The Downsides of Managing Your Own Freight Transportation CostsWritten by Paul Forand
We like to talk about how your freight transportation costs are among the most controllable expenses in your budget, but that doesn't necessarily mean it's easy.
A company trying to take control of its shipping costs is going to be fighting a few uphill battles. That doesn't mean it's not worth trying, but there are definitely issues that can come up if a company isn't wary.
Let's take a look at some of the challenges that often occur.
Common Issues When Companies Optimize Their Own Transportation
1 - Core Competencies
Transportation and logistics management is, ultimately, a full-time job all by itself. Is there anyone in your organization who actually has the experience and know-how to be an effective transportation manager? And don't they probably have better things to do, like focusing on your products or your customers?
Someone ends up taking on a lot of work if they attempt to refine your transportation costs. This may lead their own work to suffer, if they're now wearing two hats, and it may not even guarantee an optimized outcome.
2 - Territoriality
It's increasingly common for businesses to use hired services, or outsourced vendors, to provide transportation services. The issue is that if they already have a Transportation Manager (whether official or ad-hoc) that person is likely to get very territorial about their job.
It's hard to entirely blame them for being paranoid if they're being paid to hire people who could theoretically replace them. Any move towards using services to lower your budget needs to be done carefully, and without scaring your existing employees.
3 - No Big-Picture Thinking
Proper transportation optimization requires someone being able to think about your business as a whole because shipping costs affect every department and every budget.
A Transportation Manager who's merely a "bean counter" will not be effective because changes need to be made that create high-level savings. It's not simply a matter of cutting budgets and leaving departments to deal with the fallout.
Likewise, many may even lack the ability to engage in big-picture thinking. Without software services tracking expenditures across the organization, along with rate-tracking software, they're going to lack the information necessary for their job.
4 - Lack of Authority
On the other end of the scale, one mistake we often see is having a Transportation Manager who lacks the power/authority to actually make changes. Effective freight management requires a Big Picture perspective AND the authority to act on it.
If you don't trust your manager with this authority, he won't be effective.
5 - Few Contacts
Whether it's fair or not, shipping is becoming a "who do you know?" business. Getting good rates virtually requires having well-established relations and a long history with a particular carrier. It helps to have a lot of contacts at a lot of carriers, specifically to aid in price-comparisons.
Someone within your organization, without prior transportation management experience, simply won't have much leverage.
The Alternative: Hiring a 3PL
Third-Party Logistics firms aren't just for big businesses! 3PLs today have a much wider range of services, and can take over shipping operations for even small businesses. They can usually deliver all the power, software, and expertise needed, for less cost than a dedicated Manager.
To learn more, just contact Re-Trans Freight for a cost-cutting analysis.