Transportation Cost-Cutting Strategies to Maximize Supply Chain Profits

Transportation Cost-Cutting Strategies 
to Maximize Supply Chain Profits

Businesses are preparing to recover from the crisis that is still unfolding. A recent survey by the Institute of Supply Management (ISM) highlights that approximately 16% of the businesses affected by the pandemic plan to cut their revenues by 5.6%. The cost of moving products or the transportation costs of a supply chain business forms a significant part of its overall spend. This cost, most of the times, is passed on to the customers in the form of product price hike, which adversely affects the business.

Understanding how to reduce or cut transportation costs so that it does not hamper your business is crucial. There are various ways in which you can cut transportation costs and in the process improve your supply chain processes as well. Let us look at a few practical tips:

Consolidate your shipments

The idea is to move from less than truckload (LTL) to full truckload (FTL) shipping options. This might not seem feasible but with a little planning and care, it is the best way to reduce cost of transportation. While shipping, take care to load smaller packages into bigger ones that are to reach the same destination. This will reduce the number of trips considerably and the benefit of availing lower rates on larger shipments also becomes a possibility. Monitoring the weight of the packages can also be helpful as higher the weight, higher the shipping charges.

Resort to efficient route planning

While preparing a route plan a lot of factors have to be taken into consideration such as weather conditions, avoidance zones, material handling capacity, or number of stops on the route. Many route planners use advanced technology to make route planning easier for you. These route planners have the capability to efficiently map out the best optimized routes for smooth operation, factoring in everything to minimize the cost of transportation. The mappings ensure better routes, balanced workload, and less fuel spend. Leveraging a route planner to plan the best routes without maximum repositioning of vehicles is a wise thing to do.

Go for fewer carrier options

Most transport managers usually take the multi-carrier approach and fail to look at the bigger picture. When you opt for fewer carriers for transportation, larger volumes of work can be offered, leading to the possibility of bargaining for lower transportation rates across various routes. Carriers would also readily oblige to negotiate for reasonable prices keeping in mind the increased volume of work they are being offered. This strategy would work well for both the parties.

Be mindful of recently introduced carrier surcharges

Similar to supply chain vendors, carriers are also reeling under the impact of the unprecedented global crisis. Hence, it is always good to be aware of the newly introduced carrier surcharges. While such surcharges may be introduced to recover lost revenue during times of crisis, it is surely an added cost to be incurred by the supply chain vendors. Being mindful of such costs and planning to get a deal that does not go beyond your budget will ensure that transportation costs are kept under control.

Reduce the number of failed deliveries

Each attempted delivery that fails is a setback for business as it harms the profit margin. Failed delivery means another delivery attempt at another given time, resulting in extra cost for fuel to make a rerun to the same location. It might also affect other deliveries on the go, upsetting the entire delivery cycle. Thus, focus on reducing the number of failed deliveries as it can jeopardize the entire delivery system and increase transportation costs.

To conclude, it is important to establish cost-effective and efficient transportation to maintain the profit margins of the business and survive in times of crisis without suffering a major setback. It is prudent to examine the areas where changes are required and implement cost-saving strategies for improved return on investment.

Read More:Recession-Proofing the Supply Chain

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