Peak Season is Coming: What’s Your Transportation Spend Strategy?
In today's competitive business landscape, reducing transportation spend is a top priority for companies looking to optimize their logistics and supply chain operations. This is especially true during peak season when demand is high, and costs can skyrocket.
Optimization strategies have historically relied upon forecasting models that could have been more reliable. Still, the tide is turning as more global enterprises dive into data to help understand logistical bottlenecks that increase operational costs. Creating a strategy around transportation spend requires a few key pieces, most of which revolve around visibility.
Trax allows transportation leaders to leverage reliable data to improve visibility in their supply chain operations. By simplifying complex challenges, organizations can create a well-rounded transportation spend strategy that will help them maximize profitability through peak season and beyond.
The Basics of Transportation Management Strategy
Before we dive into the nuts and bolts of reducing cost structures within your organization, it is important to understand the fundamentals of transportation management strategy and basic costs.
What is transportation management strategy?
Transportation management is the process of planning, executing, and optimizing the movement of goods. When successfully executed, a transportation management strategy makes it easier for shippers to achieve an error-free, cost-effective, fast, and smooth flow of products.
Pieces such as freight audit and payment (FAP) tools are relatively new to the industry but can provide empirical data to improve visibility, decision-making, and operational efficiency. During peak season, strategies will shift to accommodate the increased demand and limited capacity, as these factors will impact the cost of moving goods.
What are the four basic costs of transportation?
Several factors impact transportation spend, most of which can be put into one of four categories.
- Line Haul is moving costs based on the distance carried. Goods are shipped through a container that has a specific weight and volume. The carrier has basic costs associated with moving the container, whether full or not. These include the driver’s wages and fuel.
- Pickup and Delivery costs are similar to line haul but are dictated by time instead of distance traveled. Each pickup or delivery will incur a separate charge from the carrier.
- Terminal Handling costs depend on the number of times a shipment must be loaded, handled, and unloaded. This is particularly important for partial shipments as they must be unloaded and sorted before being sent to their final destination.
- Billing and Collections must be factored into the strategy, as each shipment requires paperwork and invoice. This process is put under the microscope during peak season.
As the demand for freight increases, the cost for each of these factors will inevitably rise. Having systems and processes in place will help highlight areas that can be improved and where costs can be reduced.
A freight audit and payment system allows full visibility of each step in the process. As data is introduced into the process, examining each cost structure and where efficiency can be gained is easier.
While FAP tools provide a clear understanding of where you have bottlenecks, the next step is putting that information into action. One of the best ways to do this during peak season is to consolidate freight. By consolidating shipments, you can impact each of the four cost factors outlined above.
Explore Shipping Consolidation Opportunities
Consolidating freight allows shippers to make the most of higher volumes by batching their similar freight or coordinating with other shippers with products headed in the same direction. Once these combined shipments arrive, they’re broken down and redirected to their final destination. Here are a few things to consider when examining consolidation.
Know your Costs
As shipping volume increases, per-unit shipping costs decrease, so it’s advantageous to combine shipments to boost total volume and lower overall transportation spend. This means that consolidation is to your advantage during peak seasons when demand is high and limited capacity causes rates to jump.
TMS and Freight Spend Visibility
As mentioned, visibility is the foundation of a well-rounded transportation spend strategy. Transportation management spend tools can help with forecasting so you know exactly when you need to start consolidating freight to have the greatest impact on profitability.
Keep Customers Happy
Consolidating freight has the added benefit of fewer touchpoints as it moves through the supply chain. Full truckload shipments take significantly less time to inventory than LTL shipments, meaning deliveries are more predictable and can be easily expedited. Consolidating freight ultimately leads to faster delivery times and more satisfied customers.
Don't Rely on Single Modes
Consolidation may require you to get creative with how you ship. Diversifying the modes of transportation can help you find avenues that streamline the process to a greater extent. A perfect example of this could be choosing rail instead of over-the-road (OTR) options.
We may sound like a broken record, but data is the key to understanding which mode can alleviate some transportation costs. Each segment of the logistics industry will experience its peak at different points over the next few months, making it essential to follow the breadcrumbs provided by your transportation spend tools.
The Journey to Transportation Spend Management Maturity
Freight consolidation is one of the best ways to streamline your shipping process and ensure that your customers are taken care of during the busiest times of the year. Finding efficiencies during peak season doesn’t have to be like searching for a needle in a haystack. Having the right systems and processes, like a freight audit and payment system, will make it easier to uncover areas of improvement to help reduce costs.
At Trax, we understand that peak season is a make-or-break period of the year for most organizations. With our modern transportation spend management tools in place, we can help you break down the complex challenges that arise during this time of the year. Backed by data, you can be confident in your decision-making and easily navigate the remainder of 2023.
To learn more about our solutions, connect with our team and schedule a demo.