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Thursday, January 28, 2010

Leveraging to Reduce Transportation Costs

The overriding objective of business logistics is to deliver the correct product, in the right amount, on time, undamaged, at least fully loaded cost, and within defined customer service constraints.
Nearly all organizations are uniquely positioned to secure cost savings thru transportation leveraging, and as well, each company faces unique challenges.
Larger volume shipments more fully utilize transportation assets, and typically require less handling and administration. For example, a fully loaded truckload shipment (TL) weighing 40,000 pounds will cost less than 1/3 of that same trailer loaded with 22 separate pallets, each an independent LTL shipment, assuming identical product, freight origin, and freight termination. In the LTL circumstance, each shipment has its own bill of lading, is typically handled at an LTL terminal at origin and destination and, many times, during the linehaul process as well.
Correspondingly, the cost per pound of LTL shipments weighing several hundred pounds to a few thousand pounds is vastly less than the cost per pound of parcel shipments, in some instances on a scale of 1/10 of the cost of parcel shipments; and again, parcel shipments are vastly more economical than overnight express envelopes, postal shipments; all based on more fully utilizing transportation assets.
By reducing the number of disparate distribution centers, consolidating manufacturing locations, or aggregating originating outbound (or inbound, as the case may be) shipments, a manufacturer / distributor (indeed, virtually all manufactured products must be distributed!) can increase the size and decrease the frequency of their shipments.
By creating larger shipments, given a specific finished product output, shipments will obviously accrue less often. “Fewer larger shipments” are much more cost effective than “many smaller shipments”.

1 comment:

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