Logistics Q&A: How Can I Reduce Transportation Costs?

A new series focusing on plant operations and logistics.

Q. How can I reduce costs in transporting goods from the plant or warehouse to my customers?

A. With capacity tightening and fuel prices rising as a result of the economic rebound, shippers should speak with several different transportation providers. Years ago, you could call a provider and get a standard price quote, but today's technology allows for a customized quote to be given through an automated process. The quote is no longer a standard rate given to all shippers, but a unique rate for you depending on your load's requirements. A transportation management system (TMS) is what provides the quote, and it allows shippers to streamline their shipping processes, saving both time and money.

This technology has been acquired by large shippers because they have enough freight to cover the cost of the investment as well as the people to run it. Smaller shippers can utilize the same technology through a third-party logistics provider (3PL) without any upfront investment in technology or staff. With a 3PL, a shipper can bid to obtain optimal pricing and therefore keep costs in check. Keep in mind that if you were to purchase and implement a TMS package of your own, it would take months to implement, but with a 3PL the start-up could take a matter of weeks, enabling you to start saving money faster.

Many providers offer this service including Greatwide Logistics Services, FedEx Global Supply Chain Services and Caterpillar Logistics Services. When looking at third-party providers, it's critical to look not only at the technology provided, but also at the people and process for support, along with the 3PL's fleet capacity to get your goods where they need to be.  A strong 3PL is able to leverage the moves of their network to benefit customers in addition to having technology and carrier management capabilities. A 3PL often can leverage other customers' "backhauls" or empty miles on a return trip as your "headhaul" or main trip and offer both customers below-market rates, because you're using assets already in place.