By Caroline White | August 19, 2021
The recent spike in transportation costs, capacity constraints and delays have put a large focus on transportation budgets in companies of all industries and sizes. Nearly 35-45% of companies are using a TMS in some capacity as well as some utilizing advanced functionality (InTek Freight & Logistics Inc).
While many companies are familiar with the potential benefits of a TMS system, freight optimization seems to remain an elusive goal for most. Freight optimization is the ability to analyze shipments, rates and other constraints to produce a route plan that minimizes costs and meets pickup and delivery time windows. Many users find transportation optimization to be time consuming, overly complicated and confusing when presented will all the potential options included with most Transportation Optimization engines on the market today.
Companies are being asked to deliver smaller batches of products more frequently and now maybe to multiple locations when traditionally that same company would wait a week or more for one larger order to be dropped off at a single facility. The reason for this behavior is because of increased cost and availability of warehouse space. Setting aside all the complexities and specifics the bottom line is that shippers, retailers and 3PLs are now drawing clearer lines between inventory and transportation.
Given all the previous complexities mentioned and shrinking timetables demanded by consumers this is where a correctly implemented transportation optimization engine can really shine! Once transit times, carrier rates, special equipment and other data are entered into the optimization platform the software takes into account the requirements of the shipments against the above-mentioned data and generates a practical, executable load plan for the shipment(s). Once this optimization process is complete the shippers, retailers and 3PLs can cut costs, save valuable resources and make better decisions.
What does this all mean for the bottom line? In general companies that are utilizing a transportation optimization system are seeing anywhere from 10% to 30% savings in transportation costs thanks to overall optimization of pall the processes surround transportation. Using optimization, shippers and retailers can look at their freight movement from a holistic perspective which enables them to cut costs and make improved strategic decisions. The estimated (ROI) for a correctly implemented transportation optimization engine is typically 4% to 8% of total freight budget (MercuryGate). There are other benefits such as reduced Co2 emissions and greater ELD compliance.
All of this is amplified in the current (2020-2021) transportation market which is projected to have increased costs lasting though all of 2021 and spilling over into 2022. Without the correct carrier contracts, transportation network strategy and other important considerations, any company trying to implement an optimization engine is going to struggle. Reach out to one of our subject matter experts here at email@example.com to unlock your transportation optimization potential!
Contributor: Travis Witthoeft, Senior Manager at Bricz