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Value is More Than Just a Base Rate

A true logistics partner will look for savings beyond the obvious.

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If you are tasked with finding the best freight and logistics solutions, you know that only six underlying cost drivers truly influence the final price:

  1. Base Rate
  2. Distance/lane
  3. Commodity type/freight class
  4. Average weight per shipment
  5. Fuel surcharges
  6. Accessorial charges

Don’t let a seemingly competitive base rate overshadow the remaining five cost drivers. Your real power as the buyer lies in the knowledge that there are other levers to pull to save your company, and your customers, more.

Comprehensive and Personalized Strategies

Strategic supply chain managers exist to help you navigate the challenging world of logistics. A good supply chain expert should possess the following core competencies:

  • Experience in analyzing processes to intimately understand your business’ inner workings
  • Eagerness to dive into standard operating procedures to help you leverage improvement opportunities as they come up
  • Deep knowledge of transit times and inventory requirements, and the influence they have on freight costs
  • Ability to identify moving parts of your supply chain and marry rate with other options (route, weight class, lead time, etc.) to position your company in an optimal scenario.

A customized approach will expose savings opportunities that a big box logistics provider is either not going to reveal or take the time to uncover for you. But digging into the details is imperative, because things like inventory purchasing, contracts with vendors and lead times can all impact your bottom line.

Nothing but the Truth

Many logistics and freight providers extol the virtues of their customer-centric approach to business. But as plenty of shipping managers may tell you, these claims do not stand up in the real world. You are not alone if your provider has suddenly blindsided you with hidden fees or was unreachable when you needed them most. First and foremost, you should look for a partner who operates a transparent business in an industry where rates are systemically used to mask margins structures. Demand suppliers show you how price is calculated and what options exist, because you don’t have to tolerate a solution that primarily benefits the freight provider.

Good, Better, Best

To understand how smart supply chain strategy works in the real world, consider one large e-commerce retailer who had been choosing carriers based on geography, not on any other detail, such as weight or carrier footprint. Finally, the retailer engaged with Visible in hopes that its robust technology and strong relationships with multiple carriers could save the e-commerce company more.

In the end, if Visible had simply utilized the same carriers and same base rate by optimizing routing, our customer would have saved about 10 percent. Not bad. If we had used our standard base rate, our customer would have saved 18.4 percent. Not bad at all. HOWEVER, we went even further and optimized the entire scenario by utilizing both site-specific pricing and the best routing to save the customer 22.8 percent.

Customized Savings

Your transportation manager may think that a particular carrier is optimal, but a strategic supply chain partner will truly know the best options based on a host of thoughtful criteria. Experts like Visible also have more technology at their disposal, enabling them to rate shop multiple carriers and give you more insight into, and control over, the selection process.

A Good Partnership is Priceless

When you’re with a true supply chain partner, you get more than a lower overall freight spend. You enjoy tailored service and better overall efficiency and productivity so you can devote more energy to other important business functions.

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From the August 2019 Logistics Management Magazine
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