In the last blog, I highlighted some of the opportunities that shippers miss out on to save money on freight when they don’t manage their freight spend data effectively. What steps can a shipper take to correct this situation? Here is a partial list.

• Utilize a Transportation Management (TMS) System. TMS systems have changed significantly over the past ten years. Shippers can now buy or lease a TMS system at a reasonable rate. For companies that don’t wish to make this investment, they can reap many of the benefits without making a capital investment by working with a logistics service provider that has a leading edge system.

• Make sure the company’s or LSP’s TMS system is capturing the key data elements on a daily basis that are needed to monitor freight expenditures. This includes complete and accurate commodity descriptions, actual weights and billed weights, capturing the various cost elements of their shipments individually such as the freight rate, fuel surcharge, currency exchange, accessorial charges, carrier name, origin and destination cities, state/province and postal codes/zip codes, ship date and arrival date.

• Sort the data in the following ways to help identify opportunities for improvement:

             By carrier – to reduce the company’s dependency and vulnerability in case of a strike or business failure and to leverage shipping volumes

A company’s freight costs often represents between two and ten percent of total revenues. For many companies in the manufacturing, distribution and retail sectors, their freight spend has a direct impact on their bottom lines. Nine years ago I wrote a blog with the title above. In that blog, I identified one of the consistent problems we encounter in working with shippers on a day to day basis, namely a lack of complete and accurate information on their freight transportation activities.

Nine years later, this problem persists and it is not limited to just small companies. In fact, many companies with freight expenditures of five to fifty million dollars or more face the same problem.

The challenge now is that freight companies have figured out that if they use their scales and dimensioning devices, they can weigh and measure the freight they move more accurately. If shippers have poor practices that hinder the flow of their assets, they can calculate the cost of these deficiencies. They are now charging more aggressively for these additional costs and for the precise cubic space occupied by the freight. As a result, carriers can and are securing revenue that they may have missed in the past.

What is interesting is that some of these shippers have high quality ERP and accounting systems. However, when you try to extract a year’s worth of freight transportation data, you receive a file that is riddled with errors and omissions.

Some companies have strong leaders with good strategies and good systems. Unfortunately, they don’t put the pieces together and therefore deliver less than stellar freight management results. In other words, the execution isn’t there.  Projects are identified but they don’t produce the desired results.

Some companies seem to adopt a “flavour” or “mission” of the month approach. They hire a consultant to adopt lean manufacturing, lean logistics or balanced scorecards. The tools to make these systems work are never put into place properly and before you know it, they criticize the consultant, move on to the next consultant and don’t accomplish much of value.

While these companies may be able to generate pretty reports, the programs were ill conceived in the first place. They don’t produce results. This can lead to the “blame game.”

Achieving operational excellence is not about sexy slogans and programs. It is about teamwork, communication and commitment. There has to be an identification of the root causes of the problems. There has to be a commitment from the leadership to fix the problems. The company leaders must stay the course to fix the problems. They cannot assume that since a program has been put in place, the results will come automatically.

As we all know, freight capacity throughout North America is tightening. A shortage of drivers, new government regulations and rising fleet costs are making it increasingly challenging for trucking companies to operate their fleets. As a result, carriers are being selective in terms of the shippers for whom they will offer their fleet capacity.

Smart carriers are ranking their customers on the basis of profitability and ease of serving. Shippers must now make their companies and their freight attractive to their carriers to secure the capacity they need. These are some things they can do.

Run a Clean Operation

Simply put, shippers need to be organized. As carriers enter their customers’ yards, they want to find an available dock door and they want the freight and paperwork to be ready for pick-up. They don’t want to have to wait as other carriers to block their way. They also don’t want their customers to call them back 30 minutes after they left the yard to pick up an extra skid or two. In other words, trucking companies want consistency, reliability and predictability. They want to work with shippers that are efficient and keep their costs down.

Throughout this series of blogs, the focus has been on how Best in Class shippers ensure their freight is delivered at the right place, at the right time and intact. The beauty of freight management is that so much about transportation is measurable. Over the years we have observed how Best in Class shippers pull away from mediocre performers and industry laggards in the area of measuring performance. They tend to have better data and more robust and relevant tools and reports. These are some of the Key Performance Indicators (KPIs) and Reports that they utilize.

Macro Financial Indicators

The first set of financial ratios helps identify trends in supply chain costs and their impact on the business over time. Key ratios include:

Supply chain costs as a % of Revenue