There is a lot of information available on supply chain costs, its cost elements, and ways to save costs. We are not going to reiterate what has already been said but will focus comments on the cost of transportation as it is one of the largest components of supply chain management. A recent peer-review survey concluded that transportation spend can be as high as 10% for some companies. The same survey also concluded that more and more companies are realizing this as an important focus area necessary to reduce overall supply chain costs. So, what are the different cost components of transportation and how can one go about reducing those costs?
Transportation Cost Elements
Let's start by looking at primary cost components. Irrespective of the mode of transportation, transportation cost elements include;
The last of the three, Accessorial Charges, can include a plethora of charges. Some of the charges are voluntary and unavoidable in most case e.g. Weighing, Tolls, Required Dual Drivers, etc. However, some are involuntary charges and, in most cases, can be avoided e.g. Detention, TONU (Truck Ordered, Not Used), etc. There are ways and means to prevent some of these charges, and we will talk about some of those in this article. But before that, let’s talk about some hidden charges that really drive the total cost of transportation up. The reason these are sort of hidden is that these charges are not mentioned in the carrier contract, not categorized as one of the three buckets mentioned above, and are not for any specific services. So, what are these costs?
Using Technology to Save Costs
A recent survey conducted by Gartner concluded that 42% of organizations surveyed will be investing in transportation over the next two years to support digital business capabilities. Low capacity and high transportation costs are leading companies to turn towards technology for lowering costs, increasing productivity, and improving performance.
Using technology, manual processes are digitized, which means more automation and less paperwork, which dramatically reduces the time companies spend on each shipment and human error, which positively impacts companies' bottom line. The use of technology allows companies to implement the measure twice cut once philosophy to plan better saving them time and money. Digitization means companies can benefit from a reduction in data redundancy. Digitized data is easy to share and report on, savings companies countless hours spent in manual work involved in creating business reports. Companies can automate complex workflows thereby reducing manual labor.
Modern technologies like GPS, SIM tracking, etc., can allow companies and their customers and partners to track and trace shipments in real-time. Using technology makes it easy for all the parties involved in a shipment to collaborate, and avoid costly mistakes caused by not getting timely and accurate information. Being able to collaborate and be on the same page is a great way to increase customer satisfaction. Companies can make technology help them stay compliant by building automated checks and balances. Technology can allow companies to be environmentally friendly and reduce their carbon footprint.
To compete and scale while retaining talent and staying environmentally friendly, companies need to embrace technology.
Written By: Idris Gagan
About ChaiOne Corporation
ChaiOne is a pioneer in industrial digitalization. Reimagining plant, field, supply chain processes with design thinking led solutions that reduce cost, increase adoption and elevate the customer experience. The complete strategy-to-solution expertise sets ChaiOne apart to help industrial customers achieve exponential outcomes across their logistics, supply chain, field, and plant operations. To learn more, please visit www.chaione.com.
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