Regular invitations to tender have made it possible to control transport costs but they are now reaching their limit. Companies need to come up with solutions to improve transport consumption, by optimizing flow management (fill rates, miles traveled, etc.), seeking out economies of scale with other partners, developing logistics specifications, and equipping themselves with information technologies that assist in decision-making or forward planning of requirements.
We assume that our clients already have their transport procurement organized. However, we are convinced that there are still significant opportunities for optimizing transport. There are five main components:
- Ensuring a high fill rate: checking whether the transport capacities procured are being put to the best use, by studying filling process, apparatus (pallets, rolls, etc.) at-a-height filling, and container-filling (tubs, boxes, etc.)
- Minimizing total distance travelled, based mainly on the ability of the shipper to constantly optimize its transportation plan and adjust it to variations in volume. Another consideration is the distance travelled by empty vehicles, which can account for up to 50% of journeys
- Making effective use of resources and drivers: as the depreciation of vehicles accounts for a significant portion of carriers’ cost prices (12-14%), both the vehicle and the skills of its driver must be put to best use, i.e. transporting, as opposed to waiting, loading, or unloading, over a maximum operating range
- Having an effective transport procurement policy, in terms of the shipper’s ability to find the means of transport at the lowest cost (either own or market), to enable it to achieve its service quality and environmental targets and effectively manage its service providers (monitoring, invoicing, etc.) in the long term
- Monitoring performance rigorously: to rapidly identify any service quality deviations and to control transport invoicing.
Argon Consulting has developed unique expertise by producing cost-price models and cost-benchmark baselines that can simulate the impact of these different levers on costs and prices.
Transport organization must provide answers to the following questions: How should flows be managed? How can the optimized transportation plan be implemented with respect to resources, costs and delays? Which organization and structure should be chosen? (Reporting line, staff, location, etc.). What are the issues in relation to pre-invoicing and event monitoring?
Transport performance monitoring
Performance monitoring must aim to: cut the cost of disputes for the company by analyzing causes and identifying avoidable costs, monitor the evolution of transport costs and budgets, monitor transport performance using effective indicators, analyze customer satisfaction levels, and implement and monitor productivity plans.
Going the extra mile in transport optimization
A Supply Chain initiative must look beyond the strict business context and identify new areas for improvement, both for customers (e.g. by questioning the customer service policy: frequency, lot size, and levelling through the implementation of Activity-Based Management) and for suppliers (e.g. organizing merchandise pick-ups on suppliers’ premises is a powerful means of limiting "empty miles"). Similarly, the optimization of packaging and preparation units is a real lever for reducing the final delivered-to-customer cost (including transport [volume, stack factors] and preparation [productivity]).
How can Argon Consulting help you?
- Audit and identification of areas for improvement in transport procurement
- Current performance analysis and identification of potential for optimization
- Definition and audit of transport unit processes and organization
- Advice on the selection of transport service providers
- Advice on choice of tools [Transport Management System (TMS)]