Shippers get advice from experts on reducing logistics costs
David Hannon, News and Transportation Editor -- Purchasing, 8/17/2004 2:00:00 AM
With so much emphasis on reducing costs today, supply chain and logistics professionals are looking for ideas from a variety of sources to help control bottom-line costs. With that in mind, Purchasing has polled a list of logistics experts to produce the following list of 10 cost-cutting tips.
Tip #1: Work with suppliers to reduce supply costs
Some simple cooperation with material suppliers on their shipping habits can go a long way to reducing costs, say the experts at MIT's Center for Transportation and Logistics.
Tip #2: Work with C-TPAT certified carriers when possible
The security benefits of having shipments registered before they come to the U.S. are clear; the cost benefits for shippers may not be quite so evident—but equally as valuable.
Tip #3: Visibility can show you the money
It's clear that a little technology can go a long way in terms of logistics cost savings, assuming it is the right technology for the right supply chain.
Tip #4: Appoint a director of logistics procurement
Appointing a logistics procurement director provides focus and vision to a complicated spend area while sending a message to suppliers and internal users that nothing falls through the cracks anymore.
Tip #5: Get the service vs. cost equation right in contracts
A recent survey by Boston Logistics found that reverse auctions 'can be hard-pressed to capture the benefits that a good contract logistics provider can offer, such as global breadth, backhaul programs, multilane bid optimization, and bundled asset and nonasset-based services.' Evaluate both price and service equally.
Tip #6: Don't assume a correlation between volumes and discount
Bret Febus of Insource Logistics points out that if a logistics buyer is 'known to always ask for more, how can you expect to ever get the most? Providers will always hold out more waiting for you to ask.'
Tip #7: Benchmark...the right way
Benchmarking in logistics is a two-fold exercise: it requires analyzing the rates you pay for logistics services as well as analyzing the actual costs associated with your internal logistics activities.
Tip #8: Monitor logistics providers' performance
All the work done to get better rates from carriers can be lost if the performance of those carriers is not up to par. John Urban, president of technology firm GT Nexus, recommends buyers make sure what they planned to buy is what they get by monitoring performance.
Tip #9: Collaborate internally
Best-in-class firms that source and ship goods from multiple suppliers in multiple markets can achieve enormous cost savings by leveraging collaborative planning between logistics and sourcing.
Tip #10: Get control of inbound freight
If you are purchasing materials with freight included and letting your suppliers make decisions on freight, you are likely paying too much, says Neil Yee of Spectrum Transportation Consultants.
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