Freight Shipping Blog

LTL Transportation & J.I.T. Scheduling - Small Change Adds Up to Big Savings for a Textile Manufacturer

In today's uncertain economic times, most companies are seeking ways to cut costs.  Smart companies are looking long and hard at their business processes to identify new opportunities for savings. The smartest companies know the biggest savings are often achieved with the smallest operational changes --and many are scrutinizing their distribution and supply chain management models.

This is the story of one Massachusetts company - a leading manufacturer of woven jacquard fabrics for the high-end home furnishing industry - whose shrewd assessment of how they got their product from one place to another generated a seven-figure cost reduction.

In addition to manufacturing fabrics for the high-end home furnishing industry, this company held additional contract fabric lines selling to automotive interior, office furniture, wall coverings, and freestanding panel manufacturers. Highly sought for its automotive interior fabric line, the Massachusetts company was bought by a larger Michigan based fabrics producer whose business plan dictated that they concentrate solely on automotive fabrics.

These kinds of mergers usually produce redundant operating systems, and this one was no exception. The Michigan-based company maintained a private fleet that served much of the company's distribution and supply chain needs and also procured and managed the company's purchased transportation requirements. The Massachusetts company asked DSi to assess their current logistics and supply chain requirements and costs.

DSi's assessment uncovered an inefficient and costly transportation system in which intra-plant shuttle activity was set up on a time schedule, rather than being tied to peak production periods. Basically, the trucks weren't going out with full loads and the company was losing money.

This money-losing process was developed for two well-meaning reasons: 1) to insure that looms and weaving facilities were supplied with dyed yarns and 2) to insure that finishing plans had woven fabrics within hours-regardless of available quantities. As a short run producer, the resulting constant set-up and takedown of beams for loom operations and return of fabric racks required same-day deliveries on 53-foot trailers that were loaded with small quantities of product.

"Just-in-Time" to the Rescue

Working with the company, DSi carefully plotted production schedules and material requirements for those production schedules.  DSi's goal: To design, develop, and coordinate a just-in-time shuttle schedule that would reduce transportation cost inefficiencies.

Just-in-time is an inventory strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs. The philosophy of JIT is simple: Inventory is waste.  JIT focuses on having "the right material, at the right time, at the right place, in the exact amount" - without the safety net of inventory.

The subsequent schedule eliminated duplicate runs for materials and dunnage not required by each specific plant's production schedules. In further discussions with the transportation firm, DSi negotiated truckload and half truckload (LTL transportation) pricing for deliveries that required the company to ship smaller quantities and allowed the shuttle company to more closely match their equipment capacities with the fabric company's load requirements.

With the combination of DSi's leveraged and professionally conducted formal RFP processes, aggressive freight audit error recovery, just-in-time scheduling and optimization of truckload and LTL transportation, our client achieved first-year savings of $1,408.540.

Read the complete LTL Trucking CASE STUDY>>

Refrigerated Trucking Options

If you are fortunate enough to be shipping your frozen or temperature maintained product in full truckload quantities you have a fairly wide range of refrigerated (reefer) carriers to negotiate with and award contracts to. On the other hand if you are shipping in less than truckload (LTL) quantities the options and available carriers represent a considerably smaller range of choice. Most refrigerated LTL shipping revolves around one or two freezer locations and local radius shipping in support of the freezer location. You can count on one hand the number of national or long haul carriers providing frozen or temperature maintained LTL services. 

Even those "national" players may not match your desired origins and destinations due to limitations in their service area. In addition even the larger scope LTL carriers publish a sometimes restrictive pickup and delivery schedule that might not meet your required delivery or pickup dates. There are hundreds of local, niche LTL reefer carriers serving limited service areas but few if any in that market that come close to the breadth and scope of service and territory that their dry freight LTL trucking brethren can offer.

In addition to the local niche asset based carriers there are even more brokers or non asset based logistics companies that make a market in matching their customers LTL freight with other customers LTL freight to build truckloads with stop offs. They too however are also plagued by limited service areas and restrictive operating schedules. In short the infrastructure is not there to easily move smaller lot shipments anywhere at anytime for reasonable prices. Most of the refrigerated trucking carriers or brokers charge on a per pallet or weight basis for their services.

