Reducing Outside Trucking Transportation Costs

One key focal point should try to increase you "load" per truck from pallet rates to LTL, and LTL to truckload, with much lower costs per pallet at each juncture. Delivery schedule planning to "drop" to several customers in one trip, with negotiated "intermediate" rates, can yield substantial overall reductions in the average cost per pallet shipped and total shipping costs.

One of the issues that I have found is that by trying to save costs on transportation it has a negative impact on the service levels to customers and thereby on sales. The small saving in transport costs is more than offset by the losses due to late delivery. Loaders wait until a truck is full before it is dispatched. Good saving for the transport department but damaging to overall sales. Local improvement but global damage. The same types of issues need to be taken into account with the use of optimisation software.

Agreed delivery schedules to customers should take precedence over local optimisation of transportation. If the agreed delivery schedules to customers are too onerous and cause too many small shipments you must revise your agreement with customers. But if speed of service is a key part of your competitive edge the larger transport costs may be worth while.

Although your transport costs are high as a percentage of revenue this evaluation should still be done.

Hi Charlie,

The first simple step that will save money without changing current shipping patterns is to do a tariff analysis. This can cut parcel and ltl rates up to 40%.

Once you save this money, you can look at making changes to your program based on the relative savings those changes will produce.