Strategic Freight Bids: A Benefit of Logistics Outsourcing
For shippers, freight bids are typically the first and most effective tool used to identify savings opportunities in transportation spend. Whether it’s picking up the phone and calling ten different carriers or managing a robust RFQ process, more and more shippers are reaping the benefits of logistics outsourcing to optimize this process. Logistics outsourcing can provide leveraged carrier relationships and established, tried and true bid processes to help you reach your transportation savings goals.
Below is a case study about how one shipper leveraged logistics outsourcing to optimize their transportation spend.
Meeting customer ship date requirements and lowering transportation costs are key priorities for the customer – a leader in lift truck manufacturing. The client leveraged logistics outsourcing of its transportation management functions to LeanCor, challenging the team to save 3% (roughly $400,000) on transportation spend between July 2013 and March 2014, as well as to communicate the savings credibly. LeanCor needed to manage the tendering of 30+ daily loads to carriers using the most competitive rates at the highest possible service level.
The client's current rates were outdated and unorganized. No formal process around tendering was in place. The long load tendering process was preventing the needed attention to tendering to the proper mix of carriers for maximun service at minimun cost.
The customer had one cost metric which reported the weekly recovery of outbound finished goods transportation spend through flat rate shipping charges to the end user. No cost or efficiency metrics were being used on IB raw material tranportation.
An optimal future state for the customer involved saving 4%-6% (or roughly $400,000 - $600,000) on overall transportation spend while not losing ground on carrier performance.
LeanCor’s Carrier Relations team leveraged proprietary bid analysis tools to develop rate targets and quickly compare the target to each carrier rate. They sent feedback to the carriers notifying them where each of their rates fell in comparison to the target allowing them to adjust if they desired. The team then selected a "champion" and a few "preferred" carriers on each lane based on the desired mix of cost, service, and capacity. The carriers were notified of the awards so that they could plan for the new volumes.
Once the new rates and awarded lanes went live, LeanCor began an automatic tendering process that would tender automatically to the champion and preferred carriers. Future metrics will now focus on:
1) Total Transportation Savings
2) Adherence to the Auto-Tender Process
3) Champion / Preferred Carrier Acceptance Rates
If the customer’s champion carriers aren't accepting loads, LeanCor will make changes to eliminate waste and make sure everyone is on track for savings targets.
In setting up the auto-tender process, LeanCor received and organized over 9000 unique lane rates that are now easily accessible in our TMS. LeanCor also provided conservative real-time savings metrics that the customer can check at any point throughout the year to track the progress.
LeanCor provided a projected $500,000 transportation savings in a nine month period.
As part of its strategic logistics outsourcing partnership, the client continues to benefit from LeanCor's improvement projects that lower costs and increase service levels.
Logistics Outsourcing with LeanCor Transportation Management Solutions
Partnering with LeanCor Logistics, shippers of all types and sizes can benefit from transportation network stability and visibility, service quality, and overall cost reduction. Effectively utilizing a vast database of partner carriers, LeanCor balances transportation cost and service to build a customized transportation strategy based on what is best for each customer.
Achieving sustained cost savings from disciplined, daily event management and hour-to-hour focus on waste identification and reduction, LeanCor's dedicated transportation professionals leverage advanced proprietary technologies to focus on core carrier programs, leveled flow of transportation requirements, and optimized transportation network design.
To learn more about logistics outsourcing with LeanCor, visit our website.
Posted by LeanCor Supply Chain Group
LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.Facebook LinkedIn Twitter Google+