The Importance of a Centralized Transportation StrategyWritten by Neal Willis
Decentralized Transportation Management
Operational procedures can vary drastically for companies with multiple locations who do not have a centralized transportation policy. One location may have a logistics manager making decisions based on transit times while another location is using a completely different carrier altogether based solely on cost. With transportation policy left up to individual site locations, purchasing power is not optimized, freight policy and processes aren’t standardized or enforced, and there is poor visibility of shipment movement and information across the board.
Communication with carriers and vendors can be fairly convoluted and there’s an increased likelihood of mistakes being made. Since inbound shipments are typically controlled by vendors, the visibility of shipment information is somewhat limited across the organization and, because only the volume at each respective location is taken into consideration when rates are being negotiated with the carrier(s) of choice, purchasing power is not optimized.
Centralized Transportation Management
When freight purchasing decisions are centralized, companies can begin to gain control over their inbound shipments and benefit from a more strategic freight policy, which facilitates better communication between vendors & carriers. Additionally, a centralized strategy allows for increased visibility into shipment information, helps to reduce costs and errors, creates more efficiencies, and helps to eliminate vendor markups.
Better Vendor & Carrier Communication
With multiple sites communicating with carriers and vendors independently, work is often duplicated and/or completely left undone. Communication between carriers and vendors is streamlined with a centralized transportation strategy, and information can be made visible and distributed throughout the organization as needed, putting everyone on the same page.
Cost & Error Reduction
Rather than multiple locations leveraging a smaller freight spend, a centralized transportation management approach consolidates and leverages the purchasing power of all locations as one, which allows a company to benefit from economies of scale. Additionally, when fewer people are involved in filling out paperwork and entering order information, the likelihood of making mistakes is drastically reduced.
With better visibility of shipment movement, companies can more efficiently plan their workdays and schedule staff according to expected shipment arrivals. Shipment information, such as document images and accounting information, can be easily accessed across multiple locations at all times from one place, which saves internal staff time and money from having to track down historically localized information from several different departments.
Reduced Vendor Markup Costs
Many vendors rely on marked up freight to cover unexpected freight costs and, sometimes, they rely on the freight as their profit center. Controlling the inbound carrier decisions allows companies to cutout the vendor markups, which leads to savings that go immediately to the bottom line.
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