These factors and others help to explain why a frozen or temp maintained LTL shipment generally moves for multiples of what a similar size and weight of dry freight would cost to deliver. Fuel costs also drive pricing levels in this market as refrigerated tractor trailer units not only burn diesel to power their tractors but also burn diesel to maintain temperatures as low as 0 degrees. The refrigerated units installed on reefer trailers run continuously until the load is offloaded. The driver may turn off his tractor and grab some sleep but the refrigeration unit on the trailer continues to burn diesel to protect the integrity of its load. Not much market demand for wilted flowers or runny ice cream! 

At the other end of this situation is the refrigerated truckload market. The truckload market has plenty (in comparison) of local, regional and national players looking for loads. The competition in this market results in some very competitive pricing. So competitive in fact compared to the LTL arena, that it often doesn't take more than several pallets of heavy product to result in a lower cost to place those several pallets on a truckload unit and run it as a truckload. So there go eight pallets weighing 16,000 lbs taking up 16 ft. on a 53 ft. trailer for a cost equal to or less than what the reefer LTL carrier or broker would charge. Most truckload reefer carriers charge for their services on a per mile basis. While loads can max out at 44,000 lbs, the reefer truckload carrier doesn't generally care what the shipment weighs( although the weight is a factor in fuel consumption); they run from point to point for an agreed upon rate per mile without much regard to the weight of the shipment.

If your average consignment is one or two light weight pallets every other week, you're really up against it. Not too many options and steep prices and lengthy transit times to move your product to market. On the other hand if you have multiple shipments daily with pallet weights of more than 1,000 lbs per pallet, and if you also have a mix of one or two pallet consignments and larger lot consignments than you might be able to reduce your time to delivery and reduce your costs greatly by building your own loads.

You could work with brokers who mix and match shipments to build truckloads but in these cases your looking at a 15% to 20% markup at a minimum over direct carriage costs. So if you have the right mix of frozen or temp maintained shipments you could build your own loads. 

In addition to the right profile of shipment frequency and density the last piece in the puzzle to be successful in this process is the technology piece. Given the complexities and variations of due dates, shipment size, weight, loading and unloading schedules, appointments, mileage between stops and driver hours of operations regulations you would be hard pressed to build loads that met all of your customers requirements and the realities of space, weight and distance with out such technology.

There are a number of load optimization software programs whose sophisticated algorithms can provide intelligent load planning that builds cost effective, straight line stop off loads that meet required delivery dates at total cost considerably lower than the direct LTL refrigerated shipping options discussed earlier herein.

Available LTL pricing and truckload pricing, stop off charges and other pricing criteria are uploaded to the optimization software to compare direct LTL pricing with truckload with stop off pricing. The setup of the software also configures other variables such as driving time, loading or unloading time, and appointment dates and time to insure realistic load planning. Uploads of shipping level detail from your order entry system are run multiple times per day to update all shipping orders allowing the optimization software to run multiple combinations of the orders to build optimal loads that meet required delivery times and produce savings of 20% or more.

There are a number of Transportation Spend Management (TSM) consulting companies who make a market in temperature controlled and frozen LTL consolidation using these technologies. These TSM companies can run a 30 day sampling of your LTL invoices through the load optimizer to determine the feasibility of load planning for your specific situation. If this is an option for you the TSM companies generally work on a percentage of savings or on a fixed fee.  

It's not right for everyone, but with the right mix of shipments it's a great way to improve transit times to your customers, significantly reduce your freight shipping costs and to increase your refrigerated trucking shipping options. That's what they pay us for right?

For a case study illustrating the benefits of frozen refrigerated LTL consolidation services, click here.

Bill of Lading Software- Can it Help You?

 

A bill of lading is a legal contract between carrier and shipper for transporting goods. It also specifies the terms and conditions of carriage, and influences the rates and charges associated with that carriage and serves as a receipt for goods received by the carrier from the shipper.

