Optimizing Your Transportation Network

1. Define Perfection. What is the ultimate goal of optimization—a state of near-perfect results? The cost/service balance can be very different for a company that ships medical supplies as opposed to a company that ships steel. Is freight cost, total time in transit, total supply chain cost, total cost to manage, or some combination of this "perfect?" Define what your "optimal" freight network looks like.

2. Survey Your Customers. Optimization starts with your customer. To avoid delivering too frequently, too slowly, or at an unacceptable cost, understand what your customer needs before you significantly change how you manage transportation.

3. Leverage Your Data. Your enterprise resource planning system, billing system, and carrier/3PL freight bills provide plenty of information. Key data for studying optimization include: earliest/latest ship and delivery dates, order size, weight, and origin/destination locations.

4. Run Freight Model Scenarios. Do you have the tools and personnel in-house to effectively run "what-if" scenarios with your freight? Can you mass-rate weeks-worth of freight for all modes? Can your system suggest mode conversion? Can it build multi-stop truckloads? Design pool distribution scenarios? Consider doubling or halving your order size by select customers? If the answer is "no" to any of these, consider talking to a consultant or 3PL.

5. Test Before Implementation. Test scenarios to validate results prior to major investments and implementation.

6. Overcome Hurdles. Talk to your freight partners, carriers, and technology providers. Once you optimize your freight network, many things will change. Your carriers will have different routes at different times. Your customer’s experience will change. Anticipate hurdles and proactively communicate to ensure minimal disruption.

7. Assess Technology Capabilities. Optimizing freight without a transportation management system (TMS)—or a 3PL that operates a TMS—is not likely sustainable. Due diligence in TMS or 3PL selection is a must. A system may offer "optimization," but be sure it meets your needs, and the provider has the ability to execute your deliverables.

8. Determine Freight Planning Experience and Talent. Some freight networks can be repeatable—the automotive industry often runs on a static schedule. Others, like consumer goods, retail, and grocery can be more dynamic. Ensure you have the right supply chain team or partners to manage a flexible and changing environment. If there is volatility in order size, date, timing, or special requirements, anticipate conflict even with the best plans.

9. Consider All Possibilities. Optimization enables the best selection of options such as consolidation, pool distribution, zone skipping, mode conversion, multi-stop truckload building, deferred service, milk runs, dedicated carriage, spot-market pricing, and volume pricing, based on customer requirements.

10. Consider Collaboration with Other Shippers. The best optimization occurs (a) with a significant amount of freight, and (b) when there is excess lead time at shipping and customer delivery locations. B can be discussed with your customers, but A is tough to build organically. Consider partnering with other shippers in your area or a 3PL that can help coordinate a freight consolidation solution.

SOURCE: Dave Giblin, Vice President, ODW Logistics