TRANSPORTATION COST REDUCTION 2
Running Head: TRANSPORTATION COST REDUCTION 1
Transportation Cost Reduction
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Transportation cost reduction in the supply chain
Outline
(1) Transportation cost reduction process and procedures; types and how to works
(2) Metrics and benchmarks; cost measurement on freight.
(3) Conclusion
Transportation costs have affected the movement of goods to their destinations. There are processes and procedures that companies might engage to minimize cost issues. Some of the methods include the use of intermodal transportation which is an essential aspect of changing transportation mode options for shipping. The known cheapest mode is by rail transport which minimizes cost involved. This mode is very reasonable compared to trucking. Large corporations and organizations combine two or more modal transportations to cease charges and increase efficiency. An intermodal process used in logistics assists in budget control hence savings. In transportation cost reduction, the use of automated logistics which can track an organization’s shipments from departure to the destination is necessary. ( Mašek et al.,2016). By automation, it ensures that goods are secure and reduces damage costs that might be involved. Customers can have timely deliveries due to enhanced logistic technologies. Automated transportation allows one to get real-time information which reduces delays. This aspect ensures transport efficiency hence cost management( Coelho et al., 2016). A convenient, cost-effective procedure in transportation is the Less-than-truckload as known as (LTL) type of shipment. It is a cheaper option for much smaller weight goods. Nowadays, manufacturing firms embrace new cost-effective strategy like consolidation shipments that involves numerous products or commodities for varied customers into a single delivery. Transportation costs can be minimized therefore saving money by use of full-truckload shipping type (Christopher, 2017).
Transportation cost measurement usually is done through the on-time delivery adherence metric. It enables companies to show their average on-time delivery against delivery dates for the goods to reach the customers. Importance of this metric allows retailers to monitor carriers’ delivery margins. Another significance of this metric is it indicates the percentage of items that need delivery. Measuring transportation costs helps companies in time efficiency management and cost savings of goods to customers. Another parameter that measures and delivery schedules are the
on-time pickup percentage. Carriers can identify problems associated with product delivery. This metric helps supply chain managers alert logistics irregularities and reduce consumer dissatisfaction that may arise.
An efficient transportation cost reduction strategy is the consolidation of shipments. This action helps firms make fewer trips, get lower rates in more considerable shipping.
Benchmarks in transportation cost help firms have the tactics and experience integrating new processes and ideas in logistics. One of the parameters in transportation is freight cost which involves finding high performing enterprises and understanding their metrics to their success. Through the understanding of freight cost, it will help new firms and shippers increase operations flexibility (Joo et al., 2017).
The benefit of such benchmark has a total analysis that provides competitive insights on shipping rates. Carriers can compare actual freight rates to predicted rates.
Another benchmark benefit is gives carriers a better cost control advantage. Understanding the average contracted freight rates gives companies better control of accessorial charges.
In conclusion, cost efficiency in logistics is imperative to move goods faster to customers. Transportation costs affect an organization’s operations and processes. Warehousing is a transportation process that reduces expenses when goods /items get stored as reduction costs measure.
References
Coelho, L. C., Renaud, J., & Laporte, G. (2016). Road-based goods transportation: a survey of real-world logistics applications from 2000 to 2015. INFOR: Information Systems and Operational Research, 54(2), 79-96.
Mašek, J., Kolarovszki, P., & Čamaj, J. (2016). Application of RFID technology in railway transport services and logistics chains. Procedia Engineering, 134, 231-236.
Joo, S. J., Min, H., & Smith, C. (2017). Benchmarking freight rates and procuring cost-attractive transportation services. The International Journal of Logistics Management, 28(1), 194-205.
Christopher, M. (2017). New directions in logistics. In Global logistics and distribution planning (pp. 47-58). Routledge.