Transportation Spend Optimization
Managing transportation spend for a supply chain often involves tactical and strategic support from a logistics partner. While it’s common to work with a third-party logistics provider, technological advances are driving a growing need for fourth-party logistics providers, specifically when it comes to optimizing transportation spend.
A recent review article by Rocha and Lehenbauer (2019) covers the key advantages of working with 4PLs for transportation spend optimization. However, with so many factors to consider, supply chain leaders need to prioritize. The following post reviews the top four priorities for transportation spend optimization.
Trax is a world-class logistics provider that empowers global enterprises to achieve transportation spend maturity. As a result, supply chain leaders are better equipped to optimize their transportation spend through the complete Trax product suite, including freight auditing capabilities, freight data management, and performance management.
Priority 1: Freight Audit & Payment
Freight Audit and Payment (FAP) can refer to freight audits, freight payments, or a complete freight audit and payment system. FAP systems are designed to streamline the process of freight auditing and taking freight payments, which is a critical component of transportation spend optimization.
Performing regular freight audits allows for better data and advanced analytics, reduced costs, greater control and visibility, and less time wasted on tedious tasks that can be automated. Additionally, when working with a 3PL or 4PL, supply chains can customize their FAP solutions with routing rules, approval parameters, exception criteria, and more. All of this streamlines operations and uncovers inefficiencies that lead to unnecessary costs.
Accuracy in Transportation Rates
Ensuring accurate transportation rates is crucial for transportation spend optimization, and the right FAP system significantly improves accuracy. The key to accurate data is access to a complete dataset, including by channel, SKU, zone skipping, and accessorials.
When a company centralizes its data and makes it visible across departments, it is easier to catch inaccuracies early and prevent negative consequences, moving from a reactive state of transportation spend management to a more proactive state.
The Trax FAP solution encourages organizations to gain control and visibility over their transportation costs by leveraging the latest technology and analytics.
Priority 2: Sustainable Methodologies
Sustainability has been a buzzword in supply chain management, with research emerging in the early 2000s. The study highlighted three dimensions of sustainable development: techno-economic, ecological, and social. Companies might focus on reducing carbon emissions. A complete TSM solution will address this through carbon emissions tracking.
The Trax Carbon Emissions Manager provides real-time, comprehensive carbon emissions data for all shipments across all modes and geographies.
Additionally, to gain a complete picture of a company’s environmentally sound methodologies, the Overall Business Impact Assessment (OBIA) can be used. The OBIA represents an econometrics parameter that accounts for the performance of a business and its environmental impact.
Economic sustainability focuses on supply chain efficiency. Utilizing technology that improves operational efficiency related to order fulfillment, cloud-based computing, and big data analytics paves the way for techno-economic sustainability.
According to Clift (2003), the social aspect of sustainability can be challenging to measure, and indicators should be further explored. However, the researcher points to Maslow’s hierarchy of needs as a means of identifying social sustainability indicators, for instance, satisfying physiological and/or social needs with a certain product or service.
Priority 3: Transportation Payment Solutions
Ensuring that payments are made on time is critical for supply chain leaders. A transportation spend management solution with a Rate Manager is ideal because it centralizes the data and processes, eliminating multiple side operations. For example, Rate Manager by Trax validates rate and spot quotes for all transportation modes in all regions.
By utilizing these advanced tools, companies gain visibility to all rates and can set up alerts for expiring or expired rates. This leaves less room for error and improves payment accuracy.
Taking this a step further, payment automation can significantly improve transportation spend management capabilities. TraxPays is a world-class payment automation and supply chain financing solution. The solution enables timely payments to the carrier to strengthen relationships, reduce the workload for internal team members, and better optimize cash flow.
Priority 4: Agility and Adaptability
The supply chain market is bound to change over time. For example, COVID impacted countless lives and disrupted the normal supply chain. As a result, demand surged, and freight rates increased, causing undue stress on enterprises. Now, companies need to remain agile and adapt to any volatility.
Having a reliable TSM system in place can help companies prepare for future disruptions in the supply chain by paving the way for intelligent visibility. Not only does a transportation spend management system improve operational inventory visibility, but intelligent visibility in supply chain analytics also involves accessing real-time data, sharing reports, and streamlining business processes by acting on the findings.
Optimizing transportation spend can only be achieved when a business is agile. By accessing complete datasets and balancing Sales, Inventory, and Operations Planning (SIOP), businesses can adapt to changes in the market more quickly. In addition, a successful SIOP process improves forecasting, resource planning, ROI, and inventory levels.
Dynamic Transportation Solutions
When optimizing transportation spend, working with a 4PL to address the four key priorities above will keep an enterprise competitive in today’s supply chain market. The goal is to find transportation spend management software that offers all the capabilities to achieve a business’s strategic and operational goals.
Finding the right fourth-party logistics provider starts a company’s journey toward maturity in transportation spend. The Trax TSM solution covers freight audit and payment, sustainability, transportation payment automation, agility, and more. Contact Trax today to learn how we can help you achieve global transportation spend management maturity.