I am amazed at what I see being used by many small to medium sized shippers to tender a shipment to their carriers. Documents used range from a packing slip to a print out from their order entry system, neither of which serve the purpose of a bill of lading. Of those shippers that use a standard uniform bill of lading form available almost anywhere; many have no idea how to fill out the form.

The handwritten scrawl used to describe the commodities being shipped routinely use "pet" names for their product such as " 20 cases of brightener". While "brightener" as a product description might convey exactly what it is to anyone within the company, I can guarantee you it would cause most rating clerks for the carriers involved to scratch their heads, provided they could read the writing in the first place.

You might ask.... "So what's the big deal? We may not have a perfectly executed Bill of Lading every time we ship something but we haven't had any problems." You haven't had any problems that you are aware of yet, would be my response.

Your product descriptions are an important part of insuring a correct application of rates and charges on your outbound shipments. Those descriptions need to carry a National Motor Freight Classification (NMFC) item # and attendant freight class. When carrier rate clerks have to interpret what you are shipping they generally interpret your freight to be a higher rated class carrying a higher rate.

Here's a specific example of what improper commodity descriptions could be costing you: 

One of our client's inbound vendors located in Butner, NC shipped three freight collect shipments of the exact same commodity by the same carrier.

The product is listed and described on all three bills of ladings filled out by the vendor as: " polymers/iokyurethanes combined with textiles".

Because there is no NFMC description that matches that description rate clerks for the same carrier interprets the description and rates each shipment in the following manner:

One as: Item#49880-Sub 3 - Class 100- Clothing, density of less than 12 Lbs per cubic ft.- 2,195 Lbs rated @ $32.52 per hundred lbs.

Another as: Item #29275-Sub 1- Class 92.5- Corrugated boxes, less than 12 Lbs per cubic ft.-1,013 Lbs rated @ $36.83 per hundred lbs.

Another as: Item #43490-Sub 2- Class 85- Chemicals, not otherwise indicated in bags, boxes, drums or packages -1,426 Lbs rated @ $34.00 per hundred Lbs.

Does anyone know how to fill out a bill of lading with proper National Motor Freight Classification Item #'s and Freight Class anymore? Short answer- not many, and especially not this vendor. 
The product in question happens to be cloth or fabric coated with vinyl in rolls with cloth backing. Item # 49210- Class 65. The collective overcharge resulting from improper product descriptions on these three shipments alone is: $385.81 not a large sum, but as a percentage, 24.6% greater than correctly applied contract charges.

What is a 24.6% overcharge on your current annual outbound freight bill worth to you? Is your vendor properly describing your inbound freight collect shipments? If you don't have a Freight Audit, Payment and management company looking out for your interests, money could be flying out the door.

Additional more obvious problems from bill of lading issues could range from denied freight claims for loss or damage to recourse against you for freight charges that weren't supposed to be your responsibility in the first place. Volumes have been written on the legal problems involving improperly conveyed goods on an improperly executed bill of lading, suffice it to say It's in your best interest to do it right the first time.

For many companies the solution to these issues may be Bill of Lading software packages. There are a number of on line bill of lading software packages that automate the execution of a bill of lading with pre-programmed freight descriptions carrying accurate NMFC item #'s and freight classifications. You may need to consult a Transportation Spend Management company to insure that the set up of your product descriptions are accurate.

These on line bill of ladings systems are generally not expensive and can save you time and money in a number of ways. In addition to accurate product descriptions that will eliminate overcharges, some additional benefits to name a few are:

• 1. Stored carrier, and customer records for retrieval and reuse
• 2. Pre programmed routing instructions to know which carrier to use for different customers
• 3. integration with your order entry system to auto generate the Bill of Lading
• 4. Pre shipment carrier rating functions
• 5. Shipment summary detail used for reporting
• 6. Shipment tender and pickup notification to the carrier

For most companies the time, effort and expense associated with purchasing a bill of lading software system and setting it up properly will be paid back quickly in efficiencies received and costs avoided. 

Learn about DSi's freight shipping services.

