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How can you identify the cost drivers in transportation management?

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Transportation management is the process of planning, executing, and controlling the movement of goods and materials from one point to another. It involves selecting the best mode, carrier, route, and service level for each shipment, while minimizing costs and maximizing customer satisfaction. But how can you identify the cost drivers in transportation management? What factors affect the total transportation cost and performance of your supply chain? In this article, we will explore some of the main cost drivers in transportation management and how to measure and optimize them.

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1 Fixed and variable costs

One way to classify the cost drivers in transportation management is to distinguish between fixed and variable costs. Fixed costs are those that do not change with the volume or distance of shipments, such as depreciation, insurance, licenses, and taxes. Variable costs are those that depend on the volume or distance of shipments, such as fuel, labor, maintenance, tolls, and fees. Fixed costs are usually harder to reduce or eliminate, but they can be spread over more shipments to lower the average cost per unit. Variable costs can be influenced by factors such as load size, weight, density, speed, and route optimization.

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Tarang Mathur

Incoming Associate at McKinsey | MBA candidate at Duke Fuqua'25
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Some of the fixed costs include: 1) maintenance 2) Technology ( GPS devices, sensors, etc) Some of the variable cost include: 1) fuel 2) Labour 3) tariffs

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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A gest?o eficaz do transporte é uma parte crucial de qualquer negócio que envolva movimenta??o de mercadorias, seja para distribui??o de produtos ou para presta??o de servi?os. Uma das principais preocupa??es nessa área é a identifica??o dos fatores de custo, que podem impactar diretamente a rentabilidade e a eficiência operacional de uma empresa. Neste artigo, discutiremos como identificar os principais fatores de custo na gest?o do transporte e como gerenciá-los de forma eficiente.

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Asad Jan Khan

CLTD | MBA | ME | BE (Logistics, Transportation and Distribution Professional)
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To identify cost drivers in transportation management, it's essential to analyze various factors impacting expenses. This includes examining fuel prices, vehicle maintenance costs, driver wages, route efficiency, and equipment utilization. Conducting a comprehensive review of transportation data, such as freight volumes, shipment sizes, and delivery distances, can provide insights into areas where costs are highest. Additionally, tracking key performance indicators like on-time delivery rates, fuel efficiency, and maintenance expenses can help pinpoint specific areas for cost optimization and inform strategic decision-making to mitigate expenses and improve overall operational efficiency.

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Alex Markovic

Supply Chain
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Fixed costs: 1. Asset depreciation IE vehicles 2. Insurance 3. Lease or loan payments under fixed terms 4. Salaries 5. License and permit fees 6. Tech Stack variable cost: 1) Fuel cost 2) hourly labour cost (overtime etc...) 3) Maintenance and Repairs 4) Toll charges if you are moving freight in the US in particular 5)

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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Os custos operacionais incluem uma variedade de despesas, como salários dos motoristas, seguros, licenciamento de veículos, pedágios e taxas administrativas. é essencial manter um controle rigoroso desses custos e buscar oportunidades de otimiza??o, como negocia??es com fornecedores, ado??o de rotas mais eficientes e utiliza??o de tecnologias de gest?o de frota.

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2 Trade-offs and trade lanes

Another way to identify the cost drivers in transportation management is to consider the trade-offs and trade lanes involved in each shipment. Trade-offs are the compromises that have to be made between different aspects of transportation, such as cost, speed, reliability, flexibility, and sustainability. For example, choosing a faster mode of transportation may increase the cost, but reduce the inventory and warehousing expenses. Trade lanes are the routes and networks that connect the origin and destination of shipments, and they can vary in terms of demand, supply, capacity, congestion, regulation, and competition. For example, shipping by ocean may be cheaper than by air, but it may also face longer transit times, higher variability, and more customs and security issues.

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3 Performance indicators and benchmarks

A third way to identify the cost drivers in transportation management is to use performance indicators and benchmarks to measure and compare the efficiency and effectiveness of your transportation operations. Performance indicators are metrics that quantify the results and outcomes of your transportation activities, such as cost per unit, cost per mile, on-time delivery, transit time, fill rate, and service level. Benchmarks are standards or references that help you evaluate your performance against your goals, industry averages, or best practices. For example, you can use benchmarks to identify gaps and opportunities for improvement in your transportation processes, such as reducing dwell time, increasing utilization, or negotiating better rates.

