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27 January 2017

Making logistics work for you: Streamlining freight cost management

Major events such as Brexit and the change in the U.S. leadership have reshaped the political landscape, and by extension, the global trade and business environment in the near future. Uncertainty with the outcome of proposed trade agreements and the threat of higher tariffs are issues that businesses will be grappling with as a result. These events are placing more pressure on logistics operations to reduce expenses and put a hold on eroding profits.

Reducing supply chain costs

Businesses are fast recognizing that there is a need to streamline their freight cost management due to fundamental issues related to talent, technology adoption and costs. Forward-thinking companies are gaining strategic advantage over competitors by capitalizing on technology innovations and using analytical tools to provide them with better visibility in their supply chains.


However, few companies have a system in place that can accurately and completely manage the pool of logistics data such as verifying freight invoices. This prevents companies from taking full advantage of potential logistics cost savings.


With supply chains spanning over numerous links and geographical locations, this has created a very scattered and opaque supply chain environment for businesses and their stakeholders. On top of that, companies who have outsourced some of their business operations – such as freight cost auditing –  have engaged with service providers whom are not able to provide businesses with the real-time visibility to manage this opacity issue and enable them to make decisions in a timelier manner.


In this current challenging environment, businesses need to review all aspects of their operational costs to remain profitable. Freight charges can represent up to 10 percent of a company’s total expense, which means cutting freight costs is an excellent way for companies to improve their bottom line.


Driving profitability via digital tools

By arming businesses with data analytics, real-time visibility is now an option to help manage their freight audits. Businesses will only need to pay for what they ship. For example, carrier costs is an area where organizations often overspend. Most businesses examine their carrier costs only where there is a variance, without realizing that the daily choices that they make has an impact on their business profitability.


Equally as important, businesses can make more informed decisions about their shipping operations to improve their bottom line. By having real-time visibility on freight volume, they can consolidate their freight and negotiate for better shipping costs.


At the operational level, once the manual tasks of freight management have been automated, this enables businesses to focus on value-adding activities. They include discrepancy negotiation and resolution with forwarders, while keeping a sharp eye on freight invoices without sacrificing quality control.


Challenges in freight auditing

One of the issues that companies need to address when they look into managing and streamlining freight cost management is freight auditing. It has been found that in general, approximately 30 percent of freight invoices contain an error.


The problem lies in the fact that managing freight invoices is often a tedious task. Aside from having to deal with the sheer mass of invoices that need to be processed, there are issues such as complex rates and tariff structures in which freight invoices are subjected to as well.


Many businesses in Asia currently do not have a system in place that can accurately and completely manage the pool of logistics data to verify freight invoices. While a number of companies are using service providers that offer freight auditing services, the processes might not be automated. The skills required for freight bill auditing is time consuming and requires expertise.


Digital transformation through outsourcing

In a recent study, “The Digital Silk Road to Success” by NTT Communications Corporation, 94 percent of the organizations in Singapore, Hong Kong and China have plans to deploy disruptive technologies — IoT and big data analytics — to accelerate digital transformation and boost competitiveness.


The success of retail, manufacturing and wholesale industries surveyed relies heavily on an efficient supply chain ecosystem where companies’ ability to trace and visualize the bilateral flow of goods, information and cash throughout the value chain at a given moment is becoming more critical than ever.


To transform their organizations digitally, over 60 percent of respondents said that they would choose to outsource the transformation projects to reduce deployment time and cost, and tap cross domain expertise from suppliers.


Many businesses lack these specific capabilities and capacities. As such, engaging a service provider for freight management is an option that any company seeking logistics efficiency should consider.


Companies would no longer have to worry about the time-consuming tasks of auditing their freight invoices and will enjoy savings on both their freight and operational costs for verifications and processing of invoices and corrections.  Supply chain managers will have access to analyses, ad hoc reports, alerts, and dashboards. Monitoring KPIs, performance analyses, and other reports will enable them to continuously monitor service levels and the performance of their logistics service providers.


More importantly, by providing transparency to their supply chains, businesses are able to embark on data-driven decision-making and planning.


Managing freight costs is an exercise in trimming operational costs, and substantial cost savings cannot be underestimated. For companies that are constantly looking at managing their logistics costs, complementing their existing talent and technology capabilities with digital tools by using an outsourced strategy might be the best cost-effective solution that they can easily adopt.


Source: http://www.logasiamag.com/2017/01/making-logistics-work-streamlining-freight-cost-management/