In regards to driving down transportation cost, you can only squeeze so much water out of a rock by trying to reduce shipping rates. I think there are a couple of other key areas that hold companies back from total visibility of other costs stuck in the supply chain.
These costs include the division of a typical organization by functional area, (i.e., groups having different agenda's) and understanding the real impact of a change in terms of total cost (Transportation, inventory, service, etc). As organizations evolve to be more logistics focused, these functional barriers will come down but currently most organizations remain stilted.
Millions of dollars are being spent on ERP systems and other systems with out getting any process improvements from those new systems. Most companies want to customize the new ERP, SCM, SCP, and CRM systems to match their company’s current processes.
Hence, they simply try to wrap a new system around old processes, be those processes right, wrong, good or bad, rather than looking at the new system to see how it can help their company by making process changes and process improvements.
Unfortunately many of the current processes within those companies are not very efficient. The reason this occurs, is that many people within those companies that are responsible for the implementation of the new systems do not have a good understanding of what ERP, SCM, CRM is all about. They believe that by implementing a new system that is all it takes to move a company forward and give it a competitive advantage.
This is a dangerous misconception. Before any company ever considers a new system to implement, the team that will be responsible for the implementation of the new system should receive training on the latest concepts and practices of ERP, SCM, SCP, CRM, etc. Only then will they be able to correctly implement a new system to the full advantage and benefit to the company.
There is a barrier between shippers and liners. Especially in regards to the disconnection of production planning and transportation. To expire this, a well, good, efficiency management is needed to control over the upstream business function and activities. E.g. POM (Production/Operation Management), TQM (Total Quality Management).
It is true to say that the way of manufacturers doing there cost saving is to emaciate the transportation cost. The "true efficiency" is neglected. They even can't remember what is "Economies of scales". On the other hand, the effete freight rate can no longer support and accept by the carriers sooner or later.
An imbalance in transportation cost has occurred and inflated toward carriers. This is the signal where it is dangerous and unhealthy to the macro economy.
By taking transportation and logistics costs, and assembling them into the costs of materials being shipped, and to assess materials planning and purchasing on a total landed cost basis will help make them encourage thinking about equipment optimisation, collaborative carrier relationships, and the elimination of process disconnects between transportation and planning/purchasing.
reproduced with the permission of eyefortransport.com Fiona Kerr, Senior Editor, eyefortransport.com