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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O uso de tecnologias inovadoras pode ajudar a otimizar a gest?o do transporte e reduzir custos. Isso inclui o uso de sistemas de rastreamento e monitoramento em tempo real, roteiriza??o inteligente, análise de dados para tomada de decis?es e automa??o de processos. Ao investir em solu??es tecnológicas adequadas às necessidades da empresa, é possível aumentar a eficiência operacional e reduzir desperdícios.

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4 Data and analytics

A fourth way to identify the cost drivers in transportation management is to leverage data and analytics to gain insights and visibility into your transportation performance and costs. Data and analytics can help you collect, process, and analyze information from various sources, such as orders, invoices, carriers, GPS, sensors, and external databases. Data and analytics can help you identify patterns, trends, anomalies, and correlations in your transportation data, such as demand fluctuations, cost variations, service failures, or network inefficiencies. Data and analytics can also help you forecast, plan, optimize, and control your transportation decisions, such as mode selection, carrier selection, route planning, and shipment tracking.

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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Por fim, uma parte fundamental da gest?o eficiente do transporte é a análise de desempenho e o uso de métricas para avaliar o sucesso das opera??es. Monitorar indicadores-chave de desempenho (KPIs), como custo por quil?metro, tempo de entrega, índices de satisfa??o do cliente e eficiência de combustível, permite identificar áreas de melhoria e tomar decis?es embasadas em dados.

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5 Technology and innovation

A fifth way to identify the cost drivers in transportation management is to adopt technology and innovation to enhance your transportation capabilities and performance. Technology and innovation can help you automate, integrate, and streamline your transportation processes, such as order management, shipment execution, freight audit and payment, and performance management. Technology and innovation can also help you improve your transportation visibility, agility, and responsiveness, such as real-time tracking, dynamic routing, predictive analytics, and artificial intelligence. Technology and innovation can also help you reduce your transportation costs, risks, and environmental impact, such as fuel efficiency, safety, security, and sustainability.

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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Em resumo, identificar e gerenciar os fatores de custo na gest?o do transporte requer uma abordagem abrangente que envolve desde o monitoramento dos custos diretos, como combustível e manuten??o, até a ado??o de tecnologias inovadoras e o cumprimento de regulamenta??es. Ao adotar práticas eficientes de gest?o e investir em solu??es adequadas às necessidades da empresa, é possível reduzir custos, aumentar a eficiência operacional e melhorar a competitividade no mercado.

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6 Strategy and alignment

A sixth way to identify the cost drivers in transportation management is to align your transportation strategy with your business and customer objectives. Transportation strategy is the set of goals, policies, and actions that guide your transportation decisions and actions. It defines how you want to position and differentiate your transportation service in the market, how you want to balance the trade-offs and trade lanes in your transportation network, and how you want to allocate your transportation resources and investments. Aligning your transportation strategy with your business and customer objectives can help you optimize your transportation performance and costs, while creating value and competitive advantage for your organization.

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Thalita Azevedo

Especialista em Transporte de Colaboradores - Transporte Sustentável - ?nibus Elétricos
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Os custos relacionados à logística e armazenagem também desempenham um papel importante na gest?o do transporte. Isso inclui despesas com armazéns, gest?o de estoques, embalagens e processamento de pedidos. Ao otimizar os processos logísticos e adotar práticas de gest?o de estoque eficientes, é possível reduzir custos e melhorar a velocidade de entrega.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you identify the cost drivers in transportation management?

1

2

3

4

5

6

7

1 Fixed and variable costs

2 Trade-offs and trade lanes

3 Performance indicators and benchmarks

4 Data and analytics

5 Technology and innovation

6 Strategy and alignment

7 Here’s what else to consider

Transportation Management

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How can you identify the cost drivers in transportation management?

1

2

3

4

5

6

7

1 Fixed and variable costs

2 Trade-offs and trade lanes

3 Performance indicators and benchmarks

4 Data and analytics

5 Technology and innovation

6 Strategy and alignment

7 Here’s what else to consider

Transportation Management

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