With the timing and velocity of an economic recovery uncertain, many companies are looking for new ways to improve profits without risking growth capacity. One key opportunity for gaining competitive cost advantage is transportation spend.
So this year, we conducted a survey transportation decision makers to learn more about their concerns and expectation for 2011. Supply chain professionals from a variety of companies and industries were polled. Here’s what we learned:
- In today’s environment, cost and service still dominate all other considerations
- Despite current economic conditions, 87% of respondents are concerned about rising transportation costs
- 75% of all respondents find it challenging to balance the tradeoff between cutting costs and adding too many carriers
- One in four respondents were not able to measure the impact of their “improvement initiatives”
To read the complete report, including our conclusions, click the link below:
I’m a picture guy. In our kind of work, we have to be able to take a lot of data and make sense out of the process or processes that generated it. I used to work with a fellow named, Bill, who has a PhD in Operations Research, and is probably one of the smartest people I’ve ever met in my life. Bill is a guy who can look at six or seven big tables of numbers and then say something like, “… and the answer is 7.563.” He was usually right. I don’t have that talent to create the linkages among lots of different types of information in my head to come up with a conclusion like that. That’s why I like pictures.
Recently, one of my colleagues and I were visiting a manufacturing plant to assess their production scheduling process. The client invited us to visit the plant because they knew they had a problem. As we followed the scheduler through his day, we began to understand the root causes of the problem. So how did I choose to communicate what we’d found to the client? You guessed it; I drew a picture.
When the plant manager first opened the file containing the flowchart of their existing process, she told me she only needed to see that it took me three letter-sized pages to document to the process to know that the process was much too complex and cumbersome to be fixed with a couple of “quick hits.” Why is it that she knew without studying the details that we needed a full redesign to fix this process?
I think many of us are just built that way. I know there is a lot of clinical and academic research that shows how we human beings use our sense of sight as a first preference for observing the world, and that there are specific parts of our brains that are able to detect visual patterns or the lack thereof. However, I don’t think we need to see the results of that research to know why the phrase, “a picture is worth a thousand words,” is such an enduring statement. It rings true with all of us.
That’s why I like a software product called Tableau. It is marketed as a visual analysis tool and I think it does its job quite well. Although I don’t claim to be an expert user, I have found it quite useful when I need to understand what’s going on in a large dataset. Let me illustrate using an example from a recent transportation analysis that we did for one of our clients.
Our client had grown by acquisition and managed its transportation in a very de-centralized manner. Each of the sites contracted individually with their own set of carriers, using their own set of criteria for selecting and then awarding business to the carriers. Profit Point was called in to help the client understand the cost-savings opportunities that would result from a more centralized approach to carrier contracting and management.
Our first priority was to find out what was going on at all of the different sites so we developed a database from the client’s freight payment records to do it. Now, picture this (pun intended). We now have over 63,000 individual shipment records to analyze and we needed to do it in a way that told a story that we could understand and that we could then communicate to the client. The first thing we did was look at the spend by plant and by carrier. The spend by plant was more of a prioritization issue, to understand which of the plants had the highest freight spend, but the spend by carrier became the first part of our story as you can see in the two pictures below.
This second chart was a very powerful image to help the client quickly see that the number of carriers being employed was out of control. You don’t even need to be able to read the name of the carrier on the Y-axis to know that there are too many carriers in this picture. Many of these carriers had only a single load all year long, but were still carried in the system.
We also wanted to show the client the significant different in pricing policies across their carrier base. The following slides show how we used some more of Tableau’s functionality to make our point.
By plotting cost vs. distance for all of the shipments, we were able to see the general correlation of cost with distance that we expected, but we also saw a number of outliers that we wanted to better understand.
We then highlighted a group of very high-cost shipments and kept only those points to see what we might find out.
Using a simple stacked bar chart, it was very apparent that carrier “C-g,” the red bar in the chart at left, was the main player in this group. Once “C-g” was identified, we were able to demonstrate that their cost was always greater than the average cost for shipments with distances greater than 200 miles and by as much as 50-66% for shipments with distances greater than 1000 miles.
Again, these pictures allowed us to find one of the smoking guns inside this mass of data. Suffice it to say that we found many other opportunities through similar visual analysis.
Because of these pictures, and others like them, it was an easy sell. Using a tool that makes it easy to use the built-in “intelligence of our eyeballs,” we were able to develop a convincing call to action for our client, who went out to the market with a targeted freight bid and reduced their transportation spend dramatically.
As technology continues to penetrate more and more aspects of business and our everyday lives, it makes more and more data available for us to turn into useful information. But it’s only useful information when we can put it into a form that we understand and can communicate it to others. That’s why I’m a picture guy.
Many carriers went out of business in 2008 and 2009. The stronger ones survived and have typically sustained their business by establishing high levels of asset utilization. This has been achieved by limiting empty miles and finding complementary loads to ensure trucks are being used in both directions. This creates a wonderful opportunity for shippers: By identifying those carriers who can offer you the lowest rates because your loads help them balance out their network, you can find significant cost saving opportunities when purchasing transportation.
Learn about the essential steps that you can take today to cut costs and gain advantage in your carrier negotiations. Click the link below to access our new white paper:
Profit Point’s transportation procurement optimization service reduces outsourcing costs by quickly analyzing multiple carrier bids and provides insightful data for decision makers
Profit Point, a leading Supply Chain Optimization company, today announced the introduction of Transportation Procurement, an optimization service that will cut costs for manufacturers and distributors that outsource some or all of their shipping to third-party carriers. The service provides transportation analysts and procurement managers unsurpassed ability to quickly analyze carrier bids and evaluate the best combination of carrier discounts, enabling them to negotiate rates to ship at the lowest total cost.
“Our clients are looking for new ways to reduce costs and gain productivity in every aspect of their business.” said Alan Kosansky, Profit Point’s President. “With the constant fluctuations in the transportation market, this service enables clients to manage their core carrier base and make effective decisions quickly, negotiating with carriers from a position of strength.”
The company’s optimization service and technology provide the analytical horsepower to the transportation or procurement professional to quickly evaluate different mixes of carriers and lane assignments, making trade-offs among both quantitative and qualitative business goals. The service’s richness and flexibility enables clients to dictate constraints to enforce site-specific, regional or global limits on the number and types of carriers that are included in the awarded lanes.
“We have deployed carrier bid optimization software to our clients in the past; however we have found that many of our clients prefer to leverage our deep analytical expertise. By partnering the client’s negotiating team with the analytical insights we provide them, they are able to reach the best possible outcomes in their negotiations with carriers,” said Kosansky. “And when our clients are ready to bring the analysis in house, we readily provide our Profit Procurement for Transportation software.”
Most large manufacturers have hundreds of carriers and thousands of lane options available to ship products from their manufacturing and distribution centers to their customers. The firm’s procurement optimization service addresses all inbound and outbound transportation routes, including rail, truck (bulk, packaged, and LTL), and marine bids, and simplifies the selection process while lowering the overall transportation costs.
To learn more about Profit Point’s transportation procurement optimization services, call us at (866) 347-1130 or visit www.profitpt.com.
About Profit Point:
Profit Point Inc. was founded in 1995 and is now a global leader in supply chain optimization. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including The Coca-Cola Company, General Electric, Logitech, Rohm and Haas and Toyota.