How Using a Little Data Can Add Up To Big Savings
04/19/2016
Phillip Riback - Vice President for Development
We live in the new world of Big Data provided by running hundreds or thousands of powerful processors in parallel. Where an influenza epidemic is predicted by Google searches. Where 99.99995% of the data from 150 million sensors in the Large Hadron Collider is filtered out to detect the long-hypothesized Higgs Boson, the so-called God particle. Where a smartphone app crowd-sources the flow of traffic throughout the developed world and changes your route instantaneously. Where an individual’s DNA is sequenced in a few hours rather than the 10 years it first took to accomplish, allowing for personalized medicine. Where next week’s weather is predicted with pinpoint accuracy – well, maybe that’s going too far.
But none of this really affects our day-to-day decision-making process. Except maybe the weather forecast, which is wrong half the time anyway. So, what are the data points that we can use to improve our freight and transportation decisions, where can we get the information and what should we do with it?
I like to use a three-step decision-making process my father learned in Officer Candidate School of the US Air Force:
- Collect the relevant information
- Evaluate the information and decide on a plan of action
- Follow up and reassess the decision, taking any new information into account
When making shipping decisions such as carrier selection, what is the relevant information? People outside of transportation and logistics tend to look just at the price. But we know there are other considerations. I can send a letter from New York City to Honolulu for $.49. But it can take up to seven days to get there! Yet if I need the letter to be there by 8:30AM tomorrow, I can send it by an express carrier, although not for $.49. So transit time is another important factor in our shipping decisions. Sometimes, an LTL carrier will hand off the shipment to another carrier if the destination is beyond their service area, an Indirect Shipment. This may save us money, but cost more time or increase the risk of loss or damage. These critical bits of information (freight cost, transit time, direct vs interline) are available from your Transportation Management System (TMS) for you to use in your decision-making before you ship.
The other crucial piece of the puzzle is the level of service. Does the carrier get the truck to your terminal when they say they will and do they have the equipment you need? How frequently are shipments lost or damaged? What is their on-time record like? How easy and fast is it to resolve a claim? Much of this information can also be obtained from your TMS, especially if you have tracking and claims capabilities.
Everyone makes mistakes in their billing process, carriers included. You may be charged for someone else’s shipment. You may send out shipments collect and they bill you anyway. Discounts and fuel surcharges are applied incorrectly. Accessorial fees are charge despite being waived in your contract. Carriers with guaranteed delivery times are late sometimes. Depending on your contract, you may be eligible for a refund. If you rely on your carriers for accurate invoicing, you are likely losing 1-2% of your freight spend. Use your TMS to preaudit your freight bills before paying them or contract this function out to someone who specializes in it. Freight auditing and payment is similar to payroll in that they can be done in-house, but outsourcing is often a good business decision, and frequently money-saving as well.
These types of analytics will help you assess and improve your shipping decisions. They won’t predict next week’s weather, but then again neither can big data!
In Summary:
- Use your TMS to get freight cost, transit times, direct vs interline for carrier selection before you ship.
- Audit your freight bills to avoid overcharges and duplicate payments.
- Use post-hoc analysis with your TMS and/or freight pay service to evaluate your shipping decisions to assure that your outcome was optimal and act accordingly if it wasn't.
5/24/2016 - Lower Your Freight Spend by Auditing
3/3/2016 - How Old is Your Rate Base - Does it Matter?
