Managing carriers and negotiating contracts are things most logistics managers take a lot of pride in. The problem is they also require a lot of maintenance once done making them areas these same managers can get complacent about.
Logistics and carrier rates, in particular, are very dynamic markets. This means that even the best logistics operations need to shake things up sometimes.
Here are three reasons that companies find themselves with freight rates that aren’t competitive anymore—and logistics costs that are too high. A proactive approach to each is the best way to make sure this does not happen in your own logistics operation.
No real control over what’s going on
The idea that you can’t manage what you can’t measure it just as true for logistics as anywhere else. Many companies, lacking technology or a sound process, operate with no visibility to shipping data or cost information. The result is business critical decisions about routing and carrier selection are routinely made based on gut feel and not objectively based on service and cost.
Worse yet, it’s also impossible in these situations for companies to know over time how their rates compare to the current market. The point is you are flying blind and have no way to know if your rates are competitive.
Failing to keep logistics aligned with where the company in going.
Whole businesses constantly evolve, so knowing where the company is going and what that means to logistics costs is important too. Carrier agreements based on history and not the future may be reliant on bad or outdated assumptions about your company’s needs. This can include things like paying for the wrong service levels, or constantly incurring additional costs because of delivery problems or delays during production.
All functional areas—sales, production planning, and logistics need to be on the same page. Carrier rates and contracts need to reflect the service levels and shipping characteristics required by your entire organization.
Not being active enough managing carrier and running more bids
Often, the complacency mentioned earlier is the result of thinking rate negotiation is a once and done event. Another mistake companies make is thinking it’s bad to run a bid for fear of upsetting current carriers, or getting stuck in a rut with a small list of providers. Others end up with poor contracts simply by not knowing how to run an effective bid.
These problems are usually the result of a company trying to do it all on their own. A lot of logistics operations find partnering with a specialist in freight rate contract negotiation is an easy, no risk way to gain expertise that overcomes these problems.
High performing logistics operations do not operate in a vacuum. It takes an approach that connects an organization and suppliers to create the best balance of service and cost for every shipment. Logistics is always a give and take with other departments, as well as constant work to make sure you have competitive rates and quality partners in your carrier network. Focusing on these 3 areas will make your operation the best it can be.