It’s that time of year again—budget planning season. You’re trying to maintain or trim your transportation costs, across carriers, product lines, departments, and business units, but with fuel prices all over the place, carrier rates going up, and capacity tightening, how will you stay in budget, and where will the savings come from?
You will need to dig deeper, and an overlooked source of cost is Non-Production Shipping, defined as “the movement of goods not classified as inventory–such as samples, documents, assets, and pre-production prototypes–typically originated by individual office employees.”
Let’s just say that these shipments are not always a “drop it off at FedEx and forget it” kind of shipment. In addition to filling out forms manually, there are often special compliance requirements and documentation that shippers need to complete. And when you add in the need to get it to the recipient ASAP, the end result is — you guessed it — another overnight delivery! With limited or no process in place to manage these shipments and a lack of visibility, the potential for non-production shipping costs to creep upward while flying under the radar is huge.
Historically, organizations have not focused on non-production shipping as a potential source of cost reduction mainly because, as a non-revenue-generating activity, it is considered to have a low impact on the business. Also, it’s not always easy to ‘see’ across the whole organization. How do the customer service group, marketing, finance, engineering and administrative departments handle their day-to-day shipping needs? Do they repeatedly come to the shipping dock looking for assistance getting something out the door? Or do they call FedEx/UPS/DHL directly for a pick-up? What account(s) are they using? Are they the same or different than your production shipping carrier accounts? Obviously, taking a closer look at this type of transportation spend can yield some pretty interesting results for your overall bottom line.
Uncovering the Hidden Costs through Enterprise-wide Logistics
In recent years, companies have started to change their mindset to engage in an “enterprise-wide” view of their logistics services. The purpose of this transformation is to control and reduce costs across all levels, not just in production. With some simple adjustments to your systems and processes, and with visibility into spending for non-production shipping, you can realize significant benefits.
Better negotiating power with your carriers. Carriers work on volume. Making sure your non-production shipping volumes are included with your production shipping volumes gives you a stronger negotiating position with your carriers as you discuss your organization’s annual shipping rates and your compliance with those contracts. This should also help to reduce costs by making sure that office personnel actually use your contracted carriers and rates.
Get Better Visibility. A wise person I know said “You only see what you look for, and look for what you know.” If you haven’t looked at how shipments are handled outside of your shipping dock, chances are there are some surprises about carrier and service usage there. For example, do you know how many carrier accounts and contracts are in place for each carrier? Do you monitor overnight vs. ground vs. courier usage? And even if you think you know what to look for because all shipments from the front office go through your dock today, there will be some surprises, such as how much time your logistics personnel spend handling shipments from the front office.
Save Time. Time is money and handwritten waybills are cumbersome to fill out, particularly when it is not done on a day-to-day basis. Throw in international or customs forms, hazardous paperwork, and other forms into the mix and you’ve got a real headache on your hands.
Increase Control. With a decentralized approach to shipping, there is no real procedure to determine who does the shipping or the level of priority a package is given – so people simply do what they are used to doing. Experience has shown again and again that taking a more centralized, automated and rules-based approach to non-production shipping can help companies save an average of $2 per shipment – and that’s without the potential savings from a change in the type of service delivery or through the visibility gained by reporting.
Be More Efficient. Transportation Management Systems that include non-production shipping capabilities are designed to support office users by automating much of the required data entry. What is often termed “Desktop Shipping” can include rate shopping to suggest the most economical carrier, restrictions on carrier/service usage, carrier label generation, tracking visibility and the ability to allocate shipping costs to the right department. There is also international support, complete with customs documentation generation and compliance screening.
And because today’s desktop shipping platforms are web-based, software-as-a-service (SaaS) solutions with easy to use workflows, literally anyone can get a shipment off their desk and out the door using company-approved carriers and policies. At the same time, you get the enterprise-wide visibility you need to help understand what you didn’t know to look for.
So, this year dig deeper and effectively manage your company’s non-production shipping. The ‘value’ hidden here will vary depending on the quantities and types of shipments you make, the carriers and services you use, and the type of automation you have in place today. But bottom line, with an enterprise-wide transportation point of view, you can reduce non-production shipping costs through automation, control, better compliance with carrier contracts and better negotiating power.
Now back to those budgets…What’s keeping you from looking across the organization and saving more money on shipping?
Mark McMonagle is the Vice President, Solutions Engineer Operations, of Precision Software, a division of QAD Inc., and is responsible for a pre-sales group that consults with clients to deliver integrated global logistics solutions. McMonagle holds a B.S. Degree in Software Engineering from Griffith College and is a member of the Irish Exporters Association and the Institute of Export, UK.