The Right Questions to Ask When Cutting Transportation Costs

 

The following is a list of questions every transportation leader should be asking. Getting the right answers is critical to the success of those organizations that rely on private carriers to keep the supply chain in motion.

What is the financial stability of your carriers?

  • Review current carrier base for financial stability. Seek carriers with a long history who know how to weather tough economic cycles.
  • Look for carriers with a solid cash position.
  • Look for carriers with a network that closely matches your distribution needs.

Have you appropriately identified the costs of your fleet and how much capital you are spending on a noncore capability?

  • Do a cost analysis with your insurance provider, and run the cost of premiums with or without your fleet.
  • Review maintenance costs, replacement costs and average age of equipment.
  • Complete a risk assessment of your private fleet with a third-party consultant or a dedicated fleet provider.
  • Review your fuel costs, fuel surcharge program.

Are you using the same carriers you were using five years ago?

  • Put your transportation business out for bid to better understand what the market will bear for running your fleet on a “periodic” basis.
  • Explore modal shifts to save costs. Less-than-truckload shipments could be consolidated and shifted to lower- cost full truckloads. In some cases, over-the-road freight could be shifted to intermodal and private fleets could be shifted to dedicated contract carriers.

How many carriers are you using?

  • More carriers mean more time spent and more cost invested in managing each relationship.
  • Consolidate freight with fewer core carriers to improve negotiating position.

What is your carrier’s safety record?

  • Look beyond preventable accidents to driver injuries, product damage and cost of regulatory compliance.
  • Do an assessment relative to your capability to impact these results. Do you have the right people with the right skill set to actively manage driver safety related issues?

How does your driver pay compare with going market rates?

  • Calculate pay per mile for your drivers using advertised rates in driver magazines and the mileage your drivers currently log.
  • Use third-party compensation consultants.

Is your fuel surcharge program accurate and fair?

  • Find out how your provider is calculating the fuel surcharge.
  • Work with your carriers to ensure you are paying for the fuel associated with moving your freight.

Are you getting optimal utilization on all your equipment?

  • Look at the number of out-of-route miles logged for each truck in your fleet.
  • Adjust your distribution strategy, optimizing delivery schedules to move the same amount of freight with fewer trucks.

What is your carrier’s approach to equipment life-cycle management?

  • Look to optimize maintenance spend.
  • Ask your carrier to explore the advantages of purchasing used equipment.

What is your transportation cost to serve your customers? What percentage of the product cost is built in for transportation? Are you recovering those costs?

  • Review pricing and distribution strategy given your review of the costs mentioned above. Make sure you have the appropriate numbers built into your pricing strategy.

Published January 2014

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