Understanding your logistics data to focus on what you can control

It has been a tough few years to be a logistics leader. As the topic of freight delays, port congestion, driver shortages, and surging freight costs have been frequently mentioned as contributors to missing financial targets all over the world, those who lead logistics efforts have been under increased pressure to work smarter, think creatively, and collaborate closely with stakeholders to minimize the pain.

It can be difficult to sort through the noise (and often – the emotions of others) associated with blown freight budgets, and teammates likely have no issues weighing in on their opinions of what you should do as the logistics leader (sound familiar to anyone?).

At times people respond too quickly without all the needed information or insights, and emotional decisions often lead to temporary solutions to a long-term problem (and may not actually solve any problems).

As someone who has been in the trenches of logistics management during the pandemic (and way before that), I have consistently encouraged people to focus on what they can control – the noise of everything else can be distracting.?By focusing on a few key areas of what you can control, logistics leaders can still push for improvements that can positively impact freight costs and your overall organization.

Review your average shipment weights by mode

During times when production might be constrained and companies are trying to serve customers quickly, average shipment weights often drop well below baseline weights which can rapidly lead to a higher cost scenario. The key here is to start with good baseline data for comparison.

Using your prior year averages as the baseline, can you easily communicate average TL, LTL, and intermodal weights per shipment in comparison to your baselines? Do your teams know the targeted goals and the current results? If your load weights drop by even a few hundred pounds, the impact in how that shows up in your freight costs could be significant and make the difference in overall profitability.

I don’t know how many times I’ve heard statements like “it seems like our rates are much higher” when the main issue is that load weights dropped so much, impacting the average cost per unit being paid for transportation. Good data around this leads to better conversations which can support efforts around load weight improvements where possible.

Are you being realistic with shipment lead-times?

Another area that can be quite challenging to manage during a compressed market but has a serious impact on costs is lead-time being provided to carriers for freight coverage. We are not in a “normal” freight environment where same-day coverage used to be easy and reasonably priced. The supply & demand imbalance continues and will be an ongoing issue throughout 2022.

Being able to understand how much of your volume is being tendered with less than 24 hours’ notice, 48 hours ahead of shipment date, etc. helps to have better internal discussions. Frequently a same-day load or a shipment being requested to move with less than 48 hours will cost well more than the freight included in a healthy financial model, and the people requesting the “hot” freight may not understand that. Good data helps you to explain how that could potentially be an unwise decision.

We continue to operate in a truckload spot market where rates are up 30+% in most areas vs. prior year, so measuring the lead-time your teams are providing to carriers could drive big benefits if the data is used to set guidelines and drive improvements.

Mode shifts – can you explain the impact?

There is normally a meaningful financial difference in cost/unit (or cost/lb.) between LTL, TL and intermodal shipments, and a big shift toward more LTL (or moving away from intermodal) can flip your numbers upside down quickly. It has always been quite helpful to me to understand the monthly split of freight by mode in comparison to the prior year, as that measurement can quickly help to explain deviations to budget results.

If your LTL suddenly jumps from 25% of your volume in a high-cost origin point to 50%, as an example, you can quickly review why and better communicate outcomes & opportunities to your teammates (and financial teams). Is your intermodal volume suddenly much lower because you can’t afford the transit time and need to move those orders via truckload instead??You may not be able to control some of this if the goal is to service the customer first, but the data helps you to have better conversations.

Overall mix of what you are shipping is simply different vs. what you expected/planned

We can’t always directly influence what is happening in the customer environment and sometimes companies have to make adjustments to serve a customer based on circumstances that have changed. This might include servicing a customer from a different location vs. what you originally planned (i.e., perhaps you planned to ship from the East Coat and now you’re servicing that customer from the West Coast). Or maybe you lost a large customer or gained some new business that would not have been reflected in your baseline data, so now your financial results are off each month because the comparison points have changed.

Have you opened a new warehouse? Closed a manufacturing site? Added a new supplier that shifted how you serve a customer?

I have found in the past that mix can be one of those big drivers that people miss in their consideration of what is happening in their freight costs, yet it is such a critical area of activity to understand in interpreting financial results.

These are just a few areas where valuable info and insights can help a company to focus on potential opportunities for freight cost improvement. We can’t individually control what is happening on a global scale with logistics costs, but we can focus on a few areas that could support better results and improved internal discussions as we all continue to battle through market headwinds that keep logistics leaders up at night.

Battle on! ?(with data ??)?