A Note on Considering Small Changes to Create Cost Savings without Reducing Rates, from BridgeNet Solutions' President, Niko Michas:

The focus of this month's newsletter stems from recent discussions with carriers regarding companies' current rate-lowering tactics.  The general opinion of carriers across the board is that there is only so much squeezing a company can do to a ratebefore a reduction in the carrier's profits starts to dip into the costs associated with servicing the client.

While in the past, rate reductions were fairly easy for shippers to achieve, carriers cannot continue to operate effectively this way, for obvious reasons, essentially forcing shippers to get more creative in how they create cost savings throughout their supply chain. 

Fortunately, there are many creative ways to achieve leaner supply chains that won't adversely affect your carrier's ability to serve, and that won't require you to invest in pricy warehouse management systems or costly Six Sigma projects.  

Sometimes cost reductions can evolve from something as simple as understanding exactly what your customer service department is offering to your end clients and why each policy exists in the first place.

Take time-in-transit.  Many companies offer 24-hour guaranteed delivery from the time an order is placed, regardless of how many clients actually need or want orders filled within 24 hours.  As a result, they wind up paying the high transportation costs associated with such a policy every time they ship.  If this guarantee is something that your company offers, you should stop to think about where these orders are going.  Are you sending your shipment to a hospital that will place your product on a shelf for two weeks before using it?  Are you sending shipments to a distributor who places orders for a two-week stock replenishment?  Clients like these may not even notice if you start filling orders within 48 hours, but taking that extra day could result in a 20 percent reduction in your supply chain expense. 

Filling orders within 48 hours rather than 24 hours is something you can do on a client-by-client basis.  If a client complains that they need their shipments sooner, simply revert back to filling their orders within 24 hours and assume with some confidence that the clients who aren't complaining have either not noticed the change in filling time, or, better yet, not been bothered by it.

Another practical instance to create cost savings is by taking a second look at your order management process.  If you are shipping multiple orders to the same locations on the same day, this can open the door to staging consolidation points throughout your warehouse to consolidate orders.  By doing this you will be able to reduce the number of shipments, which, in turn, will lower the transportation costs associated with each order.  Order consolidation can be accomplished by holding multiple orders in a designated area of your warehouse throughout the day and then consolidating them at the end of each day.  A more in-depth approach to order consolidation would incorporate programming in your manifest system that would automatically identify potential consolidation opportunities over given time frames.  In addition to the transportation cost reduction, this approach would also reduce manual efforts, lowering your labor costs.

Other cost-saving options might be right for your company.  Just remember that in an economy that requires supply chain managers to come up with out-of-the-box solutions, even relatively simple changes like those discussed in this article can make a significant impact.  Things like extending filling times for orders and consolidating shipments can allow you to cut costs without compromising the levels of service you receive from your carriers or the levels of service you provide your own clients.

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