When you want to drive down your logistics and transportation spend, the very first thing that you need is freight and transportation data. Without hard data, you can’t take action. When enterprises try to act in the absence of data, they are usually guessing and won’t get the results they need. However, as we’ve noted in a previous post, getting the right data is key as well.
In many different industries, it can be difficult to secure the kind of operational data you need to make a real impact on your spending. Luckily, this isn’t the case for transportation data. With the services of a trusted 3PL and a good transportation management system (TMS), you can glean an abundance of data around activities and practices related to your transportation department.
Accurate freight and transportation data is particularly important. Large shippers can save millions of dollars annually if they obtain and act on this data.
Looking to Transportation Data to Help Lower Transportation Costs
Transportation spending is a perennial target of budget-cutting exercises, and a large, multi-faceted cost center for many companies; some may spend three to six percent of their materials costs on transportation. Seizing control of freight and transportation spend can improve operating income by five to 10 percent, and boost stock prices by 10 to 20 percent, according to an Accenture study, From a Shipper’s Market to a Carrier’s Market.
Improving the ability to analyze and automate true freight spend is a priority for many large shippers and Directors of Transportation at these companies.
Cutting costs is not always easy, but because transportation spending comprises several dimensions, many opportunities are available to control that spend.
One of the most difficult questions for companies to answer is, ‘how much do you spend on transportation?’ Many shippers can identify transportation costs associated with a specific product flow, business unit, or set of contracts, but many hidden costs make an enterprise-wide total difficult to ascertain.
The bundling of production and transportation costs into vendor contracts is one reason behind this difficulty. In the communications, media, and high-tech industries, for example, it’s common for original equipment manufacturers (OEMs) to price goods on a cost-plus basis, with incentives to expedite hot products, such as the latest smartphone. This makes it hard for buyers to maintain visibility and control the transportation portion of a contract, and often requires revisiting contract terms and analyzing which party is best positioned to cost-effectively manage transportation.
With freight costs rising, the task of teasing out hidden costs is becoming increasingly critical. Deconstructing the supply chain to isolate transportation costs is where the opportunity lies.
There is a step-by-step strategy to gain control of transportation spending, starting with the basics and layering on additional capabilities that enable shippers to reap the greatest benefits from that foundation. Those steps include:
Use Transportation Data To Isolate Transportation Costs
Assess the current state of your company’s transportation management. Identify the who, how, and why of all existing transportation choices, and consider all the internal and external assets currently in use.
Work with upstream suppliers to analyze their supply chain—including shipping costs, modes and mode-shifting opportunities, and order frequency—and how it affects your business.
Unbundle those contracts to shed some light on the transportation portion—then start to manage it.
Migrate To Centralized Transportation Management
Product lines, business units, or geographies often manage transportation, but pulling transportation management into a single, shared service opens up a host of savings opportunities, reaping a transportation spend savings of 10 to 30%.
These synergies include consolidating carriers, rationalizing service agreements, and deploying internal distribution and transportation assets more efficiently by rebalancing distribution, rerouting, and using augmented line hauls, backhaul, and continuous moves.
These two steps can reap a considerable return on investment. These strategies establish quick wins, driving tangible and short-term savings that enable shippers to capture value in three to six months.
Invest in Technology
Once visibility and a control infrastructure are in place, shippers need technology support to maximize the benefits. Important enabling functions include the ability to look at order activity and volumes, aggregate capacity needs, plan and tender loads to carriers, and manage order requirements in real time. These functions must integrate easily into current logistics, invoicing, and procurement processes.
Transportation management systems (TMS) can typically handle many of these functions, but maximum transport spending control requires not only TMS, but execution execution and added best practices and functions.
Another requirement is to ensure sufficient customer service levels when the TMS directs the shipper to the lowest-cost carrier for a particular route. Shippers need tracing capabilities, such as order tracking, real-time visibility to shipment status, exception management, and compliance so they can manage across multiple carriers. Such capabilities are commonly part of enterprise resource planning systems, not TMS. Therefore, integration is a must for those shippers looking to gather all the logistics and transportation data they need to tackle trimming transportation costs.