 

 

Freight Bill Post Audit - What Most CFO's Are Missing

So most likely you fall into one category or another on this issue. Either you recognize that freight bill post payment audit services is a viable option for you, or you don't.

If you do, you realize that the average recovery on freight billing errors ranges from 3% to 8% and you have a strategy in place to recover those freight bill overcharges.

If you don't utilize these services you either aren't aware of the practice of post payment audit recovery, or you don't think it's worth the effort to look into it.

I can tell you personally that freight carriers make a lot of mistakes and most of those mistakes are not in your favor. Many freight vendors today are actually outsourcing their invoicing functions, which ultimately increases the overcharge/error ratio. The number of freight overcharges and the cumulative dollar amounts of those overcharges we see sometimes makes me wonder if the outsourced vendors the carriers work with are compensated on some percentage of the dollar amount invoiced.

Post audit recovery involves certain statutes of limitation concerning the time frame in which you can recover an overcharge. In the absence of any negotiated agreement to extend those times the time limitations which vary by transportation mode and or vendor are as follows:

•  Motor Freight (LTL or TL): 180 days from date of delivery
•  Air Freight: 6 Months from date of delivery
•  Ocean Freight (FCL or LCL): 30 to 180 days depending on    forwarder/carrier involved

Most post audit firms work on a contingency basis at 50% of overcharge claims filed and paid. If they don't recover the overcharge, you don't pay for their services.

The essential ingredient for a successful freight bill post audit program is a robust audit trail of contracts, rate publications and other rate documentation from the participating carrier group. If you negotiate your freight rates on the back of a cocktail napkin it's unlikely that post audit will be a successful ploy for you and your company.

Some companies don't use post payment audit services because they feel the have a good outsourced or in-house pre-payment audit system. I tend to favor pre-payment audit systems that detect the error before you pay the invoice for the following reasons:

• Pre-payment audit services are pennies on the dollar, you can either detect a $500 overcharge and pay $.85 for the pre-payment audit or you can pay $250.00 to detect the same overcharge on the post audit.
• Some freight companies can really drag their feet on overcharge claims- why fight for the overcharge if you detect and eliminate it before its paid?

Most CFO's are all over freight bill post audit services and routinely put their paid freight invoices out for post audit. At the same time most CFO's completely overlook a much larger opportunity. Let's call it a "competitive freight audit."  It's great to get 25% back on an overcharge occurring on a small percentage of invoices that are billed in error. How much greater would it be to understand that every invoice was 20% higher than it needed to be even if it was correctly invoiced? Just because an invoice is correctly charged for doesn't mean that your not overpaying for freight services.

There are a number of companies who can evaluate your freight spend in concert with your business rules and required service parameters. They can even provide freight cost benchmarking by specific industry so you can evaluate where you are vs. where you could be.  A competitive freight audit involves:

• Providing a Complete & Current 30-90 Day Sampling of Invoices
• Providing an understanding of service requirements, business rules and SOP's

With this information a competent TSM (transportation spend management) consultant can create a database model of your current freight invoices. The next step is to apply achievable pricing parameters to that model for annual savings projections deliverable from the design and implementation of a Core Carrier program that meets or exceeds all indentified business rules. The design, and delivery of such a program is also within the scope of a competent TSM consultant.

Every freight invoice should be audited against contract rates, pre or post payment as a standard procedure. Having taken those steps the last and most often overlooked step should be to evaluate and benchmark your freight costs. You'd be amazed at what you may learn!

 

Transportation Spend Management (TSM)

The concept and practices of Transportation Spend Management (TSM) have been taught in business schools for years. In reality it is a little used and understood discipline in most small to medium sized companies. With transportation spend approaching fifty (50%) percent of total logistics costs and logistics costs trending higher, many CFO's or other "C","V" level personnel are asking questions about transportation spend management within their organizations. More often then not the answers they receive to those questions indicate a missed opportunity to create competitive advantage and to improve profitability.

