Four Key Factors That Require Management Focus
By: Transervice Staff
There are four key factors that affect businesses large and small and in many cases these are real challenges that if not addressed successfully can lead to poor business performance. If not already done so, management needs to determine how they measure up in dealing with these challenges and how to quickly move forward with meaningful actions.
The four factors or challenges are (1) transportation continuity planning, (2) fuel efficiency and the move to alternative fuels, (3) driver shortages & training, and (4) transportation management.
Transportation continuity planning: Recent natural disasters such as tornados, earthquakes, fires, floods and severe storms have disrupted the ability of many companies to deliver their goods on time or even at all. Shippers need to plan for these events now more than ever in the past. If you don’t have a plan, you need one. You may very well have very good freight management in your company but without a solid transportation plan you could be caught much unprepared to deal with a disaster. Suggestions are as follows:
- Meet internally with your business leaders to discuss requirements and develop an approach. Create a clear but concise as well as realistic transportation continuity plan. If you have a private fleet, a leased fleet or a dedicated contract carriage service collaborate with their managers to learn about their continuity plans and how they mesh with your needs. For example, are backup carriers identified and willing to help in an emergency … how do you prioritize back deliveries to customers … can your private or dedicated fleet be expanded, can it be cost justified? Find out what emergency plans exist and this also applies to your LTL carriers. Don’t wait for a disaster to do this.
- Next, work with your company operations and sales teams to develop a process for improving distribution planning levels by examining your inbound movement of goods and raw materials, lead times from suppliers, transportation modes and inventory policies.
- Understand your private-fleet capacity and your organization’s ability to redeploy this capability to your most vital lanes. This is your insurance policy!
Fuel efficiency: How to deal with volatile diesel fuel prices? From an operations perspective developing the right approach is key to mitigating fuel and ever increasing equipment costs. Suggest the following:
- If not already done, join the EPA’s SmartWay program, make sure your transportation providers have a program in place.
- Discuss an alternative fuels pilot program with your fleet provider with potential to eventually convert a part or all of your fleet to alternative fuel trucks and tractors. Also investigate whether your core carriers have a program in place.
- If you are in fleet ownership build a realistic total cost of ownership model for alternative fuel vehicles, consider the implications of high acquisition costs, fueling infrastructure limitations, and maintenance, repair and overhaul. Do you want to undertake the risk of acquiring and operating an alternative fuel powered truck that may not perform well or end up being an unsustainable alternative vehicle model.
- Talk to a fuel procurement expert, your fleet provider should have one or know of one, about how best to track diesel pricing and possibly incorporate hedging strategies into long-term plans.
- Talk to you fleet provider to utilize a route optimization modeling software tool to plan more efficient routes or to update your current route plan. Reducing miles traveled and improving load building to increase trailer capacity can mean big cost savings.
- Make sure your trucks and/or tractors have engine-monitoring systems to optimize fuel MPG and to identify maintenance items that could affect fuel efficiency.
- Consider vehicle tracking GPS systems to monitor your drivers’ behavior like excess idling, speeding and other driving characteristics that when changed can improve fuel economy.
Driver shortages: the trucking industry pundits estimate that there is a shortage of more than 40,000 drivers at current demand. It is apparent that driver shortages will increase and be a long term problem especially when it comes to quality. Shippers need to provide driver safety and skill training to their drivers and implement recognition programs to elevate the importance and visibility drivers have in the company. Shippers should collaborate with their transportation providers to avert the impact of driver shortages to their operations, re-calibrate the utilization of private fleet versus purchased transportation, and examine opportunities for enhanced value via creative outsourcing solutions.
Transportation management: many companies have developed their transportation strategies over time and are doing the same thing day in and day out and due to the pressures of the day they don’t have the time or resources to step back and take a fresh look at what they are doing. Progressive companies are looking at transportation more strategically and investing time in understanding the possibility of outsourcing transportation functions.
- Assess the current state of your transportation function in terms of people, processes and technology. The Supply Chain Operations Reference (SCOR) provides a solid benchmark for this type of analysis, or hire on a skilled transportations consultant to get the analysis done more quickly.
- Review and elevate the visibility of the role that transportation plays in executing your company’s revenue and profit objectives. Think about how transportation can improve your company’s bottom line not only in the numbers but with customer service and customer retention.
- Develop a three + year transportation plan that sets forth the changes needed to execute at a higher, safer, more responsive and sustainable level. Consider your organization needs, people, equipment, technology and which service providers are required to meet your vision.
It’s important for survival for companies to learn about logistics trends and stay ahead of these trends. Don’t be caught looking for help when disaster strikes, whether it is man-made or nature-made or simply an event that appears to initially not be catastrophic. Optimize your transportation organization within your company, secure buy-in from senior management, get your budget approved, continually strive for improvement and remain true to your overall plan.