Why do some companies achieve savings and gain a logistics advantage while other companies are left guessing? As a transportation management company, we work with numerous types of small and midsize shippers and distributors. The biggest difference in the amount of benefit we can provide typically hinges on one common factor — transparency.
Companies have two options: they can either create the advantage internally or they can source help to achieve it. Either way, an honest assessment exploring how you currently stand against world class is the best place to start. In order to offer transparency to someone outside their own company, shippers and distributors have to get a little vulnerable — something that may not come easy for most. As we all know, inviting someone into the company to see how the sausage is made can be uncomfortable.
If anyone understands those feelings, it’s that of a business owner that has built their business from scratch. Business owners know that companies are built by those who have cared enough to make it personal. While it may not always be a perfect fit, everyone who puts time into a business adds a bit of themselves to it; the company becomes a reflection of who they are. Whether it’s the owner, executive, or the newest employee, they take ownership in the company, and that’s a good thing! I am not suggesting that you become transparent with just anyone outside your organization; your company and data need to be protected. But if you have decided that you do not have the time or expertise in-house and would like an assessment done, find a transportation management company that you can trust with your data.
While there may be a natural desire to keep the company door closed to others, I find that the most successful business people are strongly motivated by their desire to be the best and, accordingly, prioritize their aspirations over their fears. They want to be the best in every aspect of their business.
Many companies have recently made a tremendous investment in improving their supply chain operations, but others still have not. Without investing in improvement, it will likely be difficult to achieve a competitive advantage with your supply chain. An honest benchmarking assessment arms you with this information. In this world of two day shipping, it doesn’t matter what you’re shipping, customers are expecting (and sometimes requiring) quicker order-to-delivery cycles, lower costs, and more predictable deliveries — all with the convenience of shipment visibility or notifications that can be tracked and documented. Are you currently able to check off all of those boxes?
To some, making the pivot to supply chain excellence seems like something that is too overwhelming or can be put off until another day. Unfortunately, the longer you wait, the gap between what you are able to accomplish and what customers are requiring is only going to widen. The wider the gap, the harder it is going to become to do something about it.
For that reason, some have turned to adaptive transportation management companies to overcome roadblocks that stand in the way of supply chain improvements. Below are some common roadblocks that we have helped our managed transportation customers overcome.
Roadblock 1: Costs
When making any change to your business, the first thing you may ask is “what are the costs?” How can you afford to pay for the effort?
We see successful companies enter into self-funding projects where the return is greater or equal to what it costs to engage in them. For example, it is not unusual for our customers to receive a 50 percent return on their investment. In other words, for every dollar that they spend, they show $1.50 in savings or profitability that otherwise would have not been achievable. Conversely, we often see those who do not invest in supply chain or transportation because of the “cost” of hiring, training, and managing a team. They may then look at that as a “savings.” However, the reality is that just because someone chooses to not hire someone for a role that needs to be performed, you cannot consider that non-paid expense as savings. If a role needs to be filled, but is not, then the actual cost to the organization is greater than the perceived “savings” of not having the role’s functions performed.
Specifically, customers need to ask themselves how they can manage freight costs. There are a few ways to approach this.
Our customers work closely with us to develop a strategy to reduce freight costs. Solutions vary depending on the complexity of the supply chain but results often come from implementing strategies in one of these key areas: sourcing, shipment optimization, equipment optimization, carrier selection, centralization of processes, and controlling cost previously controlled by vendors or customers.
Spot Market TL Costs
Our managed transportation customers stopped playing the game. When freight goes to the spot market, the typical response is to use a broker. However, an article from DAT Broker Benchmarking, Q4 2019, shows that the average brokerage margin across the top five brokers has been 17 percent for the last three years. Our managed transportation customers pay based on a prearranged markup of 10 to 12 percent — an instant savings of 5 to 7 percent when compared to spot market freight rates.
This works because the shipper and transportation management company are transparent with each other, creating efficiencies and expediency for both parties. We are able to reduce our rates, in turn reducing the shipper’s rates, by streamlining the communication flow, requirements, and processes. Additionally, our streamlined process ensures that freight is quickly getting into the hands of core carriers and extended networks.
In the truest sense, time in money here. According to Uber freight, the cost from moving from your core carrier to spot market is over 15 percent. In other words, communication is king. The tools and processes that they use enables quick and effective communication, allowing them to quickly reach their core carrier base in a clear and concise manner, saving them money.
When the core carriers are not available, our customers get quick access to a network of assets. They open the doors to competition and use strict onboarding and compliance monitoring standards that are set to their internal requirements. Our customers use vendor management technology and integrations to ensure that all of their carriers are screened and monitored in real time to ensure shipments are moving legally and safely.