So, you might ask, "what's the upside of implementing a properly structured and executed TSM program and how do we achieve that upside?" For most companies it can return the following benefits:

1. Improved service and transportation broker responsiveness

2. Greater control, visibility and insight into direct costs

3. A twenty percent (20%) or more direct cost savings

Believe it or not, for many small to medium sized companies the first step is to determine what their annual transportation costs are. Most of these companies simply have not taken control of this expense, using far too many LTL trucking companies and other transportation brokers. They allow an undisciplined use of transportation brokers within their company and by their suppliers who dictate carrier usage even through they are paying the freight costs. 

Many companies who employ an effective transportation spend management program are assisted in that process by the use of a freight audit, and freight bill payment company. In utilizing the services of these companies all freight invoices are send for detailed freight bill audit, entry into a freight audit database, and for freight bill payment. Cost allocation for each freight invoice or individual component costs of each freight invoice can be accounted for by entering applicable company specific general ledger (GL) codes into the freight audit database.  GL codes can account for freight costs down to the SKU level, by customer, by direction, or any other of a number company specified parameters. The reporting, control and visibility gained from using freight bill audit, and freight bill payment companies can be a small investment in returning significant benefits. The costs of these services are nominal in relationship to their payback for most companies.

Most freight audit and payment companies can also assist in the control of transportation spend through the implementation of Routing Guides that specify exactly which carrier should be used for each individual transportation transaction. The Routing Guides are lodged with all suppliers who ship inbound freight collect and all company shipping locations who ship outbound freight prepaid. If the Routing Guides are not followed, lost savings or non compliance reporting can allow the company to charge back their suppliers or shipping department for any premium freight charges incurred as a result of their supplier's or shipping department's non compliance.

These are just a few ways a freight bill audit and freight bill payment company can help you implement an effective TSM program. It's your money, you need to take control of how it is spent.

Here are the five (5) basic questions you need to ask to determine if your company has an effective transportation spend management program in place:

1. Are we leveraging our total transportation spend when negotiating with carriers, or is our spend fragmented across departments, business units, or Logistics Service providers?

2. Are we engaged with the right set of carriers, or are there other carriers that can meet our service level expectations at a lower cost?

3. Are we consistently using contracted carriers and paying contracted rates, or is there a lot of "maverick" spend taking place?

4. Are we being invoiced correctly, or are we paying too much? What's the cost of our freight settlement process and can we streamline it?

5. Are our transportation costs aligned with the rest of the market, or are we paying more or less than other companies?

(Source- five questions) : ARC Advisory Group

Expedited Freight Shipping - A Budget Buster

How many times have you ordered something really cool on line and just before checking out you check out the shipping options? "Hmmm..., I can get it in 3 to 5 days for $15.00, but I can have it tomorrow for $26.25, oh what the h..., I'm springing for the premium freight charge!" In my younger years my Mother always accused me of needing "instant gratification". Maybe that's just part of the psyche of the boomer generation, but we see more and more expedited freight requirements coming through our system daily. I suspect it has less to do with 'really cool' stuff and more to do with less than optimum inventory and manufacturing  planning. As a nation we want things to move quickly and we want what we want sooner rather than latter. We want it fast, and this includes fast freight! "I don't care what it costs, its got to be there Friday morning"; that's music to a lot of carrier's ears in the air freight forwarding, or ground expedite business.

So what really is the cost of all this expediting? Is there a typical markup as a percentage from 'standard service' to 'premium service'? Is everybody in customer service or shipping authorized to select expedited shipping options? How do we manage expedited shipping services to make sure we're not paying more than we should be?

The right answers to these questions for most small to medium sized companies could significantly impact the monthly P&L statements. The fact is for many companies premium or expedited freight shipping is a wild card. They might rely on one or two spot market expediters, and the more they lean on the panic button the more their costs escalate.

We generally define domestic expedited freight as any shipment that requires delivery earlier than standard service. Standard service of course would be normal surface LTL published transit time, which is specific to the LTL carrier you use. Most of the LTL carriers have service upgrades that are available at roughly a 20% to 30% uplift from their standard service. In some cases where the service requirement is upgraded after the shipment leaves the dock, these "in-system" upgrades may be your best option, but not always. There are times when the in-system options cannot achieve your required delivery date and time. In those situations the shipment has to be "rescued" and recovered by another expediter from the LTL trucking carrier's system.

