21 Mistakes adding cost and killing productivity in your warehouse #18: Choosing the wrong carrier

Your choice of carrier and freight service is an integral part of your product and service experience.  Your freight provider will likely have more regular contact with your customers than you do.  Choosing the wrong carrier can not only add cost to your business by paying too much for freight, it can cost your business through poor service delivery that may drive your customers to your competitors.

So how do you choose a freight provider?  Let me start with the do it yourself option.  Should you run a dedicated fleet?  i.e. vehicles that deliver only for you.  The answer is yes if you have sufficient volume of orders and a limited customer base so that you can ensure a high fleet utilisation.  The most likely candidates are B2B companies serving a particular market niche.  The next question is whether to outsource the management to someone else.  This is probably also a yes unless you are very big and can afford to invest in the vehicles and management staff and systems required run your own fleet efficiently.  The halfway option is to manage a fleet of subcontractors, where you provide the management and any vehicle fleet management technology but the subcontractors buy the vehicles.

Even if you have a dedicated fleet you will most likely still need to use general carriers to service the areas of your market you cannot deliver to directly.  The best advice I can give here is to shop around.  You can do this yourself or engage a freight broker or a consultant to give you advice.  The brokers advice will not be independent as it will be limited to the carrier relationships they have in place.  A broker will help you manage your freight and will take a margin for doing so.  This can still be a very good option as they will likely get better rates for you than you could get yourself (with their carriers) even though they take a margin.

A freight consultant can perform a carrier review for you.  The only way to accurately compare rates among different carriers is to apply the rates from each carrier to a standard set of historical data that represents your typical freight requirements.  To do this a consultant (or broker) will collect all your historical freight data and run a Request For Proposal (RFP) process to independently test the market to find the best price.  In this case you will pay a fee to the consultant but the advice will be truly independent and not hidden in ongoing fees.

As independent consultants Logistics Help can run a cost effective (and anonymous) freight review for you and repeat it on an annual or bi-annual basis to make sure you stay current.  The fees are not high and will be recovered in lower freight costs.  As your business grows and changes you will be able to negotiate better rates as rates generally reduce with higher freight volumes.

Sometimes a change in freight service or niche carrier can give you lower costs on part of your freight requirement.  For example you can send freight to the metropolitan area of your capital city with an overnight express service (such as Star Track) or you can send it with a twice daily parcel service such as Couriers Please or Fastway.  The parcel service is usually cheaper and gives you more time to process your orders because they pick up in the morning instead of the night before.  They also provide you the ability to do very cheap same day freight for early morning orders, or simply the advantage of clearing your outbound freight twice each day.

A niche carrier may specialise in delivery to  particular state or regional area that you have a lot of business in.  In this case you may well get a better rate and a better service that your customers love because the carrier is a local.

Knowing what is available and which carrier is worth pursuing is what you are paying the broker or consultant for, but there is no reason why you cannot do it yourself if you have the time to do the research and are a good negotiator.  If you have any doubts or want to find out the costs to have a carrier review done for you then contact us to find out more.

This is post is taken from an ebook that is now available as a bonus to members of the Warehouse Performance Initiative (WPI*).

The WPI is a place for learning how to improve your knowledge of warehouse operations improvement, sharing skills and ideas and helping other warehouse professionals.  Joining the WPI will give you access to a growing range of free and premium content which will have a direct impact on improving your warehouse performance when you apply it to your business.

You can also subscribe to this blog by email and get my future posts delivered to direct your inbox.

21 Mistakes adding cost & killing productivity in your warehouse #16: Use of multiple freight systems

Most if not all carriers today will want you to give them your freight despatch information electronically.  Whilst there are still plenty of circumstances where a hand written consignment note is unavoidable, the processing of manual con-notes is more expensive.  To make this easier for you and for them they have developed computerised freight management systems.  Unfortunately these systems are designed to work with one carrier (i.e. the carrier providing the system).  This means that when you inevitably need to use the services of a different carrier that is either cheaper or provides services that you cannot get from your other carrier you end up with another freight system.  This can end in multiple carrier specific freight systems.  This is a mistake, it is better to have a single (paid for) freight system.  Why should I pay for something that I can get for free, you ask?  Well I’ll tell you.

Carriers don’t want you to use anyone else for your freight, a single carrier system tends to lock you into that carrier.  Once you break this barrier and have multiple systems you now have a training load to learn an additional system.  It may also take different sized labels and so you have an additional critical supply to manage.  You have just added more points of potential failure.

You have now also split your data into multiple systems.  The 21^st century more than any other is the age of data and you should regard your data as a gold mine to be guarded and protected from loss and fragmentation.  What use is my old freight data apart from looking up old consignment notes for Proof of Delivery requests, you ask?

Freight will be one of your company’s largest costs and not being able to measure and report on its performance and costs as a whole package, is a significant deficiency in your reporting.  Freight cost reporting is significantly easier if you have all the data in one multi-carrier system.  A multi-carrier system lets you extract data from all of your services so that you can get it costed by alternative carriers when you perform a freight review; which you should do annually.  Call me if you have never done a carrier review, we do this quickly and cheaply for you, even if your data is fragmented.

In addition to managing your freight costs, if you tie back your freight data to your order management system you will now be able to do better Cost To Serve analysis of your customer base to determine relative profitability of different customer groups.  This is very useful to assess the underperforming areas of your business.

If you have a large number of shipments per day there is a significant productivity gain to be made from having your freight system integrated to your WMS or order management system to eliminate data entry.  Creating freight labels at order confirmation or before each order pick (see no.15 on speeding the packing process) is a huge productivity booster.  You only want to integrate one system not four or five so this means you need a multi-carrier system.  One of our clients integrated their freight system and saved one full FTE*.  At around $55,000 p.a. for a storeperson for a development cost of only $5000 this had a payback of less than a month!
*FTE=Full Time Equivalent, or the labour equivalent of one person working full time.

There are three major multi-carrier freight systems currently available:

1.    IFS Smart Freight

2.    Supply Master

3.    Moveitnet

All are good and capable of being integrated with a host system.  Their cost structures and functionality vary so look at all three and choose the best one for your circumstance.

This is post is taken from an ebook that is now available as a bonus to members of the Warehouse Performance Initiative (WPI*).

The WPI is a place for learning how to improve your knowledge of warehouse operations improvement, sharing skills and ideas and helping other warehouse professionals.  Joining the WPI will give you access to a growing range of free and premium content which will have a direct impact on improving your warehouse performance when you apply it to your business.

You can also subscribe to this blog by email and get my future posts delivered to direct your inbox.