There are many industry trends that have a direct impact on your cost and on your ability to conduct business. On the shipping cost front, we face fuel surcharges from every mode of transportation that increase expenses from three percent to more than 20%. Labor shortages and turnover, combined with available equipment and infrastructure constraints, place further pressure on land, rail and water transportation. Security requirements, compliance regulations and insurance costs all lead to more accessorial charge assessments and add complexity in accounting for the total cost of transportation.
If we were to look beyond transportation and consider the broader supply chain, we can also include the impact of rising interest rates that increase our inventory carrying costs, a general tightening of warehouse space and rising rents as well as rising offshore production costs all of which weigh heavily on the total cost of doing business.
The challenges we face are daunting to say the least. They make us think outside the box, engage in outsourcing, work with service providers in a collaborative manner and force us to become as efficient as possible. The drive toward using technology that is compatible with both your companys systems and your outside vendors and business partners makes collaboration and the selection of service providers critical.
With all the technologies available today, how do you know which one is best for your company? Are you getting the most out of your existing system? Are you considering a technology upgrade but are just not sure what you should do?
Your Current Situation
Before making any changes to your shipping operations, its important to assess how things are being done today. Some questions to ask yourself include:
- Do you pull shipment data out of an existing enterprise-wide system?
- Will you process shipments in a standalone transportation management system (TMS) and push data back into your other enterprise processes?
- Are you one of the growing number of companies taking advantage of some of the latest on-demand, software-as-a-service solutions?
Some of the reasons why companies are looking closely at on-demand programs include reduced (if not eliminated) upfront investment, faster implementation and ease of upgrading. Not to mention the more limited need for resources to maintain on-demand services a bonus for those companies with limited IT staffs, budgets or sophistication.
So why isnt everyone jumping on board the on-demand bandwagon? For anyone who has highly specialized processes, the standardized nature of on-demand may make it more difficult to customize. And those companies who view their supply chains as a competitive advantage may feel compelled to have a proprietary or custom technology solution they can use to differentiate and sell their services.
Who is the real driver behind your technology process choices? Your customer, your service provider(s) or you? If your customer happens to be the worlds largest retailer or the worlds largest government, chances are you have some fairly stringent technology requirements to meet in order to conduct business. But is that any different than dealing with a major service provider or carrier with the system testing and compatibility requirements they need you to meet in order to conduct business through them? Before selecting any new technology, it is advisable to check the compatibility requirements of your existing platform and to determine whether you will be pulling shipping data out of your enterprise system, pushing it back into your or your customers system, or whether you have the ability to work off of an Internet-based on-demand solution.
Facing Todays Challenges Head-on
Do you use a routing guide? Is it a static document sent to shipping personnel and out to vendors instructing them on which carriers to use dependent upon weight breaks, distance traveled or some other standard criteria? If so, how often do you update it? How do you know that your guidelines provide for an optimal routing decision to be made for every shipment every day? Consider that the lines of demarcation between LTL and parcel hundredweight have become blurred. On top of it, one of todays most visible accessorial costs is the fuel surcharge. Many companies are not including the difference in the fuel surcharge between the two offerings. Instead, they focus solely on the net shipping rate. One service may have a five percent net rate advantage but also comes with a 15% higher fuel surcharge, so the total cost of transportation is actually greater. Is this properly reflected in a routing document, and is this document updated with every change in the fuel surcharge index?
A properly selected technology solution with business rules built in that can calculate the net freight cost, include the applicable fuel surcharge and is updated to take fuel surcharge adjustments into consideration as they occur will allow you to select your best-cost solution on every shipment, every day. Thats something that the best routing guide document cannot do.
Wait, Theres More
Yet another challenge to consider: Lets take the earlier stated issue of compliance. How do you know that the documentation you are completing for todays export shipment is complete, accurate and that the regulations have not changed since the last time you shipped to this country? Are you sure? Properly executed documentation will ensure that your goods are transported in a timely manner, clear customs without economic penalty and eliminate down line delays in your supply chain.
These are just two examples of how current technologies can help you overcome critical challenges in the supply chain. To learn more, I would encourage you to attend this falls Parcel Shipping & Distribution Forum, September 11-13 at the Hyatt Regency OHare in