Keeping an Eye on Cost Management

The transportation and logistics industry is currently experiencing an acceleration of mergers and acquisitions, which is causing dramatic changes to the supply chain. Are you prepared to manage through this ever-changing environment while keeping a focus on managing cost?

The 80/20 Rule of Logistics tells us that 80 percent of supply chain cost and efficiency is inherent to network layout while the final 20 percent is driven by tactical and operational processes guided within that framework. With so many high-impact changes ahead of us, shippers have a prime opportunity to drive cost out of supply chains and alleviate their dependence on squeezing pennies out of the last 20 percent when hundreds of thousands of dollars have been left on the table due to not reevaluating their network.

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Cost and arrive-by dates are customers’ go-to concerns, but are far from the only relevant issues. Every mile and minute on the road is additional risk for delay, spoilage, accidents, loss, and damage. Each day an order remains in progress is a day that sales, customer service, operations, management, and accounting are spending time following up on that order, and not spending time on growing and securing new business. These soft costs can quickly eclipse the hard costs of transportation, if smart shippers are not careful.

Appropriate engineering and analysis of an existing network will:

Optimize DC locations

  • Minimize and match spend to customer weight and margin
  • Maximize and meet customer service expectations and MAB dates
  • Plan ideal geographic location by product
  • Right-size storage footprint
  • Reduce risk and COGS

Optimize Customer Assignments

  • Plant to DC
  • DC to customer
  • Reduce service time and cost
  • Eliminate or reduce shared delivery points

Optimize Overall Throughput by Product

  • Relieve congestion and bottlenecks in flow of information, goods, and finance
  • Create stability and predictability in service pattern
  • Maximize total ROI, minimize exposure to risk

Optimized network designs can eliminate as much as 65 percent of total spend and set the framework necessary for a solid TMS and order management platform to push you into best-in-class performance. Be sure to work with a provider who has proven experience in network design and optimization. It could be the cost savings—or profit provider—you never knew you needed.

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