how efficient you are at managing costs by loading a truck. Visit www.TransportationOptimization.com. While there, request a call back with one of the premier transportation consultants in the industry from Transportation | Warehouse Optimization. Working for many companies in the top Fortune 50 like Procter & Gamble, Nestle, Kraft, and BP, they understand your unique problems and can help you to solve them.
1. Did you know that most companies, according to the DOT do not ship trucks full? By optimizing truckloads, you can save money and reduce freight rates. The median weight capacity on shipping loads is more than 47,000 lbs. It is rare that companies achieve this weight. Procter & Gamble, one of the best run supply chains in the CPG business, improved its loads using a system called AutoVLB from Transportation l Warehouse Optimization. P & G also pocketed a 7% savings.
2. Simplifying assumptions often lead to unnecessary or wasteful moves, and that can cost money. You can overcome this with enhancements to the order management system that dynamically defines ship point for any order based on cost and fill rates. This is an enhancement because most order management systems use a deterministic approach: if, for example, you are a customer in Indiana, you will always be shipped from Chicago. You don't want to ship loads unnecessarily. Here is how it works. In a deterministic order system, a customer in Indianapolis would receive a load from its supply point in Chicago regardless if the entire product was made and in stock in Nashville. Eliminating the unnecessary shipments to Chicago and then back to Indianapolis saves transportation costs.
3. Optimize modes. Conventional tractor-trailer shipments or even inter-modal 53 ft containers are not always the most economical way to ship. Steamship lines are often desperate to get their 40 ft containers back to port. While the load size is diminished, the savings can more than make up for that apparent inefficiency. Shipping even a few containers will reduce freight rates and increase cost savings.
4. Audit activities and renegotiate freight rates when there is an opportunity and lock the rates in for multiple years. Check on your freight payments and evaluate your competitiveness by going to the market often. But, when you think you have a good thing, lock the rates in with some form of indexing over the next few years.
5. Expand your base. You have to have the right combination of private fleet, dedicated trucks, dedicated capacity, and spot-market level purchases. Not only does this provide you with shipment security but also it can be very good supply chain management. This gives you good coverage for your high service customers with your private fleet on the short turnarounds, and any other thing that comes up. You have to manage it, but if run well, it can reduce freight rates.
The best way to reduce freight rates is to cut waste and work with the right partner.
Test your skills and see how efficient you are at managing costs by loading a truck. Visit www.TransportationOptimization.com. While there, request a call back with one of the premier transportation consultants in the industry from Transportation | Warehouse Optimization. Working for many companies in the top Fortune 50 like Procter & Gamble, Nestle, Kraft, and BP, they understand your unique problems and can help you to solve them.
About the Author:
Tom Moore and his associates at Transportation l Warehouse Optimization will help you reduce freight rates and save you money. Transportation l Warehouse Optimization works with companies such as P&G and BP and many other Fortune 500 companies. They can help you reduce freight rates and save money.
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