Enhancing Distribution and Transportation Operations: Unlocking Savings Opportunities

— 4 minute read

Navigating the complexities of improving distribution and transportation operations can be daunting. Key questions arise: Where to begin? Which improvements offer the most impact with minimal effort? How can we significantly enhance our operations?

Finding transportation cost efficiencies in the real world.
Streamlining Success: Advanced Transportation Efficiencies.

With over 25 years of experience and hundreds of supply chain projects, Sterling Solutions has honed a systematic approach to uncover and enact cost-saving initiatives. Our clients have reaped benefits ranging from hundreds of thousands to tens of millions of dollars. This article provides a framework for assessing savings in distribution and transportation, accompanied by practical examples of both tactical and strategic improvements.

First Steps: Assessing the Current Landscape

The journey to enhancement begins with a current state assessment. Instead of a broad analysis across multiple facets, focusing on specific distribution or transportation segments can yield quicker, more manageable wins. Understanding the cost structures of different distribution activities is crucial. A thorough grasp of both direct and supporting costs establishes a baseline for measuring improvements and making informed decisions.

Comparing these costs against industry benchmarks or past performance helps prioritize improvement areas, even in the absence of industry-specific data.

Prioritizing Improvements: A Balanced Approach

Several factors dictate the focus of operational enhancements. Key considerations include the ratio of resource investment to potential gains and distinguishing between tactical and strategic improvements. Tactical improvements, often quick to implement, should target high-return areas with minimal resource requirements. Strategic improvements, though resource-intensive, can lead to substantial long-term savings.

Illustrating Improvements: A Closer Look

Operational enhancements span a broad spectrum, influenced by business type, supply chain maturity, external and internal factors, and past initiatives. Below are examples specifically pertaining to transportation and distribution:

Tactical Improvement Opportunities in Transportation

  1. Rates:
    • Evaluate rate structures and carriers to balance cost efficiency and service quality.
    • Prioritize proven carriers with reliable service over simply low-cost alternatives.
  2. Increased Shipment Sizes:
    • Consolidate shipments to the same customers for larger, less frequent deliveries.
    • Implement minimum order size requirements to decrease unit costs.
    • Optimize load configurations for maximum product capacity on trucks.
  3. Modal Shifts:
    • Consider less expensive transportation modes, like intermodal, for long hauls if service requirements allow.
    • Opt for multi-stop shipments over less-than-truckload (LTL) when feasible.
    • Utilize specialized transport options such as LTL Direct/Pooled LTL Shipments strategically.
  4. Customer Pickup Allowance Optimization:
    • Tailor incentives for customer pickups considering backhauls and overall cost reduction.
    • Regularly analyze allowances to prevent margin leakage over time.

Strategic Improvement Opportunities

  1. Distribution Network Optimization:
    • Analyze cost tradeoffs between potential distribution locations, customer costs, and volumes.
    • Use optimization modeling to determine the best manufacturing and distribution locations.
  2. Customer Strategy Development:
    • Segment customers based on volume and cost, implementing tailored service strategies.
    • Introduce delivery charges and minimum order stipulations strategically.
  3. Transportation Strategies Redesign:
    • Integrate pooling locations into the transportation network for load consolidation.
    • Focus on tailored optimization without comprehensive network redesign.
  4. Inventory Strategy Enhancement:
    • Analyze inventory turnover by product type, customer segment, and profit margin.
    • Rationalize SKUs focusing on high turnover items and consider alternative deployment options.
  5. Bracket Pricing and Incentives:
    • Structure pricing mechanisms based on order profiles to align with shipper costs effectively.
  6. Competitive Strategy:
    • Form alliances with competitors to leverage physical capital and collaborative planning for mutual benefits in competitive landscapes.

Conclusion: A Continuous Process

Improvement in distribution and transportation is an ongoing, dynamic endeavor. It requires a proactive stance to keep pace with business evolution. Sterling Solutions, leveraging extensive experience and success stories, is poised to guide your business through these tactical and strategic improvements, ultimately enhancing your bottom line.

For a comprehensive discussion on how we can assist you, please contact us.