As we turn the page into a new year, we often find ourselves filled with ambition to take on new challenges. While many are setting personal home, work, and fitness goals we often find ourselves faced with a monumental challenge from work that comes with the calendar change: the annual budget. As transportation personnel, this means balancing top-down financial pressure, while maintaining service excellence for customers, in a manner that is safe and executable by the operational staff. From year to year, we always seem to have unique challenges to balancing these, and the ability to adapt is what ultimately defines your logistics success.
Hitting the Number
The past few years have offered unique pricing climates across transportation modes, namely the spike through the pandemic that broke even the savviest shippers’ budgets. Then the rebound, particularly for shippers who have ocean and air freight, made-year-over-year numbers shine. However, as we enter 2024, pricing across modes has stabilized and we expect a more standard year-over-year annual pattern — and that means general rate increases. If that extra spend isn’t in the budget, there are basically two things you can do: either get better rates or ship it in a more efficient manner.
Carriers will rarely just offer up better rates. In order to make sure you are paying the lowest fair rate possible, it is important to be informed about the market. Understanding how your profile relates to competitors can help make informed decisions about where you can improve on price. Do you need a full strategic RFP or just make a few pointed asks with targets? A mature rate procurement strategy requires preparation and understanding prior to any actual sourcing.
If we already have competitive pricing, then maybe there is a cheaper or more efficient way to move the product. The recommendation is to always start with the data and a full assessment of your spend profile. Are there any new accessorials occurring, or do you see an increase in certain modes or services? What business decisions are driving those results? Typically, as you review these, you will find cost down opportunities that may come with tradeoffs that impact service.
Making the Date
As we look to make changes to reduce cost, we must constantly be aware of the impact to your customer. Typically, most shippers can be more aggressive with inbound transportation, which often has fewer time commitments. However, particularly for retailers who compete with Amazon, outbound delivery times are crucial. Shippers who can implement more dynamic rules into shipper software and take advantage of different service levels, regional carriers, hub and spoke models, etc. will have an advantage. Once you understand the cost and service tradeoffs, make sure to share these across the business. Sometimes those static service rules can be broken if the folks in charge understand the potential return.
Does It Work?
Lastly, as we look at unique solutions, we have to be mindful of keeping operational fit. Will changes impact work schedules, or perhaps technology? Maybe you will need new conveyors and have to adjust dock door allocations to accommodate a new regional carrier. Also, even if it can not be done operationally right now does not mean it is a complete nonstarter; showcasing a significant ROI is always a positive motivator. That said, we strongly recommend not implementing something just because it can save money unless you have full confidence that you can operationally make it work. If a new program fails and you must revert, it will always end up costing more. Consider using a trial period for a proof of concept and understand that anytime you are making a change there always will be some bumps to roll through.
Good luck as you embark on a new year which will undoubtedly bring new challenges on your journey to logistics excellence.
Eric Grice is a Manager for Körber’s Transportation Consulting team.
This article originally appeared in the January/February, 2024 issue of PARCEL.
