Actually it should come as no surprise that many experts predict continued weak growth in the economy for the rest of 2011 and certainly into 2012. According to a recent survey commissioned by the Council of Supply Chain Management Professionals, business logistics costs – the cost to transport and warehouse goods- rose to 8.3% of the US Gross Domestic Product in 2010 compared to 7.7% the previous year.
This years report revealed that the cost of US business logistics jumped to $1.2 Trillion in 2010 an increase of $114 Billion from 2009. Inventory carrying costs also increased 10.3% last year due to higher costs of taxes, obsolescence, depreciation and insurance. Transportation costs were up 10.3% from the 2009 levels, with trucking lagging behind the performance of other modes.
As shippers know all too well freight carriers typically implement General Rate Increases once a year and many times shippers are unaware of such increases. Over several years transportation managers will really find their freight costs out of control and will have to answer to management as to why. So what can a shipper do to minimize the impact of increased costs.
- Understand what you are paying for; not just the base rates, but fuel surcharges and all accessorial fees and charges as well
- Consolidate shipments wherever and whenever possible; including consolidating small parcel shipments into LTL quantities and LTL quantities into truckloads
- Understand the services your company is paying for; do not use expedited services unless they are absolutely required.
- Continually benchmark the competition’s rates and charges; if your carrier feels they have a “lock” on your business, they probably do
- Understand your carriers’ costs; what if anything can you do to reduce their costs so they can pass those savings back to you
- Perform a comprehensive audit of your entire transportation spend; use an outside audit firm, the results always outweigh the costs
