U.S./Mexico Shipping Series Part 3: Transportation Success is More than a Low Rate per Mile.Transportfolio by C.H. Robinson
More than ever before, shippers have better access to information, and better quality information about how to find transportation savings. Our white paper, Supply Chains: Where to Find the Biggest, Fastest Transportation Savings, is just one example and it offers multiple ways to save. As freight markets become more efficient in matching supply/demand, just having the lowest rate per mile won’t cut it anymore. Being a smart transportation shipper no longer means just negotiating the lowest cost per mile, it means obtaining the best total landed cost.
Let’s take a look at three companies that have moved beyond some of the basic best practices like rate benchmarking and constrain based bids. These companies are measuring the performance of their supply chains beyond cost per mile.
A heavy equipment company focuses on claims
After a recent supply chain evaluation, one company found more value in changing their shipping process to reduce their claims risk by six figures than on immediate transportation savings. This is a company that manufactures a wide variety of construction and agricultural equipment and places a high priority on brand reputation.
By considering their total landed costs rather than just their rate per mile, the company builds brand loyalty, delivers working products to customers the first time, and potentially secures future sales through higher customer satisfaction levels.
Let’s not forget, they also saved six figures in cargo claims and reshipments. Is their success defined as a lower transportation line item, or improved company profitability overall?
Household and personal products company strives for consistency
Another customer faced climbing inventory carrying costs. It turned out that because shipping times were inconsistent—sometimes delivering in 5 days and other times in 15 days—their own distribution centers always planned for the worst and ordered more product than they actually needed. Operating with this “just in case” attitude caused cost the company quite a lot of money.
In their situation, they had a very reasonable—if not low—rate per mile, but their total landed costs were out of control because of the extra inventory expenses. Now, while they pay a slightly higher rate per mile, they receive shipments with consistent transit times. As they can rely on the consistent delivery schedule, over-ordering has stopped and inventory costs are significantly lower, more than making up for the slight transportation cost increase.
Cross-border company reduces customs fees
A U.S. based organization that manufactures their product in Mexico approached us about improving their trucking rates. During the evaluation, our proprietary Global Trade Reports® uncovered they were paying almost half a million dollars in unnecessary port user fees each year.
I think it’s important to note that C.H. Robinson isn’t this company’s U.S. customs broker. But we shared the findings and presented a way to recoup the previous year’s fees. They were quite responsive to our news. After all, who wouldn’t want to shave half a million dollars from their annual customs expenses and recoup the previous year’s fees to boot?
How to look beyond rate per mile in your own supply chain
For more information about how to get started measuring your own total landed costs, read the post, “What’s Missing in Your Total Landed Cost.” It offers a great, visual way to understand total landed costs to get you on your way to thinking beyond rate per mile and capturing an accurate total landed cost.
You can also look for the next post in my U.S./Mexico cross-border shipping series in the coming weeks, which will discuss the importance of modal and routing alternatives—as both a diversification strategy and for contingency planning.