5 Tips to Help Manage Transportation Costs

Manage Transportation Costs in the New Year

The New Year presents great opportunities for executives to cut their freight costs and impact the bottom line. Here are 5 tips that shippers can implement on their own to reduce transportation costs and increase efficiency.

1. Acknowledge and plan all transportation spend. This includes not only your outbound, but also your inbound and third-party traffic as well. Many manufacturers are aware of their outbound freight costs but overlook the costs of their inbound shipments needed to source production.

“On inbound freight, a lot of times manufacturers will pay the vendor to handle the freight arrangements and that vendor may not have the manufacturer’s best interest in mind,” Mike Broussard, vice president of Broussard Logistics, said. “There’s no management of costs and at the end of the day the manufacturer bares the costs of the higher freight.”

The logistics spend is a key part of your business, yet these costs are often an afterthought to manufacturing. “You really need to acknowledge all your transportation costs,” Keith Buford of Broussard Logistics added. “You can’t organize what you don’t recognize.”

2. Centralize your game plan. Typically, an organization’s largest expense is raw materials, followed by payroll. Both of these are traditionally monitored and managed. However, a common third largest cost is freight, yet it’s the only cost not managed, Broussard said.

By coordinating all your freight costs across your locations and internal functions, you’re able to take advantage of better costs and cut time throughout your processes. Greater efficiency drives the costs down. It can be quite complicated if you have 20 locations with purchasing personnel handling inbound freight at the corporate office and team members at 20 different docks working on the outbound freight. There are a lot of moving parts and no coordination. Businesses stand to make measurable cost savings by unifying these efforts throughout their organizations. “There should be a corporate game plan and a corporate agreement with all the trucking companies, not individual agreements,” Broussard explained.

Still, Broussard reiterates the importance of understanding and meeting customer needs as paramount. Communicating with your customers about your initiative to cut costs can help strengthen relationships, especially when your clients know that you’re being proactive to keep costs competitive. Additionally, customers benefit from freight centralization through:

• improved transit time,
• convenient shipment notifications,
• a smoother flow of information that supports expedited processes and
• better overall customer service.

“In general, improved efficiencies leads to improved profits,” Buford added.

3. Partner with the right freight vendors and optimize spending. All carriers have specialties, yet businesses often don’t put the right freight with the right carriers to truly optimize costs. For example, a business may have always used a particular carrier that has national reach. However, the national carrier usually doesn’t offer the most competitive rates for short hauls. “There are carriers that are regional that want the short runs and will give you a lot better price than the carrier focused on hauling across the country,” Broussard said.

The key is selecting the right carriers for the job and getting your agreements set up correctly. Broussard Logistics’ technology not only secures price quotes on shipments from your carriers quickly, its system ranks the bids from lowest to highest in one easy-to-read screen. The time savings is amazing.

4. Set the stage for continual improvement through checks and balances. Organizations should re-evaluate their carrier agreements at least once a year at a minimum. Carrier performance should be tracked throughout the year to make sure the business needs are being met on a consistent basis. Ensure that freight costs are spent with the most efficient carrier for the job needed and not based personal preferences or routine.

5. Automate manual processes to shrink time spent on jobs, reduce errors and save money. “We’ve found that many organizations are still manually filling out the bill of lading (BIL) that leads to errors and lost time,” Broussard said. “We can integrate with a company’s ERP system and pull orders straight through. The information can be passed electronically from shipment manifest back to accounting and expedite the entire process.”

The automation and centralization of information puts data at your fingertips so reports can be pulled at any time, helping management to better monitor and improve processes in real time.