Because we have less overhead and access to some of the most competitive blanket contracts on the market, our customers are saving money. They don’t have to have the largest volume of freight for good LTL rates because they get access from us. More importantly, they get support and guidance when they need it. In this new COVID-19 world that we live in, I often hear that even LTL takes more time to manage then it should. Our managed transportation accounts ask us to take that extra burden off of their plates — something that we are more than happy to do. As a result, they spend less time getting pulled away from their duties and are able to be more effective in their other roles.Leveraged Rates
Some of our managed transportation customers save immediately when they gain access to our extensive network and leveraged rates. For example, our partnership with TForce Worldwide, which has millions of LTL spend, provides instant savings for those customers that do not have enough volume for their own aggressive LTL contracts.
Roadblock 2: Handling Changing Carriers or Forwarders
We have helped many of our customers get increased access to capacity where needed and keep the providers they like. They often ask, what if our current carriers are not sophisticated enough to connect?
It’s not unusual for our customers to have created and cultivated good carrier/forwarder relations that they want to maintain. While we encourage our customers to keep their good vendor relationships, sometimes it is simply not enough. Many of us have found lately that capacity is king. When our customers need more access and capacity, they get it without an extended network of proven forwarders and carriers. But even then, it’s not always easy. These days, someone has to take time to fight for that capacity. We fight for our customers, and because they get capacity faster, our managed customers avoid expensive expedites and costly customer order delays.
When our customers bring on new service providers or evaluates their current providers, there is a good chance that they already have access to their ELD’s for shipment tracking through our systems. A recent study performed with our API integration partner found that over 25 percent of the 2,500-carrier sample we provided are already live with ELD integrations and that 49 percent is live with mobile tracking. Our managed transportation customers plug into this connected extended carrier network (or invite their own carriers) without needed internal IT resources to make that connection. It only takes a request from the users of the system and an acceptance from the carrier to make it happen. Once that is done, we manage the rest and our customers get live tracking from service providers.
Additionally, our customers have near instant access to API connectivity with over 800,000 carrier fleet ELD’s, Ocean lines, Airlines, and Rail and LTL carriers so that they can quickly gain visibility to their shipments, as well as share it with their internal and external customers.
Roadblock 3: Using Your Existing Team to Operate the Solution
As a business owner, the number one thing that I often hear that holds companies back from growing is how to get A-players when and where you need them. Our managed transportation customers chose to not take on the expense and effort of finding, hiring, training, retaining, and paying for A-players. Instead, our managed transportation customers get access to A-players that can act on behalf of their organization with their existing staff. Additionally, they are working with employees that have not only been trained or certified in transportation but in communication as well.
Roadblock 4: Finding the Time, Infrastructure, or IT Budget
It can be overwhelming to think about finding the time, infrastructure, or IT budget to acquire the technology needed to be best in class. Our customers once faced having to find the time to put a team together to select and implement the right technology to provide meaningful shipment visibility. They chose to leverage our experience and knowledge. By starting with a baseline solution built on best class practices and technology, they are able to make the incremental changes that their unique circumstance requires.
Once tracking integration is in place, our customers utilize Shiptransportal’s proactive monitoring systems to manage shipment exceptions (early or late pickups and deliveries). Some of our customers receive tracking information integrated into their enterprise systems via API or EDU communication, pending their preference. While our team is actively pursuing and resolving transportation issues, our customers are able to focus their time on any internal and external customer communications that are necessary to lessen the impact of any unfortunate delays. The extra time that our customers spend in customer account management differentiates their level of service from the competition.
Roadblock 5: Gaining Control of Freight Expense
Due to the pure scale of transportation expense, it is not unusual for finance to be the driver of change to the supply chain. They have to be able to quantify all expenses once incurred. Our managed transportation customers utilize our teams and systems to line-item audit and dispute all of their freight bills. Once too cumbersome an effort, our customers are able to utilize a highly automated solution with the use of AI to have all of their bills audited in detail. This not only enables our customers to ensure that they are only paying what they owe, but also captures their shipment history in a meaningful way. Our customers are armed with new data that helps them prepare for future negotiations and freight savings. Additionally, finance departments no longer have to estimate freight accruals or gather them from multiple sources. Instead, they receive regular scheduled reports by GL code accounting for all accrued freight expenses.
In short, we understand that being transparent is tough when it comes to your company’s performance. We see companies winning and losing everyday based on how they handle transportation management. For those who have found it difficult to create a competitive advantage with their supply chains internally, talk to a few transportation management companies and assess them for capability and fit. We often find that when there is a good fit, working together is easy and reaching your goals becomes achievable. For those who are still unsure, reach out and ask for a free assessment to determine how you may benefit. Or, take our 60 second gap assessment, and we will benchmark you against world class. We will perform a high-level assessment, and you can take the next steps armed with information.
It was an honor for Shiptransportal to receive recognition from the Carolina Panthers and Crown Royal as a winner in their “That Deserves a Crown” program. Certainly special coming from an organization that I have respected for doing a great deal to support the Charlotte community!