By Joseph Evangelist
Executive Vice President, Transervice
As originally appeared in FleetOwner Magazine’s IdeaXchange
When we talk about a transportation strategy we really are referring to functions that occur outside the walls of the distribution or manufacturing center. How does product — raw material or finished goods — get to the distribution center or to the customer? And how does product get from a distribution center to customers or end users (the customer’s customer)? While it may seem to be a small part of the supply chain, it is the place where a manufacturer comes in contact with its suppliers and its customers. It can have tremendous effects on cost, service and ultimately profitability. It is important for a carrier to understand this dynamic in order to provide good service to its customers.
When companies look at their inbound freight process, they establish some key objectives. Here are some examples:
- Reduced freight costs and improved bottom line
- Improvement in on-time deliveries
- Reduction in purchasing lead times
- Less handling and damage
- Lower inventory levels and reduced carrying costs
- Maximum visibility into the process
Having clear objectives lets the company make important decisions including whether they should manage their own transportation or let a fleet handle it. The decision about whether to opt for truckload or LTL carriers or have their own private fleet handle it is one companies do not make lightly.
As an organization looks at its outbound shipments, it needs to answer some key questions including:
- How frequently does it need to service its customers?
- Do deliveries need to be made into each market area every day?
- Are their minimum shipping orders?
- How far from my own distribution center am I willing to ship with my own fleet?
There is a lot of technology available today that will help companies make those kinds of decisions. Freight optimization software allows a company to model its shipments, make effective decisions and allows them to come up with transportation solutions specifically for their customers.
This is the process a manufacturer or distributor goes through when determining whether to invest in owning and operating its own fleet. If they can be shown that outsourcing is a more sound transportation strategy that is what they will ultimately do.