An important foundation of the freight review process is to profile your current freight expenditure. To do this properly you need to analyse the data from your carrier invoices and manifest data to get an in-depth understanding of services used, average consignment type; weight & size (charge weight), handling & delivery specifics, laneways, etc., etc.
Next step in the freight review process is to benchmark your freight against peer standards. This reveals the strengths and weaknesses of your current rates and operational practices and therefore the opportunities for improvement, the parts of your distribution to focus on in a Freight Review.
Plan and Invite Carriers to Tender
After this analysis is completed, you can prioritise your goals. Perhaps the analytical reports are showing you that you need a new carrier to deal with a service mode gap for example, tailgate delivery, or to change some shipments to Road Express for city-to-city deliveries (rather than current airfreight service that achieves same delivery timeframes at higher cost).
This helps you to decide which carriers need to be invited to the tender, to fill the gaps operationally in your freight profile, whilst ensuring you receive market best rates. A document summarising key details of your business, your products, freight profile details, and the scope of your Freight Review should be sent to the relevant carriers.
Rates Comparison & Carrier Negotiation
Upon receiving the submissions of the interested carriers and ensuring it matches your requirements as outlined in the documentation you’ve provided to them the next step in your freight review process is to check their rates to see if they’re competitive. These days to do this at best practice and at the level that techological advances have made possible you should use a System that provides predictive modelling capabilities. It’s not enough to do a spreadsheet analysis anymore and it’s definitely not ideal to just ‘spot check’ some of your busiest laneways as a way to compare.
Carrier Distribution Network
Initial results from this anaytical data might lead to returning to the shortlisted carriers to negotiate part or all of their rates supplied to then be run through the analysis system again. The next step in an optimal freight review process is to look at a few optional analytical reports on carrier distribution network design can lead to a finalisation on the selection of carriers for a final tailored carrier distribution network, taking into consideration all the goals of the Freight Review such as cost, service / performance, and technological capabilities.
Post Freight Review
After implementation and in, say, 3-6 months’ time you need to refer back to your freight predictive modelling reports to ascertain if you’ve reached the goals, the priorities, as defined at the beginning of the freight review process. Freight Cost Reduction is always a KPI from a freight review, so in order to confirm that you have actually reduced your freight costs you would look to analyse whether the freight costs per month and over the timeframe, (in this case we’ve said 6 months), has actually gone down.
Business Intelligence – the larger picture
Analysing the success of your freight review process is more complex than merely confirming whether your freight invoice values have gone down. What if the volume of shipments has also gone down? What if you look at the costs per month from carrier invoices and costs have gone up, the opposite of what was predicted? Closer analysis is needed to see that volume of cargo shipped wasn’t a factor. Or what if you’ve added a new element such as a B2C online shopping system, new product needing new packaging, or some other factor.
So, you need Freight KPIs in a Business Intelligence Dashboard or at the very least a report with metrics such as average cost per consignment, average weight per consignment. Then you need the capacity to drilldown to view these KPIs across parameters such as Customer, Carrier, Region, etc. Only with this type of data can you confirm that the outcome of the new carrier distribution network is hitting your business strategy goals, when the initial predictive modelling report(s) was created.
Freight Predictive Modelling will give you about as clear a picture on your options for improving your business as you can get, but, whilst historical freight data (past behaviour) is a great tool for forecasting, (future behaviour), particularly once you’ve added the rigours of profiling and benchmarking, it won’t be as accurate if you’ve increased volume or changed your profile since implementation of the initial review analysis. For example, you’ve added a new, large customer or, you’ve added new products that necessitates new packaging.
You therefore need to isolate and drilldown on key Freight KPIs and include continual monthly reporting for trend analysis on the KPIs. This continual reporting will alert you to the impact of the changes in your business and to accurately measure the outcome of the Freight Predictive Modelling Review process.
If you would like to learn about the systems and processes we use to assist with a Freight Review that will provide certainty around outcomes, please contact us for a free consultation. Our systems can run data analysis on 100,000’s of consignments against multiple incumbent and prospective carriers quickly and easily, providing the basis of a sophisticated, detailed predictive modelling report with forecast on variable outcomes. This preliminary analysis is complimentary for qualified candidates.