Companies seldom go the whole way to get control
As we work with transportation costs on a daily basis, we’re on top of things and would like to share some of our knowledge of the area. A bit of advice and a checklist, with a twinkle in our eyes.
To put it briefly, I would say that many companies have worked hard at optimising production logistics. This involves a lot of focus on inventory levels, for example, but seldom going the whole way and getting control of transportation costs.
There is often room for cost savings
Maybe this depends on the fact that production logistics and inventories are regarded as core activities, while transportation is very suited for outsourcing. My advice in this case is that regardless of whether you outsource transportation not – and there are usually good reasons to do so – there is often room for cost savings there. Plus there are a number of other benefits that come from taking over transportation planning and sourcing of freight services.
Take a look at my checklist, and you’ll see what I mean:
Checklist for optimizing logistics
Optimize manufacturing processes – Check!
- Focus on eliminating bottlenecks
- Implement lean, kaizen, one-piece flow, just-in-time, etc
- Invest in well-functioning system support for manufacturing
- Increase productivity and minimize frozen capital
Optimize warehouse stores – Check!
- Define an optimal distribution network with warehouses and depots in the right locations
- Create good sales forecasts and manage inventories accordingly, with due regard to the desired service levels
- Cooperate with suppliers on automatic inventory fulfilment
- Invest in a well-functioning system support for inventory control and handling
- Reduce frozen capital, but also costs for inventory handling.
Optimise your transportation costs – Check?
- Make conscious decisions about who is handling your freight – you or a supplier.
- Negotiate a good transportation agreement and weigh different alternatives against each other.
- Make sure the agreement is followed by your own personnel and check all transport invoices against the agreement.
- Consolidate your transportation agreements to the optimal amount for each transportation category and logistics supplier.
- Keep track of your dispatches even when they are loaded together with others or utilize several stages or modes of transport.
- Evaluate and analyse your shippers’ delivery precision, costs and effects on the environment. Based on his analysis, improve your network, your agreements and your processes.
- If you don’t have a lot of inexpensive and math-savvy staff on hand, invest in well-functioning system support. This entails automating processes and simplifies the job for you and your staff.
- Save 2-4% of the total logistic costs just by implementing transportation invoice checks, and save even more if you can also take control of transportation planning and follow-up.
Optimisation opportunities in every area
As you probably suspect, at Primelog we know a great deal about transportation logistics. If you need help with production and warehousing we’ll refer you to others. But regardless of your needs, there are optimization opportunities in every area, and thus cost savings and higher service levels out there, ready for you to bring home.