Poor logistics planning and decision making can result in excessive expenditures, damaged goods, and missing of delivery deadlines. This is why maximization the efficiency and minimizing the cost of transportation portion of the company’s supply chain is important. As the Vice President of Supply Chain Management, I will employ the following processes and procedures to maximize efficiency and minimize costs of transportation portion.
Reducing carriers for the best pricing
Finding the best carrier at the best price will involve reducing the number of carriers used for transportation. By reducing the number of carriers, the amount of work given to specific carriers increases. Offering vendors a large volume of work will mean that it will be easier to get lower rates across several transportation routes. While this strategy is good, it has a downside with the risk associated with using a small number of carriers (Martin, 2014).
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Consolidating shipments
Consolidated shipment involves shipping goods at full container loads. A company that uses carriers for deliveries negotiates payment based on distance, weight, and other variables. Consolidating shipments involves making fewer trips. The company should reap benefits of having lower rates based on the large shipment.
Cargo Insurance
For logistics planning and cost savings to make sense, insuring of cargo properly is importance. The insurance should fully cover the value of the products so as to avoid unpleasant surprises throughout the transportation.
Optimization of resources.
Efficient use of company assets such as vehicles, inventory or facilities will directly affect the revenue. By optimizing the utilization of assets, the business efficiency can be greatly improved. One way to achieve this is through proper arrangement of delivery schedules to keep the entire fleet of vehicles operational throughout the day. This will be more beneficial compared to a peak use of vehicles in the morning and idling for the rest of the day (Anderson, 2015).
The metrics and benchmarks to measure success of the transportation will include:
Freight costs
Freight costs to be evaluated include freight cost per unit shipped, outbound freight costs as percentage of net sales, and inbound freight costs as percentage of purchases. Freight cost per unit shipped will be calculated by dividing total freight costs by the number of units shipped per period. Outbound freight costs as percentage of net sales will be calculated by dividing outbound freight costs by the net sales. Inbound freight costs as percentage of purchases will be calculated by dividing inbound freight costs by purchases in dollars. It is important to keep freight costs as minimum as possible to ensure maximization of efficiency and reduction of costs (Robinson, 2014).
Transit time
Transit time is measured by the number of days from the time a shipment leaves a facility to the time it arrives at a customer’s location. Transit time is often measured against a standard time which has been quoted by the carrier for every traffic lane. The transit time can be used to analyze performance. On-time delivery shows that a carrier has the ability to deliver successfully on time at the scheduled arrival date and appointed time (Intrieri, 2016).
Claim as a percentage of freight costs
This is calculated by taking the total loss and damage claims divided by total freight costs. It is measured in total for every carrier. A high number of claim as percentage of freight costs indicates inefficiency, packaging problems, and problems at the carrier.
Truck turnaround time
Truck turnaround time is measured through the average time elapsed between a truck’s arrival at a facility and its departure. It is an indicator of the efficiency of the receiving processes and shipping process. It has a direct impact on freight carrier profits on the business.
References
Anderson, C. (2015) “6 Essential Logistics Key Performance Indicator (KPIs)” Weber Logistics. Article Online: http://www.weberlogistics.com/blog/california-logistics-blog/key-performance-indicator
Intrieri, C. (2016) “Measuring Supply Chain Performance” Data Key Performance Indicators Supply Chain Technology. Cerasis Business Article. Online. http://cerasis.com/2016/04/25/measuring-supply-chain-performance/
Martin (2014) “How to Setup Logistics for E-commerce from Scratch” CLEVERISM Business Article. Online: https://www.cleverism.com/setup-logistics-e-commerce-from-scratch/
Robinson, A. (2014) “Transportation Metrics That Matter Most to Track and Improve Performance” Freight Accounting Logistics Transportation, Cerasis Business Article. Online: http://cerasis.com/2014/07/29/transportation-metrics/
