Shippers are always on the lookout for ways to squeeze more savings out of their freight networks and improve performance. We asked leading industry analyst Adrian Gonzalez to give us his take on two important improvement strategies: targeted savings and benchmarking.
Prioritizing cost savings opportunities. Outside of a routine RFP, where do you see shippers getting their biggest bang for the buck?
A lot of shippers are taking a step back and evaluating their transportation networks and strategies, especially mode mix. Where possible, shippers are shifting volume from long-haul trucking to intermodal. In some cases, shippers are working with customers to adjust lead times and delivery windows in order to increase trailer utilization or create more efficient routes.
A growing number of shippers are also focusing on extracting savings from their inbound operations, converting from pre-paid to collect in lanes that make sense. This is particularly true for shippers with their own private fleet that are looking to better utilize their trucks by using them for inbound pick-ups.
Many shippers are also recognizing the link between smarter packaging and transportation savings. In other words, by making package design changes, companies can fit more products per case, more cases per pallet, and fit more products per trailer, thus increasing trailer capacity utilization and reducing the number of shipments.
Finally, the lowest hanging fruit opportunity is to make sure that your TMS is up-to-date in terms of accurately reflecting your current operating environment (routing guide, rates, lead times, delivery windows, optimization constraints, and so on). A TMS is like a car–you have to schedule regular tune-ups or else its performance will start to degrade. Of course, if you are working with a managed transportation services provider, these TMS tune-ups are part of the ongoing service they provide, along with proactively taking whatever corrective actions are required to keep your operational performance on the right track.
The importance of more timely benchmarking. What are you seeing shippers doing vs. saying in this area?
Shipper interest in quantitative benchmarking remains high because understanding how their operational performance compares against industry peers (or the broader market) is still the missing link in their transportation business intelligence dashboard. However, many shippers also have questions and concerns about how benchmark information is collected and presented so that it is relevant to everybody, as well as how to use it effectively, both internally and with carriers.
Simply put, we are still in the early stages of this trend, and a lot more learning and experimentation by all parties (shippers, logistics service providers, carriers, and technology vendors) needs to occur.
The same is true with qualitative benchmarking. Shippers are very interested in gaining insights and advice from their peers, as well as their service provider partners, about industry trends and leading practices. This is an area that I am very focused on today with my new venture, and it’s an area where logistics service providers are in a perfect position to provide additional value to their customers (see “Operational Excellence is Not Enough–Why 3PLs Must Leverage Their Most Valuable Asset”).
The ongoing challenge with peer-to-peer learning is that all shippers want to be consumers of knowledge and information, but far fewer of them are willing (or they feel like they don’t have the time) to also be contributors of knowledge and advice. This is the barrier that I’m trying to break down with my work.
Adrian is the founder and president of Adelante SCM, a peer-to-peer learning and networking community that enables supply chain and logistics executives to share knowledge, advice, and best practices with each other in a private, trusted, and solicitation-free environment. He is also the Director of Logistics Viewpoints, a leading blog focused on providing logistics professionals with clear and concise analyses of logistics trends, technologies, and services. Over the past 12 years, Adrian has conducted extensive research on transportation management, logistics outsourcing, and various other logistics topics. Prior to his current roles, Adrian held various leadership positions at ARC Advisory Group, Motorola, Polaroid, and Clare.