Wheels of change Featured

8:00pm EDT April 25, 2009

The transportation industry has taken a hit in the past couple of years — first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.

Delivery delays and poor packing and routing methods can all cost your company money.

The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.

“Express delivery is the most expensive,” says Jim Graham, director of corporate sales for Capitol Express Enterprises Inc. “Sometimes companies are using the wrong carrier for their needs and paying for services unnecessarily. You could be paying for express delivery when three-day would do. Software can eliminate these types of oversights by suggesting the best carrier for individual needs of shipments. In the moment you need to get a shipment out, you don’t want to be going through lists to find the best guy for the job, you’ll want to push a few buttons and get an answer fast.”

Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.

Why logistics software is important

The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.

While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.

“I’ve been in the industry for more than 23 years, and I’ve seen the best results from companies using software to run their shipping orders,” says Doug Bierman, logistics manager for HG Logistics LLC, a third-party logistics provider. “Certain software will allow you to get the best rate for every shipment instead of making a yearly or biannual deal with a carrier. This will save you money.”

A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.

“This economy has been like getting bariatric surgery,” says James Moore, vice president of sales for Ryder System Inc. “If you lose 100 pounds all at once, your clothing isn’t going to fit anymore, and that’s what’s happened with many companies’ networks. They are now way larger than what they need to be and their one-time assets are now financially draining them. If efficiency is a problem with your transportation process, software will help eliminate errors and make the most of all efforts.”

Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.

“You’ll see your investment back in about a year,” Bierman says. “The more your business relies on shipping, the faster you’ll see your return. You can make decisions on who will best suit your shipping needs. One shipment may need to go out fast while another can get there in three days. These deliveries may need two separate carriers whether that’s based on cost or accuracy in delivering in time.”

What you need to know

Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest, such as shipping and loading.

To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.

Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.

“There are too many options for error when shipping is being done by hand,” Graham says. “You need to use software to let customers know you are professional and invest into your company. You will be more than embarrassed — you’ll lose customers when you miss deadlines and make mistakes. Companies are hurting across the board right now and shipping rates are lower because companies are trying to hold onto their customers and attract ones that are unhappy with their current company. You don’t want to be one of the companies that are getting a bad rap in this economy.”

After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.

“If shipping isn’t your core competency, a third-party logistics firm can get you the best deals as soon as they’re available,” Bierman says. “If you don’t have the time or money to invest in software for your company, a third-party logistics firm is your best bet.”

Today’s economic climate may be tough, but by looking for savings in every area of your business — including transportation — you can find money that can be better used elsewhere in your organization.

“It’s a fast-paced industry, and those who aren’t at the top of their game get pushed aside,” Graham says. “It doesn’t seem like companies would be relying on such primitive means of operation like spreadsheets and hand-counted inventory when there are software solutions available for anything you could need or want for shipping, but they do. The most successful companies don’t.”