So what are your options to manage your expedited freight requirements in the most cost effective manner that protects your due dates and times? Domestic expedited shipping service options usually include:

• Surface expedite-team drivers or exclusive use trips
• Surface LTL shipments ran as Truckload
• Air Freight Forwarders (non asset based brokers/forwarders)
• Air Freight Lines (asset based operators- UPS/Fedx etc)
• Air Charter Brokers (non asset based dedicated flight brokers)
• Air Charter Lines (asset based dedicated flight operators)

Determining which of these options is best suited and best priced for your expedited shipping requirements can be a complex decision process. That process involves factors such as: weight, dimensions, ship date and time, protect delivery date and time and the mileage of the trip.

The bad news in all of this is that unless you expedite regularly and have established rates it can take a lot of time and telephone calls to find the best cost and service option to meet the need. So much time that many companies often throw up their hands and say, "just find me someone who can get it there on time. It's got to be there, I don't care what it costs".

The good news in all of this is that there are a number of excellant on- line decision support systems that can successfully leverage and manage your expedited freight for optimum cost and service in a real time environment.

Some companies have regular and consistent expedited requirements for which a negotiated solution is in place. If your company is not in that category on-line help is probably the best bet to successfully manage your expedited shipping.

Shopping the LTL Brokers - How Do I Get the Best Price?

Simply defined an LTL Broker is a non asset based (does not own or operate tractors & trailers) service company who has pricing agreements directly with LTL carriers and offers LTL pick up and delivery services through these carriers at a mark up. They bill you directly and then settle with the LTL carriers.

Using LTL Brokers as an alternative to dealing directly with an LTL carrier can in some cases provide the best LTL rates. That's what everyone wants...the world's best freight quote on every shipment, right? I am amazed at how much time and effort some small to medium sized companies spend daily in making several phone calls or accessing several web sites where they can shop their shipments for the cheapest possible discount freight quote du jour.

Far too many of these daily shoppers end up sub optimizing the competitiveness of the LTL quote they end up selecting. They are told or otherwise assume that the LTL Broker can offer a better freight price because they can use their collective volume of business to negotiate deeper pricing with the LTL carriers. This is true for the Mom & Pop shippers out there. Unfortunately a surprising number of those companies who spend hours browsing or calling for today's best discount freight quote greatly underestimate the power of their own collective volume of business when competently and professionally represented directly to the LTL carrier group.

A professionally negotiated "Core Carrier" LTL program tailored to client specific business rules and service requirements can generally deliver more competitive pricing than most LTL Brokers can offer to companies who ship as little as $30,000 to $50,000 a year or more in LTL shipments. A Core Carrier program reduces the number of LTL carriers, and properly utilizes and leverages all available inbound, outbound and third party LTL volumes. When these programs are backed up by the discipline of Route Guide implementation, Non Compliance reporting, and freight bill audit and payment services the payback is impressive. The payback can easily be measured by more competitive pricing and freeing up and redeploying  staff time spend burning up the net or dialing for dollars.

While LTL Brokers may have blanket pricing from the LTL carriers, that blanket pricing in combination with a mark up often is not your best discount freight option. The LTL carriers won't always give blanket pricing and when and if they do they are smart enough not to allow resellers to erode their client base by giving them deeply discounted pricing.

If you are dialing for dollars everyday you might want to consider contacting a transportation spend management firm who can design, deliver and implement a managed Core Carrier LTL program for you and support you in managing that program. Even after paying the management firm's fee, the savings in your LTL costs alone could be as much as 20% to 30% or more.

 

Think you're paying too much for your LTL Freight?  View DSi's LTL Rates in real-time to compare.

  

LTL Freight Consolidation, Can it Work for You?

Negotiate, negotiate, negotiate, that's the mantra in today's freight shipping environment. True, it's currently a buyers market and most LTL carriers are willing to entertain a rate reduction in this, the worst freight recession most carriers have seen in a very long time. The effort to achieve discount freight rates with qualified LTL carriers who can meet or exceed service requirements is a balancing act that's been going on since deregulation. Unfortunately, many small to medium size companies and the personnel they charge with managing their freight spend have become one-trick ponies when it comes to exploring alternate means to achieve discount LTL freight rates for their domestic LTL distribution costs.

