The cost of oil is dropping; there is a limited temporary driver pool; so how can companies reduce their freight costs?
Todays post is by Ron Southard CEO at SafeSourcing Inc.
This author has been in and around the freight business for years. Actually for 40 years. Just like the unrelated movie, I have seen it all. Planes, trains and automobiles (trucks really) to be sure but also ocean bound freight. The ships and planes get bigger, but at the end of the day the same issue exists. How do companies get their products to where they need to be efficiently and at a cost that is acceptable in order to satisfy customer demand?
This is not necessarily about your internal optimization models; it is more about the data that feeds your internal optimization models. That is of course if you even have one. The basis for collecting that information is not all of the math calculations and pivot tables; it really is the following types of data.
• Lane data in distance for your delivery model such as Plant to DC.
• Volume discount data from carriers
• Lane rate per mile
• Fuel Surcharge rate
• Human resources rates for loading and unloading (Lumpers in the US)
• 3PL storage rates
• Load balancing charges for LTL versus FL
There may be other data that is required for your individual model, but the above will cover most of what you need to come up with a well rounded format that freight companies can easily bid on. An example of other information may be questions such as “What is your overall logistics strategy”. With the cost of rail down versus traditional freight lanes, are you thinking about developing a rail hub service model. do you even know what this is?
Relative to who should be bidding; this authors recommendation conducting a three step process that includes a detailed RFI, followed by a detailed RFP and then ultimately the RFQ data compression piece or a reverse auction.
• RFI – Incumbent and other participants selected from a quality sourcing database
• RFP – Participants include a reduced number from the RFI process
• RFQ – Includes all RFP participants unless otherwise indicated by the host.
The terms and conditions of the reverse auction or RFQ can cover the balance of information needed by providers that relates to quality, certifications, payment terms, safety, insurance etc.
If you want to get control of your freight costs, please contact a SafeSourcing customer services representative.
We look forward to and appreciate your comments.