The savings opportunities from this third step are considerable—as much as 30 percent of the cost—particularly for freight that shippers didn’t previously manage.
These three steps represent a development curve for transportation spend management because only a small number of shippers currently have access to these capabilities. Transportation spend management is an emerging capability, and the market has not yet reached a level of maturity to consistently execute these steps. Those that master the ability to harness transportation data to trim your transportation spend are going to have a competitive advantage.
Accurate transportatin data is likely the single most important factor in a sustainable cost reduction plan. Last year we put out a white paper which contains all the transportation data points you can track. We recommend you download that white paper by visiting that blog post here.
What Kind of Reports Can I Create with My Transportation Data for Analysis?
When it comes to transportation data, how do you turn it into actionable insights so you can make change? Recently, as we do each quarter, we updated our transportation management system (TMS), we call the Cerasis Rater to provide even more reports using the data you create from shipping activity. This allows our shippers to glean even more from our system and get to cutting their transportation spend continually.
When it comes to our reports the following is possible:
- Shippers have the ability to schedule any report that is in the rater.
- Reports can be sent to the shipper or to any valid email address.
- Scheduling can be accomplished on the report itself or a new Scheduled Report page.
- Criteria includes:
- Report Range: Today, Last Week, Last 30 Days, Last 90 Days, Previous Month, Previous Quarter, or Custom Date Range
- Interval: Daily, Weekly, Monthly o Day of Week: All 7 days
- Time of Day: Whole hours, 24 hours a day.
- Each report has the ability to schedule from the report. Pressing Schedule Report will display a report scheduling window.
The following are three new types of reports we have made available to shippers within our TMS, and below these three new reports are all the reports shippers can get if they want to get more transportation data:
Carriers Used – Report showing summary of the top ten carriers used by Dollars, Weight, and Shipment count. The summary pages show the breakdown of all carriers, not just the top ten.
Shipments by Zone – Report showing the shipment amount by zones in the US. The US is broken into 6 zones with Canada as zone 7, Mexico and zone 8, and everything else is zone 9. Summary pages show the breakdown by the state or province.
Weight by Class – Report showing class as the percentage used across all shipments and the total weight by class.
Billing Type Compliance
- View shipments where the billing type was changed from Prepaid and Add to Prepaid.
- Show the reason the user made the change.
- The amount of incentive lost by making the change.
Least Cost Non-Compliance
- Shows the reason given for not selecting the least cost carrier, who the least-cost carrier was when you processed the freight shipment, and data on the carrier selected.
- Shows you the freight cost savings lost by not selecting the least cost carrier.
- Identify factors that impact your freight shipping costs.
- After setting a baseline cost per pound for your freight, the Matrix Report compiles the invoiced cost for your shipments and breaks them down into line-haul, fuel, and accessorial charges.
- Lists the weight and distance traveled (both totals and averages) and shows how many shipments were controlled by minimum charges.
- With this freight data, you are able to see how changes in you shipping patterns can affect your overall cost.
Freight Invoicing Reports
Invoice Accrual Report
- Displays information for shipments that have already been processed, but have not yet been invoiced.
- Ability to anticipate future invoice amounts.
Invoice Records Report
- Payment Responsibility: Displays shipment information based on who will be paying for the freight charges. The report is grouped first by the party who will pay the freight charges then by the party who processed the shipment.
- Paid By Shipper: Cerasis will invoice you for these shipments.
Shipment Incentive Summary
- If you use the incentive program, this report details the incentive refunded on each shipment. Incentive amounts are added only to PPA (Prepaid and Add) freight shipment types.
- Incentives are also refunded to the party that is invoiced for the shipment, so if you selected an alternate bill-to for a shipment, Cerasis will invoice the alternate bill-to that party, and that party will receive the incentive refund.
We also provide several shipping activity reports which give more visibility and control to shippers. If you’d like to get a demo of our TMS, the Cerasis Rater, simply fill out a request form on our website here.
How are you currently gathering transportation data at your organization and how are you compiling that data to help trim your transportation spend? Let us know in the comments below!