Do You Track Cost Drivers in your CPG Transportation System?

Consumer Goods, Transportation Management
December 9, 2015

In Part One of our series –  Stop Monday Morning Quarterbacking Your CPG Transportation System – we showed how you can score big for your CPG business with tools that allow real time visibility into where your transportation system is losing time and money, and the ability to take nearly immediate action to stop it. Addressing these profit stealers when they first happen, and having a system that allows you to seamlessly change strategy to save money and quickly accommodate changes in the fast-moving consumer packaged goods (CPG) market, is critical to your success: It’s a game-changer when entering and exiting seasonal markets. Having it means you’ll never again have to be a Monday Morning Quarterback questioning what you could have achieved if you had access to vital information when you needed it most.

We have found in our many years managing transportation within the CPG industry, that the only way to create such a system is to ensure it comprises metrics that are most meaningful to your business. These should provide quick visibility into the most significant factors influencing cost and service exceptions. They also should inform what actions need to be taken and in what priority. This function is crucial both to problem solving and taking preventive measures to avoid problems – like late arrivals, cost leakage, unprofitable routes and fuel inefficiencies. Having it puts you in the red zone – always ready and able to adjust strategy and make that quick score.

Carefully track and analyze cost drivers

Understanding and managing cost leakage within your transportation network is critical. Minimally, make sure your transportation system provides/tracks the following data. As you read, imagine the results you could achieve if you had the information exactly when you needed to apply it. It’s like being armed with a scoreboard that is more real time than after the fact:

    1. Network Summary View – A big picture of your network in its entirety that provides a reference point for overall cost performance and trends.Network Performance
    2. Prime Carrier Tender Acceptance – An indicator of how well your carrier plan is being executed.
    3. Lane Variance – Useful in examining the truckload activity of a network. It focuses on rate variance at the lane level – specifically, the variance between the executed carrier cost and a defined baseline cost.
    4. Spot Market Activity – What lanes you monitor and how often matters to your understanding of costs.
    5. Freight Brokerage Activity – Should be monitored for cost efficiency.
    6. Expedite Activity – Understanding the role expedites play in the network can help explain cost increase impacts. It’s most important to break down activity by key lanes, customers, origins, time of month, etc. for appropriate action to be taken or further questions to be asked based upon that data.

For Ryder CPG Transportation Management customers, we add even more metrics to track and analyze, but you can see from these examples how valuable it would be to have this data, analysis, and a course of action to take – all in real time. You could make time and money saving adjustments almost immediately and take customer service to a new level – for every play of every game. If your transportation management isn’t scoring these results, replace it with one that can. After all, it’s your bottom line.

 

Authored by Paul Lomas and Charles E. Husby

Mr. Lomas is Vice President, Business Development for the Consumer Packaged Goods Group within Ryder Supply Chain Solutions. Prior to Ryder, he led the supply chain practice for Accenture in New York City, was a Vice President with Cleveland Consulting Associates, and held materials management responsibilities for General Motors.

Mr. Husby is Vice President Logistics, Ryder Supply Chain Services, Consumer Packaged Goods. He has been in the field for 27 years, serving and leading logistics operations. With a passion for the practical application of technology, he has launched numerous customer implementations in both transportation and warehousing. Currently, Mr. Husby has responsibility for the Ryder Consumer Packaged Goods vertical Transportation and Public Warehousing service lines.

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