Business Logistics was contracted by a manufacturer to find ways to reduce freight transportation costs. The client was very concerned about retaining high service quality and did not want to sacrifice service quality for reduced freight charges.
Our first step was to evaluate the client’s service objectives. In doing so, Business Logistics interviewed the company’s president, its sales managers, and its traffic manager. We consistently found that high service quality was critically important due to competitive and customer service considerations.
The second step involved conducting an evaluation of the client’s freight management and shipment activities, a process involving developing a database containing recent shipment history including carriers used, shipment origins, destinations, weights, and costs. We then interviewed the client’s carriers to determine if they shared the same understanding of service requirements, and found to our surprise that they were not at all aware of any of the client’s specific service needs.
We also conducted a freight cost benchmarking process, a step that involved comparing the client’s freight costs to those of other companies using similar transportation resources with similar service requirements. Our findings were that the client had the potential to significantly reduce freight costs by using other carriers and other shipment modes that would still provide the kinds of service quality desired by the client. We received the client’s approval to conduct freight rate negotiations with its existing carriers as well as with new carriers that we were able to introduce.
After extensive freight rate negotiations, we renegotiated the client’s carrier contracts and achieved a savings of approximately 22% for the client. We also established standard operating procedures with the client’s carriers to assure that the client’s service quality requirements were fully understood and that the carriers would meet them. These procedures included steps for the carriers to take to initiate remedial action in the event pending service failures were identified in order to maintain high service quality. Total client freight savings exceeded $1,000,000 per year. For information click here: Freight Benchmarking.