Congratulations, you have negotiated the best freight program ever for your company. Now, how do you make it translate into a better bottom line? This is not easy. Remember, contract compliance is not automatic. Usage rates of 90% to 95% by your outbound shippers are considered excellent in the industry.
People are creatures of habit. If they�ve always used a particular carrier, they will tend to continue to use that carrier. Therefore, it is up to you to persuade, cajole, influence and convince shippers in your organization to use the freight programs you painstakingly put in place. Here are some key ideas to make the most of your efforts:
Solicit Upper Management Support. Explain the new freight programs to key upper management and outline the savings available if the proper carriers are used. Get total support from them for use of these carriers. Get their commitment to back the freight program in word and deed. If possible, get an upper management �angel� to draft a memo to all internal departments asking for buy-in.
Introduce the Program to Employees. A few weeks prior to implementing the new program, announce and explain the new program to the employees through memos and/or newsletters. Explain the reasoning behind the carrier choice, the savings possible by compliance and statements of support by upper management. If necessary, make a spokesperson available to discuss the program in employee forums and encourage one-on-one dialogue if appropriate. Remember, not all shipping originates from your shipping dock. Make sure the mail center personnel, the receptionist and everyone who makes shipping decisions (even for overnight letters) are aware of the programs and the benefits.
Shipping Area Routing Instructions. Create a routing guide for the designated shipping area(s). Make it specific but simple and straightforward. Base it on desired arrival date instead of carrier service. Give a number to call for questions and abnormal shipments (see Figure 1). This will assure that the routings will be done properly for the lion�s share of your total shipping.
Company-wide Routing Instructions. This is often where the most money is saved or lost in the shipping program. Every person, every department, every manager can typically ship � conceivably with the wrong carrier and/or the wrong service. I call this the �casual shipper.� Using the wrong carrier loses the discount (perhaps costing your company full retail). Purchasing a higher service level than required to reach the recipient on time can cost 50% to 200% more than required.
To reach the casual shipper, additional communication is required.
� Simple routing instruction sheets for letters to five pounds are appropriate. Make them attractive to encourage posting.
� Show options to get shipments to destination when required. Show examples of savings by using UPS Ground instead of Standard Overnight for Zone 2 shipments, for instance.
� Make yourself or someone in your group available to meet with groups to explain the program and answer questions.
� Give out a number for people to call for any shipping-related questions and man it with competent people.
Charge Freight to User Group. Many companies charge all internal freight costs to one or two cost centers � for instance, �Freight on Sales� and �Miscellaneous Freight.� Guess what? There is no incentive to follow routing guides if your shipping mistakes are buried in a big expense pot.
My recommendation is to ask shippers to identify their shipments and charge the transportation costs to their cost centers. If this is done, the cost of shipping mistakes will be borne in an individual�s budget.
Measure and Report Results. The measuring of savings and compliance is important, not only for the person who put the rates in place, but for the whole corporation. It will take some work but, if you can get the raw data, you can do an old-versus-new comparison of the costs to determine savings and you can show the savings lost by people still not complying with the routing instructions. Sometimes it�s an eye-opening experience for employees and management alike.
Using this process along with good routing guides will help your freight program be as successful as possible for your company. Using this process effectively will drive profits to your bottom line.
Dwight Sigworth is the executive vice president of AFMS Transportation Management Group. For more information, you can visit the Web site at www.afms.com or email him at dwight.sigworth@afms.com.
