Transportation optimization: How a company identified millions in annual savings

• Small mode choices drive big savings. Choosing the most cost-effective mode alone lead to about $2.25 million in annual savings.

• Consolidation multiplies the benefit. Moving to multi-stop truckload with two-day consolidation resulted in more than $4 million in yearly savings.
• Fewer shipments mean fewer problems. Consolidating LTL into truckload cut annual shipments by more than 15% and reduced damage and claims.

An American manufacturer of residential and commercial water heaters and HVAC equipment worked with Schneider to evaluate its supply chain. When the assessment revealed potential transportation cost savings, the company asked Schneider to dig in further and prove out the savings with a transportation optimization study. 

The Schneider engineering team used a representative sample of the customer’s historical shipment data to conduct the transportation optimization study. Advanced technology and modeling tools were put to work in a detailed analysis where the team replicated the customer’s processes and Transportation Management System (TMS) to test how various business rules affected transportation cost. 

• Baseline
• Mode selection
• Daily consolidation
• Two-day consolidation
• Multi-stop truckload with daily consolidation
• Multi-stop truckload with two-day consolidation

While the manufacturer uses a TMS, it manually plans its transportation in siloed business units and separates orders for warehouse ease, resulting in transportation inefficiencies. The transportation optimization study revealed that minor tweaks to the transportation strategy – simply choosing the most cost-effective mode – would drive significant cost savings of around $2.25 million annually. Further, it revealed that if the manufacturer moved to a multi-stop truckload model with two-day consolidation, the business could save over $4 million each year. 

Beyond transportation costs, consolidation of the manufacturer’s freight from less-than-truckload (LTL) into full or multi-stop truckload would reduce the annual number of shipments by over 15%, reduce LTL-related damage and claims, and improve on time delivery and customer service. 

By making logical choices about shipment mode, this manufacturer could save $2.25M annually. So, whether your business starts with quick wins or makes larger operational changes, Schneider can help make the path forward smoother. Our operations teams work closely with customers to guide them through the change management process from facility organization to creating shipment staging areas, and more. 

Legacy business rules may cost your business more than you realize. Speak with a supply chain expert about optimizing your transportation strategy.