What Is Carrier or Freight Network Optimization?

What Is Carrier or Freight Network Optimization?

freight_network_optimization

Freight network optimization and freight auditing services are the key performance areas that shippers want to track and monitor within the supply chain industry. 

This essentially means optimizing and streamlining the movement of products and goods from Point A to Point B, maintaining desired service levels and customer experience through transportation network optimization. As highlighted by Redwood Logistics, “To complete any task efficiently, you must first have the right tools for the right job. The supply chain is no different. In fact, those who facilitate the movement of freight depend upon technology and daily operations that are efficient and customized for their specific applications. This is where the idea of network optimization really comes into play.” This can be achieved within the modern supply chain industry by determining the most efficient means for shipping and transportation.

Innovation to Better Understand Carrier Margins and Accessorials

Transportation management, supply chain distribution network optimization, and data-backed strategies are essential components of supply chain optimization. This is especially true when dealing with margins, accessorials, and fees as global networks become increasingly broad and complex, involving more personnel, equipment, and processes. 

Remember that an accessorial charge refers to shipping and transportation fees a carrier charges for services provided during transportation that goes above and beyond basic shipping services. This charge is in addition to any agreed-upon fees associated with line haul, mileage, and other related shipping expenses. The most common of the fees to monitor in pursuit of  freight network optimization through freight audit data include the following:

  • Detention – is the most common accessorial fee, assessed when it takes too long to load or unload containers and pallets. These fees are among the most important to monitor regarding transportation network optimization. Typically, the drivers allow for a set number of free hours wait time. After that period passes, hourly detention fees start adding up.
  • Reconsignment – is an additional expense that gets levied against shipments when the destination changes to another location after the carrier takes possession of the freight. Last-minute changes are often needed to deal with weather and traffic issues or changes in customer requests and needs. These fees, charged by the carrier, usually vary between $50 and $75.
  • Stop-Off Charges – for each additional stop along a route can add expenses as it takes more fuel, ties up capacity for longer, and requires more staffing resources. This additional charge must be considered when looking at supply chain distribution network optimization. It can significantly affect final expenses as a typical stop-off charge will range from $50 to $100 per stop, and it can quickly add up with multiple loads affected.
  • Lumper Fees – can be charged on shipments and loads when the driver needs to hire additional third-party providers for offloading service and assistance. Hiring someone to help provide service is commonly looked into during network optimization techniques to help with cost management. These lumper service fees can range anywhere from $75 to $600, varying greatly.
  • Layovers Fees – come into play when a truck cannot get loaded or offloaded according to the original schedule. Extending the days needed for the loading and unloading will require more resources. Whatever the reason for the delays, the carrier will charge a per-day layover fee that can often range from $200-$500. 
  • Truck Order Not Used (TONU) – is a fee assessed when a truck gets canceled after all terms for the shipment are agreed upon but before the cargo gets loaded. This fee can impact transportation network optimization efforts because the assessed amount usually ranges from $150-$200.

Access to Deeper Industry Experience and Knowledge Base With Automation

Accessing industry-specific knowledge and insight is a big part of freight management and freight network optimization. Logistics managers, team members, third parties, and customers alike can benefit from the right approach to supply chain automation and data management. That’s especially true as disruption continues throughout the industry. According to Logistics Management, “Global supply chain disruptions, port congestion, capacity shortages, increasing ocean freight rates and an ongoing pandemic have challenged shippers, ports, carriers and logistics providers during the past year. And looking ahead in 2022, experts estimate that the pressure on global supply chains will continue.”

Approaching supply chain distribution network optimization the correct way takes careful planning and cannot be overlooked or ignored. With the right insight, management can enjoy the following benefits of logistics intelligence through optimization:

  • Know which markets are hot for headhauls vs. backhauls. This valuable insight can help streamline the load pickup and drop-off processes and make it easier to schedule freight loads and shipments.
  • Typical tendered rates by market and industry niches are more accessible and available for use to reduce the risk of rejections or higher costs. Knowing the going rates and expected price fluctuations across various industries and shipping modes provides valuable insight to team members.
  • Recognize when a mini-bid, annual contract, or spot freight move is best. Renegotiations happen regularly, even with contracts and longer partnership agreements. Having access to data makes these bids easier.
  • Predict changes in freight spend based on the culmination of conditions. Looking at recent trends and data points allows management to more accurately predict and plan for costs associated with current supply chain trends and needs.

