The 2018 economic surge has pushed freight demand past available capacity, impacting shippers’ budgets with rising transportation costs across all modes. Many analysts anticipate bullish freight markets through 2020, which has shippers looking for new ways to manage costs, secure capacity and drive efficiencies.
With RFP season upon us, here are 10 tips for shippers to consider when planning transportation budgets and sourcing logistics partners.
1. Consolidate shipments to increase volume: Consolidating shipments decreases overall costs by increasing volume and efficiency. It also helps avoid loading dock congestion and can result in fewer accessorial charges.
2. Leverage locations and condense length of haul: Shippers can save time and money by strategically using distribution centers and condensing length of haul based on the location of customers. Using a nationwide network of warehouses to shorten line hauls will also help decrease the cost of transporting products to final destinations.
3. Understand paper rates vs. truck rates: Sometimes what looks straightforward on paper, like line-haul distance, doesn’t reveal additional details that could affect a bid, such as pickup or delivery appointments and loading dock hours of operation. A simple 100-mile haul on paper could take two days if the consignee cannot accept a shipment that arrives after 4 p.m., which would increase the cost. Make sure to provide enough background information, so you receive accurate pricing.
4. Become a shipper of choice: Today’s capacity constrained environment, with more freight than available trucks, has carriers and drivers in a position to choose which shippers and loads are the most lucrative for their business. Shippers who provide better experiences for carriers can reap long-term benefits in the form of higher service levels, fewer claims and better rates. To be a shipper of choice, run efficient and friendly dock operations, reduce driver wait times, provide comfortable breakroom and restroom accommodations and pay carriers quickly and accurately.
5. Contract consistent freight volume: With consistent volume on repetitive lanes, 3PLs like GlobalTranz can secure and negotiate contractual capacity, while leveraging their network to cover backhauls for those loads. As a result, service levels and on-time performance will improve.
6. Drop trailers for high volume: With the ELD mandate and HOS rules, carriers have become more conscious of loading and unloading time. Drop trailer programs create flexibility for shippers to load trailers at their own convenience, reduce the cycle time for loading and unloading, and provide ample planning for carriers to align power units and drivers’ hours of service. All of this helps keep freight costs down and mitigate capacity challenges during dynamic freight markets.
7. Leverage data: Data is becoming a company’s most valuable asset. Many businesses have access to a lot of data, but lack the tools to make decisions from it. In logistics, cost savings and efficiency improvements are tied to a company’s ability to leverage their data and make actionable decisions. Tech-enabled 3PLs like GlobalTranz have advanced analytics capabilities to develop custom transportation programs and solutions during an RFP process, using shipper data to identify optimization opportunities for overall cost savings.
8. Communicate objectives and important KPIs: Service quality is as important as price, so be sure to communicate key performance indicators (KPIs) with potential service providers. Quality logistics service providers will hold themselves accountable and benchmark for continuous improvement to ensure they’re helping make an impact on your business. On-time pickup, on-time delivery and tender acceptance or rejection percentages are a few examples of important KPIs.
9. Plan and budget for high-demand periods of the year: Look ahead and remember there will be times during the year where higher-demand for capacity could impact your costs. Produce, harvest and holiday seasons place a higher demand on the nation’s trucks, which in turn could increase rates.
10. Establish strategic partnerships: Instead of focusing on price and commodity-based services, look for ways logistics service providers can be consultative and bring value-added operations to your business. A strategic partner is constantly looking for opportunities to save your company overall costs. The most effective partnerships evolve when you integrate your firm’s ERP and supply chain systems with a TMS to provide end-to-end supply chain visibility.