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Transportation Management Optimization

A shipper is always looking out for optimization practices of transportation management when using various shipment strategies. The practices that can eventually enhance the customer satisfaction and decrease the overall cost of freight. In this article, five best practices for the optimization of transportation management process are provided.

Transportation management optimization through creative strategic freight shipping

 All the transportation professionals have same mantra that is to increase the customer satisfaction and reduce shipping costs. However, these aims are discouraged by issues such as high cost of fuel and less availability of skilled labor.

Core carrier strategies and programs that were once effective for reducing the shipment costs are not sufficient anymore. Transportation managers have now realized that negotiating the prices with carriers is merely the first step in the optimization of transport management process. In order to succeed in enhancing customer satisfaction with reduced costs, the shippers have to find creative ways to maintain savings and remain competitive.

The best practices that have been proved crucial for the transport management optimization are:

  • Straight pooling
  • Shipment aggregation
  • Shipment consolidation
  • Continuous moves
  • Cross-dock/Pooling

Straight Pooling

LTL is used as a primary mode of transportation by the shippers who have a large number of orders with LTL size with same geographic region as their destination. These shipping orders can be combined to be shipped as a full truckload into the distribution pool facility that serves a particular area. This is known as pooling strategy. Then these orders are finally shipped to the respective consumers from the pool point.

Handling costs remain unaffected by the utilization of pooling strategy as it only substitutes the distribution costs of LTL carrier with costs of pool point distribution. Transit time is not necessarily affected in this framework. An opportunity for the reduction of expenditure is created when all the orders are put on a single sheet and dispatched together instead of shifting modes from LTL freight to the truckload on the starting point of outbound shipping.

Shipment Aggregation

Aggregation is simply the shipment of multiple orders in a single round by the same shipper on the same day at the same time and at the same common destination. If aggregate shipping method is not utilized then all the orders are shipped separately and more time is taken as well as increased expenditure. Aggregate shipment is different from the pooling strategy in that all orders are shipped to the same destination by the same shipper at the same time instead of sending the bulk orders to the pooling point to be shipped.

Shipment Consolidation

The option of shipment consolidation is considered when the LTL orders are combined with the full sized truckload order that has some more capacity for more loads provided that the LTL orders are part of the same route or destination point where the large order has to be delivered.

Nevertheless, if there are multiple stops or destination points for unloading of goods, then various things have to be considered:

  • Number of miles that are off the route
  • The effect of multiple stops, pick up necessities and constraints on the delivery timing of the final destination
  • Extra fuel charges due to several routes

It is crucial to note that shipment consolidation is not limited to the combination of small LTL orders with a large truckload order but it can also include different combinations such as three large LTL orders joined to create a multi stop full load shipment. Consolidation shipping is a very feasible option as long as costs of stop-off and delivery timings are not affected negatively and these constraints are kept under control.

Continuous Moves

Until now, all the strategies that have been discussed have focused on maximum optimization of capacity of the vehicle or enhancement of asset utilization but if the attainment of further optimization is not possible then the shipment is carried out as it is.

A shipper strings the loads together for the carrier to enable the carrier to utilize a certain asset or truck in a best possible way. This strategy is referred to as continuous moves. Consequently, the shipper receives discount. Both the shipper and carrier profit by the connection of moves with minimum deadhead and empty miles between pick up and drop off of loads. For instance, if a carrier offers the rate of $1.25 per mile for a single leg, he might reduce the offer to $1.20 for all the miles including the empty miles between drop offs and pickups, if the shipper provides continuous moves.

Empty miles are minimized by the continuous moves. In order to implement this strategy, the shipper combines individual shipments into the legs of continuous moves.

Cross-Dock/Pooling Strategies

Usually the LTL freight has a extended drag due to several network concerns. Consider the following situation for company A and B:

  • Company B ships the goods directly from their manufacturing plants to the customers throughout the country
  • They ship all the products to a single warehouse where the inventory is stocked until the shipment is required
  • On the other hand, Company A has suppliers throughout the country that ship the goods directly to the manufacturing plants
  • The same suppliers send the raw materials to an inbound inventory from where the materials are shipped to the company B’s manufacturing plants.

Suppose, if the cross dock network is deployed and the network at which individual shipments arrive is replaced by this cross dock network; then all the orders will be shipped to a single cross-dock plant. All the customer orders such as company A’s goods and company B’s raw materials will be loaded together and sent to a single cross-dock facility from where modes can be shifted and truckloads created. In some cases, profit runs from different plants can be used to drive the load towards a single cross-dock in a more cost effective way. The main concern of this strategy is to cover maximum distances with decreased cost of truckload.

 By utilizing these techniques, management of freight transportation can be optimized easily.

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