Following many of the latest innovations in supply chain network optimization techniques, shippers can more easily plan and prepare for short-term and long-term goals. Again, this is thanks to having access to valuable data, accurate logistics, and applicable automated processes.

Carrier Search and Optimization Available at Your Fingertips and in Real-Time

Carrier search and optimization are more important than ever in light of continuing recovery and stabilization. While much focus has been given to last-mile delivery services, the need for a streamlined approach to shipping and freight network optimization at the very start is also needed. According to Supply Chain Digital, “This lack of standardization across the supply chain is becoming a serious operational concern. Not one of the now-standard aspects of efficient last-mile supply chain operations is being achieved in the first mile.  One supply chain; two fundamentally different models.” This freight network optimization during the first mile can be accomplished through the following steps: 

  • Conducting assessments of potential contracts from carriers’ perspectives and with carrier-driven insights to make your shipments more attractive. 
  • Implementing a cost-vs.-profits analysis and planning to improve end-to-end visibility and functionality without choosing the incorrect service level.
  • Monitoring performance against industry standards with KPIs and company-specific data analytics, enabling actionable insights, and knowing when to leverage zone skipping, hub injection, or other fulfillment models. 
  • Getting resource-conscious help and advice for learning when to initiate additional RFP negotiations.

Why Shippers Need Carrier Optimization

Today’s shippers need carrier optimization, an omnimodal approach to current markets, and transportation network optimization. To effectively coordinate and locate capacity while also maintaining affordable and reliable shipping services for their customers, optimization of the supply chain remains critical. Reputable carriers offer quality services and have access to an on-call pool of carriers for scheduled and rush orders.  This is an excellent benefit for shippers, regardless of their niche market or specialty. As Modern Materials Handling pointed out, as “carriers adapt and respond to changing market dynamics, many have had to make relatively significant rate increases—in the range of 5% to 6%.” Carrier and freight network optimization go hand in hand and help shippers deliver the best results. With the right approach to carrier optimization, shippers will be prepared for the following trends: 

  • Market dynamics will keep capacity tight. Network optimization techniques must be adjusted to market trends and capacity crunches in both the short and long terms. Tight capacity is effectively no longer relegated to peak season crunches and can now occur more suddenly, which shippers must be prepared to handle.
  • Rates are likely to expand. General rate increases are common and anticipated by shippers. However, preparing for sudden increases in rates and fees is becoming more and more essential. Optimization will help as issues with dwell times, demurrage fees, holding costs, and other expenses continue to grow.
  • Carrier consolidation is expected. Shippers looking to capitalize on carrier and supply chain distribution network optimization need to leverage consolidation. Carriers will need to be vetted and then categorized based on services and load expertise to allow for faster and easier load matching down the road with supply chain technology. Moreover, carrier consolidation will imply that the networks will become denser and require shippers to stay even more vigilant over their costs as different companies merge and become one. 
  • Keeping up with demands for e-commerce along with improvements for network optimization is the need for shippers to prepare for the continuing pressure brought on by e-commerce and digital shopping. Digital markets have forever changed the face of the shipping industry, and many of those changes are likely here to stay. Also, as more customers look to online shops and as more businesses branch into online sales and services, shippers will need access to more specialized carriers. A diverse carrier pool allows shippers to handle bulk, hazardous, oversized, and other specialty loads much more easily.

Make Carrier Network Optimization Faster and Easier With Help From Intelligent Audit

Managing shipping costs in 2022 and beyond will likely be an ongoing challenge for shippers. Given the growing economic uncertainty, volatility of global currencies, and escalation of industry-level competition, this contrast between shipping insight and focus creates several problems for supply chain managers. With a unified approach in mind, shipping and transportation managers can more effectively utilize transportation network optimization tools to improve carrier search and optimization in real-time. Optimization, in this regard, refers to network optimization techniques, supply chain tools, and integrated best practices. Shippers need proactive controls to understand their expenses through actionable insights, data-backed strategies, and a single source of truth for managing their carrier networks. These are then used to monitor and enhance network performance from end to end. For carriers, supply chain distribution network optimization can help improve the day-to-day process and increase profits while keeping costs at a minimum. It’s a win-win for all involved parties. Contact Intelligent Audit today to get started.

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