It’s all in the Numbers – Part 2 – Action Steps that Shippers can take to Reduce Freight Costs

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

             By mode – to identify potential consolidation or modal shift opportunities

             By geography – to verify that the company is not losing market share to its competitors due in part to high transportation costs and to identify opportunities for round trip or continuous movements that will reduce freight costs.

• Scrutinize the company’s freight spend data on at least a monthly or even weekly basis, if possible. This allows one to identify errors and omissions. This can ensure the data is complete and accurate. It also allows one to identify exceptions and take action on these exceptions. A failure to track exceptions can result in the continuation of poor shipping practices and/or freight classification errors and/or carrier pricing errors.

• Establish a few key priorities for improvement every quarter. Establish good metrics to monitor the changes that are made. Establish a continuous improvement program and maintain this program on an ongoing basis.

• Track the company’s freight spend as a percent of revenue over time as one barometer of success.

These suggestions are not rocket science. Unfortunately, they are too often not put in place. Achieving success requires accountability. To effectively manage freight transportation requires appointing an individual with the responsibility of structuring and monitoring the data on a continuous basis and taking action to correct irregularities. Otherwise it is out of sight, out of mind.

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