More: Transportation Cost Reduction

Find out more about Tompkins Associates' approach to cost reduction in the transportation piece of the supply chain puzzle.

Three Key Ways to Reduce Transportation Costs

Opportunity #1: Find hidden costs buried in transportation practices

Identify and validate all freight costs for all moves, both domestic and international, and for all modes of transport. Total freight spend is not always clearly defined across the enterprise because of multiple suppliers and trading partners and a variety of products and components.

For example, inbound freight, which is often included in COGS and therefore lacks visibility, effectively equates to 25-40% of total transportation costs.

Additionally, in companies where freight management is decentralized or where freight audit procedures are lacking, freight costs are not accurately identified.

Opportunity #2: Use analytical tools to attack cost drivers

Freight costs depend on several cost drivers, including shipments, routings, mode selection, carrier selection, traffic lanes, transit times, volumes, etc.

Attack cost drivers by analyzing how, why, where, and when costs are incurred. Assess service requirements to ensure proper service levels are maintained and that the company is not over-serving or under-serving certain customers. Freight management efficiency improvements typically net savings from 3% to 20% depending on the state of current practices.

Opportunity #3: Use best practices to plan, procure and manage freight

Freight costs are incurred when plans are prepared, capacity is procured, and shipments are made. Scrutinize each of these processes to identify practices that are not the “best”, not new or innovative, and not integrated with other business functions.

Identifying, adapting, and executing best practices in accordance with “playbooks” can reduce costs. Initiatives to improve freight procurement strategies typically yield savings from 3% to 15%. Results depend on practices, volume leveraging and sourcing approach.

Find out more about Tompkins Associates' approach to cost reduction in the transportation piece of the supply chain puzzle.

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