How to Mitigate Additional Costs in Transportation

Last year many shippers were caught flat-footed by rising transportation costs and capacity constraints. It’s safe to say that in 2019 shippers will likely be more vigilant and more proactive in looking for opportunities to better manage and control their transportation costs. What are some of these cost-saving opportunities? How can shippers realize them? That was the focus of my discussion with Matt Anderson, Director, Logistics-as-a-Service at BluJay Solutions, in a recent episode of Talking Logistics.

Transportation spend at the C-level

In 2018, transportation cost and capacity issues were front and center in the news, so I began my discussion with Matt by asking his thoughts on what transpired last year. Matt said that for the first time in many years these issues were being brought up in earnings calls and in the C-suite. “It became very visible throughout the organization and not just background noise,” says Matt. “Mitigating additional costs was the focus, as well as idea velocity — how do we save money now!

“Three areas that companies concentrated on internally were trailer utilization, order lead times and freight attractiveness,” continues Matt. “This has caused conversations across organizational functions to address these issues.”

Capacity utilization

Matt notes there are three types of shipments where shippers can look to improve their capacity utilization, that is, how well they load trailers to maximize weight or space utilization. These are inbound shipments from vendors, stock transfers between locations, and outbound shipments to customers. He says since stock transfers are within the organization, they’re a good place to start.

“If capacity is at a premium, why aren’t we fully loading these trucks,” says Matt. “It leads to internal discussions around demand planning and production planning. Even little improvements can make a big difference, such as adding a couple of pallets to the back of a stock transfer lane. We urge our customers to put a cost to those changes to evaluate the benefits. It may not save money on that shipment, but it avoids spending additional money.”

Other areas of potential savings include changing packaging to fit more units on a pallet or load. Or combining heavy shipments that max-out on weight with lighter shipments that max-out on space to optimize total utilization of trailer volume.

Preferred shipper

With last year’s capacity crunch, many shippers considered how to make themselves a shipper of choice, or preferred shipper for carriers. Matt points out that the obvious opportunity is to reduce detention costs by limiting dwell times to help carriers keep their trucks moving. But he also notes there are hidden costs when carriers refuse loads because you’re not a preferred shipper (which Matt calls freight attractiveness) and you have to go out to the spot markets to obtain coverage at higher rates.

Matt says another area customers are looking at is adding drop yards and developing drop programs with carriers, as well as with their customers, to reduce dwell times and costs. He also recommends looking at your inbound and outbound dock scheduling to better balance times to reduce dwell. “That involves cross-functional discussions between production planning and warehousing, for example, to smooth the flow of goods to the docks at the right times,” says Matt. “It may also involve talking with customers to optimize unloading schedules at their sites.”

Order lead times

Another area Matt suggests companies examine to reduce additional costs is order lead times. “Carriers typically have a window of 2-3 days between when they accept a load and when they are scheduled to pick it up,” he notes. “When shippers require a pickup sooner than that window, it usually means higher costs. When you get customer service and production planning the data to show the higher costs involved, adjustments can often be made to minimize these additional costs.”

Cross-functional change management

“Cross-functional conversations are important to understand where you can reduce costs and improve carrier relations and customer experience because we’re only one weather event away from another capacity crunch,” notes Matt. But one of the biggest hurdles is the mindset that “we’ve always done it this way.” It requires cross-functional change management, often spurred by showing people the data and opportunities, to foster collaboration on these changes.

Matt has some good suggestions on how to get functions to collaborate, involving measurements and goals, as well as other opportunities companies can explore to mitigate additional transportation costs. I encourage you to watch the full episode for all the details, then post a comment and share your perspective on this topic!