Here are some Transport Optimisation tips from John Cole, a specialist Transport Consultant at Logistics Bureau.
“Hi, I’m John Cole. Many users of transport services wrongly associate optimization with the process of changing carriers, which in my experience means they are seeing opportunity every 3 to 5 years. Typically, the trigger is chronic poor service and view the carrier is unresponsive. This also directs the service users’ focus to the availability of better prices in the market. Seldom do these service users examine is their own role in the value or realise that optimisation is an ongoing process. In fact, there are 5 areas of management that will lead to and maintain optimal performance if given regular attention.
I’d like to discuss these with you now:
1. Define and get agreement on your service requirements. And lessen in the bleeding obvious? No. Many companies never define their service standards, handling requirements, etc. They simply expect the carrier to know or assume that these requirements will fall within the carrier service offering. Likewise, many carriers show no interest in your service standards, they assume you’ve selected them on a basis of the standard offering and that you know what it is. This mismatch of expectations can be painful to reconcile as you experience service values and inflexibility, while the carrier scratches his head thinking ‘you know we don’t do that’.
2. The second and closely related area is Performance Measurement. Common failings include having no measures, limiting them to what the carrier offers instead of what is relevant to you and specifying measures that can’t be captured. When setting measures, you must know the limitations of the carrier and your company to capture the data. Most importantly, you must actually use the data in regular reviews with the carrier and be prepared to act on any penalties you set.
3. The third area, and one that is commonly neglected, is the way the carrier structures your rates. Should it be kilograms, pellets, spaces, cubic meters, full loads? If you leave it to the carrier, it’ll be what most benefits them. You need to have a detailed understanding of your freight profiles so that you can recognize the most cost effective for each structure. If the carrier wants to quote your space rates, will you consistently fill the spaces? Or would kilogram rates be more appropriate? Focusing on the rate alone can be misleading and expensive. The best space rate in the market is a poor one, if you only fill the 60% of the space.
4. The fourth, and for many the most difficult area to manage, is Rate Competitiveness. At Logistics Bureau, we’ve conducted transport optimization projects for more than 10 years and have a detailed knowledge of transport rates across many companies and industries. Through our project work, we’ve also exposed you to many carriers. The typical transport users limited to the results of tendering every few years talking with peers and their own experience. The frame of reference recessing rates tends to be limited to price excesses and recommendations from trusted peers so it’s typically quiet narrow. Despite this, the frame of reference can be broadened through periodic informal talks with potential carriers and understanding where their rates of position compared with competitors. This can be achieved by asking the right questions, it doesn’t need you to go through a quoting process.
The final area that requires regular attention is the relationship. Poorly managed relationships and narrowly focused and set at a low level usually involving a 1 to 1 for daily operations and sometimes the same for customer service. By contrast, well managed relationships are broadly focused, multi levelled, and formally structured. Problems are elevated appropriately and when the occasional issue reaches the most senior level, the two parties will have a established relationship and won’t be adopting a competitive stats as they meet for the first time.
Many companies fail to address all these areas even when tendering, others address the most part of the tendering process and then largely ignore them. To be successful, you must address them regularly. Service standards change, leading to different performance measures and thresholds. Freight profiles changes, consequence changes, the product mix packaging market sharesm etc. This can make your right structure inappropriate and expensive your business or the business of your carrier can go through many changes, implication of these changes will need to reach the appropriate level in the relationship. By giving the fundamentals right and enabling your company to respond to change, you can optimize your transport.”
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John Cole is a senior manager and specialist at a Supply Chain Consultant firm, Logistics Bureau. You can see more about our Transport Consultant Services here:
And here is a handy Transport Management article.