LTL carriers can only negotiate to a point. Having seen so many LTL carriers exit the market place with little or no warning, we all need to hope that those remaining LTL carriers will have sufficiently understood their internal operating costs to refrain from pricing themselves into extinction.

So you have completed your bid process and negotiated the LTL trucking carriers to their rock bottom freight rate, what's next? Some companies have seen a savings from putting a couple of 15,000 lb shipments together on a truckload carrier who will deliver both shipments en route. This methodology can be a great cost saver but for most companies who have a decent volume of LTL shipments it is underutilized and only the obvious opportunities, those that jump of the page, get looked at for freight consolidation.

LTL freight consolidation done right requires technology to master the countervailing intricacies of geography, due dates, trailer utilization, and the intersecting price points of LTL carrier rates and truckload carrier rates. Other factors such as driver hours of service availability, loading and unloading time and due dates need to be factored into a complex algorithm that ultimately produces good load planning that saves money and delivers on time. Effective freight consolidation can't be done on a piece of paper or by looking at a map.

We recently completed a project for a client shipping frozen product on pallets from Distribution Centers located in FL, OH and AZ. The client shipped 75% of their product as LTL and the balance shipped as full truckload, or where they could piece together a few larger shipments, as truckload with stop offs. We implemented our LTL freight consolidation or load optimization software for the client receiving multiple uploads daily from their order entry system. All orders carried a due date. In a matter of minutes the software calculated trip miles, driver hours, unloading times, trailer space utilization, LTL costs vs. truckload and stop off costs and a number of other parameters. The load planning provided by this software consolidated costly refrigerated LTL shipments into considerably less costly multiple stop truckloads that preserved the integrity of the due dates. After implementing this software the client's improved mode utilization mix sees them shipping 27% direct LTL, 5% full truckload and 68% truckload with stop offs. The average savings through load planning and LTL freight consolidation vs. direct LTL was 38%.

You won't find another 38% coming from further negotiations with LTL freight carriers. How much of your LTL carrier freight spend might lend itself to this application?

Learn about DSi's freight shipping services.

The Impact of Transportation Services & Logistics Costs on Corporate Profitability

Surely the days of viewing freight shipping services and logistics costs as a fixed cost are behind us right? Key corporate decision makers who are tasked with the measurement and management of all line item expenses surely understand the impact of and cost reduction opportunities represented by freight savings and logistics related expenses, don't they? 

Believe it or not, even in the devastating economy we find ourselves in, most companies miss the boat completely on this critical area for improving corporate profitability. Many key financial players at the "C" and "V" level assume their companies are doing all they can to directly reduce and control costs associated with delivering their product to market and sourcing and delivering materials used in manufacturing their products. Having asked, "so what do you spend per year on transportation services?" countless times of the person or persons within a company who is/are charged with buying transportation services, the usual answer is " I don't know". The old, but spot on adage in our business is, "if you're not measuring it, you're not managing it". The best way to measure it is through a freight bill audit and freight bill payment service that can allocate costs down to the sku level and provide a wealth of data useful in managing costs and insuring proper pricing strategies for your product.

Transportation and logistics related costs as a percentage of sales range from 9% to 14% depending on industry sector for companies who do not adopt a ‘Best in Class' management approach. These percentage ranges include all logistics related expenses such as warehousing, dedicated personnel, and transportation expense. Transportation costs alone comprise the vast majority of this expense for most companies.

By adopting a ‘Best in Class' logistics management approach, logistics related costs as a percentage of sales drops to 4% to 7% depending on industry sector. That's a delta of 5% to 7%. For a company with sales of $10,000,000, that's a contribution to corporate profitability of $500,000 to $700,000. How many widgets do you have to sell to net that kind of return? Maybe it's time your company adopted a ‘Best in Class' management approach to your transportation and logistics costs.