SupplyChainBrain recently published a good article by Jeremy Dotson of APEX Analytix that noted that industry estimates show inaccurate freight bills add an average of 0.2% to a typical company’s annual freight costs (which is significant on a 100M spend, as this equates to 200K). However, vendors who fail to comply with established routing guidelines can have twice the impact – an average of 0.4%, or a 400K drain to the bottom line. Maybe 0.4% is not that significant in the grand scheme of things, but it’s just the tip of the iceberg! If you identify, and stop, five leakages in the 0.4% range, you’ve saved 2% – or 2M. And you can’t tell me that’s not significant!
The article described seven common sources of errors that, collectively, will drain percentage points of potential savings from the best network design. Thus, it’s important to be familiar with these errors and institute procedures and methods to stop them from occurring.
- Failure to Combine Shipments
The article points out that sometimes vendors overlook instructions to ship merchandise to the same destination on the same trailer and ship on multiple trailers at LTL rates, costing you significantly more than you need to be paying. However, even more important, is that in companies where different buyers handle different categories, it happens all the time! They’ll each schedule pulls from a central warehouses on different days when all pulls can be on the same day and freight consolidated.
- Failure to Create a Single Bill of Lading
Even if all shipments are consolidated onto a single trailer, if the shipments aren’t combined into a single bill of lading, you lose out on volume discounts. More importantly, if individual shipments consolidated onto the same trailer have a volume less than the minimum volume, you’ll be paying the difference for each individual shipment on the trailer!
- Selecting the Wrong Carrier or Shipment Method
Shipping by air when by sea is okay can cost hundreds of thousands of dollars extra!
- Sending pre-paid shipments via freight collect
Another case of the left hand not knowing what the right hand is doing. Adopt a standard policy for shipments and stick to it!
- Failure to Automate Records
Unless you do this, it will be virtually impossible to dig through mountains of paper to find the problems.
- Failure to Make Your Routing Guide Web-accessible
This allows vendors to enter information on each shipment and receive the specific routing instructions they are to use.
- Failure to Review and Update the Routing Guide Regularly
Your supply chain isn’t static. Therefore, your distribution network is not static either. As fuel costs rise, cost-effective breakpoints and shipping methods change. As demand changes, so does appropriate inventory levels and locations. As volume shifts between suppliers, your network needs to adapt.