Using Potential Down-Time During COVID-19 To Take On Cost Savings Projects for the Future

The current state of the global economy has caused a very large amount of companies around the world to either change how they operate or perhaps even stop operations all together. The
consequences of doing so are very significant and while companies try and figure out ways to keep their head above water, some might look at this time as a way to dive into some projects that have always been on the back-burner and could help your organization come out of the global pandemic quicker than others.

Identifying opportunities within a supply chain to reduce your overall spend as a company is a critical area of focus. Some opportunities are easier than others. Some require a lot of internal effort in order to gather the required data and perform the necessary analytics to make educated decisions. During the COVID-19 pandemic, this could be a great time to utilize the time available to collect that data and do those analyses.

One area where a company can look to reduce their overall spend is with Inbound Freight. Specifically, freight where the cost is currently built into an invoice with a supplier. An invoice might have a fixed fee for the product coming in, perhaps they charge a percent of the invoice for freight, or maybe they have their own preferred carrier network and just select the carrier they like the most. Are any of those methods the best option for you? Understanding how you are charged for inbound freight can be a huge opportunity for improvement. By taking control of the spend, you can start to find ways to improve on the cost to ship those goods. It might take a little more manual effort from your logistics team but in the end, the ability to control all of the cost levers and flexibility to change as needed, can be a great opportunity for savings.

There are a couple of things to consider when determining what the best option is for inbound freight with your suppliers.

Flat Fee: Ask your supplier for details on the shipment. As for dimensions, weight, shipping method, class, etc. Reach out to one of your carriers (parcel, LTL, FTL, etc) and ask them to price out a shipment with those specifications. Try and determine if that shipment is one of the more common shipments. Do you receive that shipment 80% of the time? When you get pricing back from your carrier, see if it is above or below your flat fee to determine if there is an opportunity to take that cost in house and use your own carrier network.

Percent of Invoice: The type of commodity is important here. If you are receiving very expensive items but a carrier values those items as ideal freight to carry (well boxed, palletized, dense, etc), then you might want to have your carrier move that freight instead of take the hit on the invoice.

Supplier’s Carrier: It easy to assume a supplier will always use the best carrier for you. That does not have to be the case. They are most likely using a top carrier in their network, not the one with the lowest cost, or best transit time or most reliable delivery. Determine which of these factors matter the most to you and either ask the supplier to select carriers bases on your requirements, or use the same method as Flat Fee and ask for a variety of shipment specs, and ask your carriers to price accordingly.

3PL: One other option could be with a 3PL or the Spot Market. If you do not want to use contracted pricing for receiving a shipment, maybe the market is in a downturn for trucking, use a 3PL or hit the spot market. Using these options when the time is right can help save a lot of money throughout the year.

Taking on an initiative like this will require a lot of time and effort. Multiple departments throughout your organization will have to get involved. The cost function of the invoice changes if freight is removed. It’s no longer baked into the cost of the goods. This could change how you price your products or services for your customers down the road. Making sure the proper internal stakeholders are involved will be critical for not only the success of the project, but making sure your company will be able to take advantage of all the operational and cost improvements made as a result of taking control of your inbound freight.

What are some other downtime projects where Corcentric can help? Please visit our website and fill out our online form here.

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