Up to 20 percent in cost savings within a few weeks
The current economic slowdown and heightened uncertainty about when and to what extent demand will return to normal is requiring many businesses to implement in-depth cost reduction and restructuring programs. Of course, no review of service areas and associated cost structures is complete without examining supply chain.
A good lever of fast cost reduction and greater flexibility can be found in transportation costs, which make up more than half of all supply chain costs for many manufacturers and retail businesses. Given the current situation characterized by volume fluctuations and increasing cost pressures, it makes sense to take a close look at the entire area of transportation management.
Experience has shown that 4flow can identify transportation cost reduction potential for its customers by up to 20 percent within a few weeks. This is proven by 4flow’s more than 500 successfully implemented projects across the globe in all industries, 20 years of competence in best practices, extensive benchmark databases and software for supply chain and transportation planning developed in-house.
The multi-award-winning software 4flow vista® is at the core of projects focused on transportation optimization potential. With 4flow vista®, transportation costs and structures are analyzed and made transparent in a short time period. This enables a 4flow team of consultants to quickly identify optimization potential in the different areas of a transportation network and to tackle them with the customer together.
The basis for successfully reducing transportation costs is transparency all the way down to the shipment level. Typical challenges include inconsistent transportation flows and costs, or freight invoices that are unconsolidated and difficult to allocate. And in 2020, there is the added dimension that optimization based on existing transportation data did not result in actual transportation cost savings because, in addition to higher volatility, many businesses find themselves in a very different situation compared to before the coronavirus pandemic.
Through volume forecast scenarios, future transportation flows in networks can be successfully modeled and used as a basis for optimization.
The current focus in transportation optimization is on measures that can be implemented on short notice: frequency and route optimization, increasing capacity utilization through consolidation or milk runs, optimizing existing tariffs or empties and container optimization.
Over the last few months, 4flow has identified potential for optimization – despite changes in volume and transportation flows – particularly at the point where established processes and structures are operated. Changing volumes give rise to new possibilities to combine different suppliers or customers on milk runs.
Another area where 4flow has recently been able to leverage optimization potential on a large scale is frequency reduction. There is no cheaper transportation option than a fully utilized full truck load (FTL). However, restrictions in the areas of space, capital costs and container availability often stand in the way of using the FTL. Over the past while, it has been demonstrated that restrictions on the availability of containers and space have been resolved through lower production volumes on many transportation routes to facilitate the implementation of frequency reductions.
In order to visualize the effects on individual shipments and thus determine the feasibility of frequency reductions or milk runs, proven methods and algorithms are used, including the 4flow vista® 3D Calculator for Loads, which allows truck load scenarios to be displayed and optimized three dimensionally.
Cost savings of € 3 million with a € 1.4 million investment in containers
It has also been shown that with comprehensive transportation optimization and by bundling optimization possibilities, investment restrictions can be overcome with the help of substantial and convincing business cases. “Individual optimization measures requiring an investment in containers are often turned down,” says Jonas Goldenstein from 4flow consulting.
4flow is able to show bundled business cases to management that demonstrate, for example, that annual cost savings of 3 million euros for 35 transportation lanes are possible by investing 1.4 million euros in containers. By bundling business cases of this type, 4flow has been able to generate sound investments at top decision-making levels.
Once measures are evaluated for possible savings and implementation time, 4flow prioritizes and implements them together with customers and then tracks their performance through continuous monitoring.
Of course, it is also important not to forget about measures that are effective from the mid to long term, be it the retendering of transportation services or the optimization of network structures to address the number and positioning of consolidated locations.
With over 500 successful network and transportation optimization projects in 20 years in all industries and over 100 experts globally, 4flow consulting is a guaranteed successful partner for cost reduction.
Author: JONAS GOLDENSTEIN, 4flow consulting
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