Freight Optimization in the Supply Chain
Freight Optimization is a key performance area for any supply chain head in any industry. This essentially means the moving of a product to the customers while maintaining desired service levels in the supply chain by determining the most efficient means.
This is so effective that if its done properly , this can reduce costs anywhere from 10% to 40% company to company.
So, as a supply chain head there has to be a continuous effort in terms of working on this and improving the overall supply chain in minimal costs and giving the desired levels to the customers.
The sad part is that many logistics heads think freight optimization means cutting down the direct cost of the vendors who are giving them the logistics services and focus only on the same.
Many of the other ways , the freight optimization can be done in todays scenario are:
Technology: Our most of the supply chain still is yet to transform completely from the traditional way of handling logistics. In todays world , the more you have got the technology in place , the better, faster and efficient results will be visible
Industry 4.0: It’s the year of Industry 4.0. This new tech tools either its AI, Block Chain, IOT, Big data analytics, optimization algorithms and so on, will be a big help in terms of improving supply chain efficiently by studying various predictive analysis, remove the unwanted processes, better planning etc. Its very important that the study is conducted and whatever suits to the organisation, part of Industry 4.0 is brought into play.
JIT: Adoption of JIT is still lacking in many industries. JIT though beiung spoken for decades now, many company continue to believe in holding Inventories and warehouses for products which may not be reqd. thus increasing the overall logistics costs.
Network Redesign: It’s very important to work on Network Redesign. Now with the GST in place and stabilised and not to go, it’s imperative that the Network redesign is worked out not only for the current year but for the next 5 years. Now from every state warehouse reduced to few, it’s to be planned to further reduce and eventually come to an ideal state of just having 5–7 warehouses in the country.
Primary and Secondary Distribution: The primary and the secondary distribution which may change due to GST . The permutation and combination of primary and secondary can be redesigned to enable the company to bring down the costs and have efficient supply chain.
Use the Right Logistics Company: Its imperative to evaluate the vendors you choose & use for your distribution needs. Now you have various logistics/Air Cargo/Speed truck companies offering multiple and effective solutions to the level of multi air logistics, better lead times to II/III/IV tier cities, reduced costs and more peace of mind. So, choosing the right partner will help instead of continuing with the age old logistics companies who have been there in the system for long and are probably increasing your direct and indirect costs and improper lead times. Lets remember, the consumption of the II/III/IV tier cities have increased and the customers out there are equally demanding. Servicing them with better services will add to the top and bottom line of an organization
Training: Its seen still in many companies, the training to the logistics team is inadequate and not a continuous process. Each employee in the supply chain should not only be knowing the process/product knowledge but also should be well versed with usage of technology, use this to their benefit to perform. This cannot be ignored and should be top of the agenda for all such companies.
Relationship and Reviews: Relationship and periodic reviews is what enables. a supply chain head to understand where to improve & how to improve and where they can reduce costs. This is an ongoing process and should be religiously worked upon.
Voluminous and Sturdy packaging, Handling Equipments: The packaging once decided for your SKU’s cannot remain what was decided few years or few decades back. You need to always see how the volume of the boxes can be further reduced to reduce. costs. Study how sturdy the packing is in terms of Air or transport worthyness. as it will help reduce. many indirect costs,. Extra precautions like shrink wrap, pvc packing will help in many circumstances.
So, freight optimization is a continuous process and will remain a key area of work for everyone. A little change as suggested above can be a big added advantage.
