more-arw search

Q&A Forum

Reducing Outside Trucking Transportation Costs

Charlie Witzke's Profile

We are a small company ($10 million in revenue) that spends approximately $2 million in outside trucking transportation costs.  We are looking at options for reducing these costs.  We’re considering better scheduling software, acquiring some of our own vehicles and drivers, etc.  Can anyone point me towards resources to help us with this project?

Answers

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

One key focal point should try to increase you "load" per truck from pallet rates to LTL, and LTL to truckload, with much lower costs per pallet at each juncture. Delivery schedule planning to "drop" to several customers in one trip, with negotiated "intermediate" rates, can yield substantial overall reductions in the average cost per pallet shipped and total shipping costs.

brian Norton
Title: Director
Company: Dynamic Business Innovations
(Director, Dynamic Business Innovations) |

One of the issues that I have found is that by trying to save costs on transportation it has a negative impact on the service levels to customers and thereby on sales. The small saving in transport costs is more than offset by the losses due to late delivery. Loaders wait until a truck is full before it is dispatched. Good saving for the transport department but damaging to overall sales. Local improvement but global damage. The same types of issues need to be taken into account with the use of optimisation software.

Agreed delivery schedules to customers should take precedence over local optimisation of transportation. If the agreed delivery schedules to customers are too onerous and cause too many small shipments you must revise your agreement with customers. But if speed of service is a key part of your competitive edge the larger transport costs may be worth while.

Although your transport costs are high as a percentage of revenue this evaluation should still be done.

Kirk Conole
Title: Partner
Company: DCI Solutions
(Partner, DCI Solutions) |

Hi Charlie,

The first simple step that will save money without changing current shipping patterns is to do a tariff analysis. This can cut parcel and ltl rates up to 40%.

Once you save this money, you can look at making changes to your program based on the relative savings those changes will produce.

Don Wademan
Title: Vice President Operations
Company: Lester Electrical
(Vice President Operations, Lester Electrical) |

Charlie,
One other resource for consideration is utilize an outsourced logistics company to help identify opportunities for cost reduction without compromising on quality or timeliness of the shipments. Because of their concentration of resources in dealing with transportation management for a variety of customers, you may find that they can identify opportunities for negotiating better rates, refining routing or optimizing who you choose to ship for various routes. Their analysis would likely help you to develop a plan on how to manage the process and whether the correct approach is internal infrastructure investment or acquiring a service to manage the process.

1824 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.