Shippers, on down to the individual consumer, pay mightily for transportation and logistics costs, whether directly or indirectly. Did you know that U.S. businesses spent $1.45 trillion on logistics in 2014, representing 8.3 percent of the nation’s GDP? That’s an increase in logistics costs of 3.1 percent over the prior year, according to the latest available figures, from the Council of Supply Chain Management Professionals’ (CSCMP) 26th Annual State of Logistics report. The logistics costs include all modes of transportation as well as warehousing, among other inventory carrying costs.
Since the “Great Recession” ended in 2009, transportation costs have continued to rise steadily each year, the 26th Annual Logistics report found. When you consider that trucking remains the biggest single slice of the logistics pie—$702 billion in 2014—beating out inventory carrying costs and all other modes, and that transportation costs rose 3.6 percent from the prior year, the need to strategize ways to control all transportation costs is critical.
Here are 5 strategies to control your transportation costs:
- Talk to new freight brokers. Be open to calls from brokers or make periodic reviews on your own by querying new freight brokers. Before you pick up the phone, research the broker’s history and check their reputation online. Share your traffic lanes that give you the most headaches or where your spending is greatest with the most qualified brokers.
- Regularly bid your lanes. You may be like many shippers who put their freight lanes up for RFP annually to carriers and freight brokers. At G&D Integrated, we recommend transportation departments conduct freight reviews annually at a minimum, and informally examine their shipping patterns every few months, or as business conditions dictate, such as during times of significant growth or as changes in shipping patterns occur.
- Evaluate your inbound freight spend. Inbound freight costs may not be as high as your outbound freight, but there are often substantial gains to be made in better managing your inbound freight costs. The trouble is many transportation departments lack visibility and control of their inbound movements, often spread across many inbound LTL and TL carriers. Plus, your transportation management system (TMS) may not adequately address inbound. A 3PL or full-service broker can help manage and troubleshoot your inbound logistics for efficiency gains.
- Less is more. Carrier consolidation is not a new concept but along with formal annual contract reviews and RFPs, paring down your carriers supports supply chain efficiencies. Likewise, staying on top of the performance levels of your carriers and logistics providers year round requires vigilance and the right systems. What are the key performance indicators (KPIs) or metrics you can track or request from your transportation and logistics providers? Are they in place?
- Take action. Finally, as these strategies illustrate, when it comes to taming your transportation costs, action is required. By taking the steps required to implement the processes and reviews needed to keep a lid on costs, your organization can also improve service levels, another boost to the bottom line. At G&D Integrated, we regularly communicate with customers to help them reduce their costs and time spent on managing their freight.
What are your go-to strategies for controlling transportation spend?
Resources featured in this blog:
Council of Supply Chain Management Professionals’ (CSCMP) 26th Annual State of Logistics report:
About the author:
Mark London is Vice President of Sales & Marketing of G&D Integrated.