Scrutinizing All Logistics Issues and Automating Processes Deliver Valuable Savings
The New Year is prime time to take a fresh perspective on your supply chain. Many manufacturing and distribution companies have reaped significant benefits from using technology to automate production and customer satisfaction delivery. However, when it comes to tackling the logistics costs, they typically focus on areas with limited impact that are symptoms of the corporate logistics structure. Instead, imagine the advantages of improving areas within your control and applying automation to your administrative side. Coupling automation with a close look at internal factors can greatly reduce your freight costs and present eye-opening saving opportunities.
“Your real costs are actually indicators of how your logistics are set up,” Mike Broussard, Vice President of Broussard Logistics, said. “Managers often start by asking how to get a lower freight rate but that’s only one aspect of the bigger picture.”
Broussard suggests taking a broader view and working backward to look at which internal factors are affecting your costs. There are a number of outside factors that are not controllable by management. These include regulations from Washington, the cost of fuel, disruptive technologies and competition in the marketplace. Since there isn’t much that organizations can do to control these costs, don’t waste valuable time and resources on these areas.
In contrast, internal factors that can be controlled are often overlooked. Many of these can have a significant impact on your freight costs. Some of these factors include:
- Management’s perspective of logistics: Are your leaders interested in the lowest cost investment or are they willing to look at technology investments that could deliver cost savings down the road?
- Are you able to pass along (bill) freight costs to your customers?
- Standard operating procedures (SOPs): How smooth does your workflow run? Are your departments connected digitally and working together smoothly or do different departments work with ad-hoc, paper-shuffling procedures?
- Freight vendor agreements: While most internal staff members focus on the carriers, they are frequently uncertain about whether or not their agreements are actually beneficial to the company. A logistics management expert can offer valuable insight here.
- Settlements: Are your invoice audit and payment processes (checks and balances) automated or handled manually?
“The state of your internal logistics, plus the outside factors will equal your costs,” Broussard said. “If you want to manage your freight costs, you need to focus on all the logistics-related issues that you can really influence, not just one area (such as discounts).”
Once you have a good handle on the internal logistics, you can reap even greater cost savings by introducing technology that automates your logistics processes from shopping rates to invoice audit and payment. Automation brings cohesiveness and nimbleness to your organization and allows you to offset costs. However, if you don’t know your costs and manual processes are taking valuable time and incurring expensive human errors, then your internal costs may not be adequately covered by what you charge the customer.
Considering how much automation has changed manufacturing and distribution, it’s time to extend those same benefits to the administrative side of the freight business. Demonstrating the return on investment (ROI) will be powerful.