{"id":1085,"date":"2021-02-09T06:01:23","date_gmt":"2021-02-09T14:01:23","guid":{"rendered":"http:\/\/themanwhosoldtheweb.com\/blog\/?p=1085"},"modified":"2021-02-09T06:01:24","modified_gmt":"2021-02-09T14:01:24","slug":"transportation-cost-reduction-in-supply-chain-management","status":"publish","type":"post","link":"http:\/\/themanwhosoldtheweb.com\/blog\/2021\/02\/transportation-cost-reduction-in-supply-chain-management\/","title":{"rendered":"Transportation Cost Reduction in Supply Chain Management"},"content":{"rendered":"\n
\"\"<\/figure><\/div>\n\n\n\n

Companies looking to improve efficiency and reduce costs can gain significant ground in the\u00a0Supply Chain Management<\/a>\u00a0function by incorporating\u00a0Lean Management<\/a>\u00a0and Six Sigma techniques.<\/p>\n\n\n\n

Reason this area has gone under the radar is that companies do not consider Supply Chain to be their core competency.<\/p>\n\n\n\n

Not only Warehousing but Transportation also has almost the same potential in terms of opportunities for Cost Reduction<\/a> and Process Improvement<\/a>.  The approach to Transportation Costs Reduction, though, is different to that of Supply Chain Cost Reduction in Warehousing<\/a>.  This is in part due to the complexity in Transportation Costs, as the costs come from numerous widely distributed individual operations every year.<\/p>\n\n\n\n

The approach to Supply Chain Cost Reduction in Transportation<\/a> encompasses 2 phases:<\/p>\n\n\n\n

  1. Understand the Baseline<\/strong><\/li>
  2. Identify and Implement Opportunities<\/strong><\/li><\/ol>\n\n\n\n
    \"\"<\/a><\/figure><\/div>\n\n\n\n

    Let us delve a little deeper into the 2 phases.<\/p>\n\n\n\n

    1. <\/strong>Understand the Baseline<\/strong><\/h3>\n\n\n\n

    Improvement in Transportation operations is hindered, in most cases, by enormous variability in operations, diverse service levels being demanded by various customers, and a multitude of transport providers delivering services in a variety of ways.<\/p>\n\n\n\n

    Transportation Costs of between 20-30% can be saved by compiling a complete perspective of the overall Transportation operations of an organization.  The evaluation will also reveal essential service categories that have a skewed effect on Cost.<\/p>\n\n\n\n

    2. Identify and Implement Opportunities<\/strong><\/h3>\n\n\n\n

    Identification of the Cost Drivers is imperative for the companies to develop a systematic approach to Transportation Cost Reduction.  This systematic approach involves observing 4 main levers of Cost Optimization<\/a> opportunities:<\/p>\n\n\n\n

    1. Compliance with Contracted Price<\/li>
    2. Negotiated Price<\/li>
    3. Contract Terms<\/li>
    4. Customer Breakpoints and Behavioral Changes<\/li><\/ol>\n\n\n\n

      The 4 levers of Cost Reductions help in countering the issues impacting Transportation Costs and enabling significant savings.<\/p>\n\n\n\n

      Significant Cost Reductions can be gained by identifying mutual benefits and risks for both companies and suppliers in addition to understanding customer breakpoints that enable Customer Centric Design<\/a>.<\/p>\n\n\n\n

      Let us consider a few instances where Cost Reduction can have a quick impact.<\/p>\n\n\n\n