The current trends in transportation management

Pieter Kinds

Pieter Kinds

October 19, 2015 - 08:00

In today's blog I'd like to pay attention to 6 important trends regarding transportation management. Logistics costs reductions should no longer interfere with long-term strategic development. Advantageous pricing, securing value proposition and service should be on a higher ground.

1. Cost savings are (still) more important than ever

The key emphasis for transportation professionals in today’s world should be to reduce costs (freight spend), without negatively affecting the service and customer experience levels. While studies find that the service levels of a company stand on a core level along with the physical product, the majority of companies would still focus on cost saving rather than service. This is partly understandable since increasing service levels would probably result in increasing costs. Despite the added value of transportation and service to a company, cost reductions continuously put pressure on the shoulders of logistics professionals. Adopting new technologies to manage transportation could offer a solution and improve service and rates levels of companies. Moreover, shippers must adapt their viewpoint from quick cost savings towards a long-term value-added proposition, rebuilding trust with carriers and invest in strategic partnerships.

2. Omni-channel distribution strategy takes you the extra (last) mile

Transportation is a key differentiator for omni-channel companies because of changing customer requirements, experience, and service levels. Transportation services nowadays are a core component of a company's offering along with the physical product. The increasing importance of this could potentially lead to rising costs. An effective omni-channel strategy and improving parcel management should be on your radar since customers are dividing their purchases between retail stores, online stores, mobile stores and mobile app stores.

3. Transportation procurement is changing

According to the 24th Annual Study of Logistics and Transportation Trends, 30 percent of the respondents reported that their companies had revised the process by which they acquire transportation services. The results of the 2015 study indicate that this percentage has increased to 35.6 percent. An analysis of the activities that comprise this process shows that procurement is increasing its involvement in two primary areas: preparation and solicitation of RFQs and carrier negotiations. Companies that changed their procurement process are implementing a variety of changes. For example, 50 percent of the companies now primarily use contract carriers while 43.8 percent of companies reported that they use the spot market for their freight moves.

4. Freight Audit & Payment evolves on a global scale

Freight audit & payment is slowly pulled away from the shadow line of the supply chain, to the frontline of organizations. It has slowly, but certainly, moved from manual correcting freight bills to automated technology that streamlines logistics operations and uncovers aspects of freight transportation inefficiency. Because companies are more and more shipping on a global scale, data collection and data reporting becomes harder to keep in-house, meanwhile putting all (correct) data in general business intelligence dashboards is becoming more important. Freight audit providers nowadays are focusing on this, highlighting supply chain improvements and other points of interest. Despite the fact that post-audit is still a frequent practice in the business, many companies are increasingly moving towards pre-audit and payment enhancing benchmarking and analytic capabilities that help streamlining supply chain operations.

5. Carriers are gaining power in their relationship with shippers

A capacity crunch in the transportation sector is causing higher costs for manufacturers, retailers and suppliers. Excess capacity during a large part of the recession enabled retailers and manufacturers to negotiate significant cost reductions that lead to lower transportation rates, however, those cost savings that shippers are now taking for granted could disappear in the near future. Today's reality teaches that demand has surpassed capacity, particularly in trucking, and carriers have the upper hand in negotiating rates. Carriers, rather than shippers, are gaining power in the relationship. This shift has put new meaning and emphasis on the familiar terms "favored shipper," "shipper of choice," and "carrier-friendly freight."

6. Shippers must counter loss of service level

Chasing the lowest cost carrier for transportation could, despite the short-term gain, seriously affect long-term implications for service. Results from the 24th Annual Study of Logistics and Transportation Trends point out that rail and intermodal are suffering from the biggest declines in service. Shippers utilizing these modes experienced the greatest loss of service in three key areas: equipment availability, on-time delivery, and correct invoices. TL followed rail and intermodal in terms of loss of service performance. For this mode, correct invoices and on-time delivery were the problem areas.

What are the most popular ways to reduce freight spend?

Like I pointed out earlier, reducing freight spend is more important than ever, however, shippers must also focus on customer experience, service levels and carrier relationships. This seems a little confusing, since this is normally spoken, in strong contrast with cost savings. Take a look at our earlier blog post on how companies are cutting down logistics costs.

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