Because so many variables are involved, controlling transportation costs is a most challenging task. However, as was demonstrated in the Driving Down Transportation Costs workshop, by using process changes, technologies, and vehicle options, a fleet can better manage its operations for an improved the bottom line.
Presenter Gary Anicich, president of Logistics and Management Services, focused on five key areas: customers, drivers, technology, vehicles, and managing by the numbers.
Anicich put forward the idea that transportation costs can be reduced by increasing stops per route by just one, and by boosting cases per truck by a mere 5%. “A 5% increase for a route that has 300 cases is only 15 cases.”
Some of his other recommendations:
Reviewing routing and minimum order size needs to be an ongoing process. “The dollars are there to pay back the time it costs you to do this,” he said.
Produce a scattergram of daily deliveries and review delivery schedules to determine any areas that are being over-serviced.
Look at stem miles (one-way distances), particularly in rural areas where there are a lot of miles between stops. “The idea is to find out businesses you are passing by that could become new stops.”
Question customers' delivery time windows. Typically, once a fleet establishes these windows they don't review them, he pointed out. “When was the last time you thoroughly reviewed and updated delivery time windows?”
Schedule ride-alongs. Anicich encouraged ride-alongs for all sales managers and sales reps because it is a good way for them to see what potential customers are being driven by, particularly on long stem miles.
Implement a fuel surcharge at the order level. When done at the item order, it creates accounting nightmares.
Companies need to become the employer of choice in order to attract and retain the better drivers, advised Anicich. The reason being: drivers have a considerable impact on transportations costs.
“Studies have shown that between your best drivers — the ones you want to clone, and your worst drivers — the ones you haven't yet figured out how to make available to the competition, there is a potential 35% improvement in miles per gallon.
“It is paramount to control vehicle speed. The right foot is the most dangerous thing as it relates to managing transportation costs.”
The key to retaining good drivers, he said, is to be involved and visible. “Regardless of your position, show up once in a while at dispatch or in the drivers lounge and let your drivers know how important they are to the success of your company.”
All too often, when business slows, many fleets stop or cut back on orientation and training. “I'm suggesting that in tough times. This is even more important,” Anicich said. “If not done, and done well, new hires are going to learn bad habits and aren't going to take as good care of your customers as you want them to.”
Furthermore, he recommended implementing mentor programs where a fleet's best driver rides with every driver — once a year for the better drivers and once a month for the poorer performers. There has to be a checklist to compare drivers to the fleet's standards for driving, delivering, safety, customer service, and so on.
“If you ensure your standards, and your drivers believe that you want to be the best, measuring them is the way to make it happen.”
Good performance should be recognized quickly, said Anicich. He suggested having $25 gift certificates and finding a way to give at least one away per month — for drivers as well as warehouse people. “Recognizing good behavior showcases what you want them to do.
“When you give a gift certificate away, let others in the company know so they can congratulate that person who has done what you wanted them to do, and done it well.” When workers are recognized for doing good work, they feel special, are happier, and tend to perform at a higher level.
His other suggestions for driver improvement included:
Create incentive programs. “Drivers have so many ways they can shave time off their route, and it's not by going faster.”
Establish a time for start and finish processes, and try and reduce the amount of paperwork drivers have to deal with.
Make sure drivers have the equipment to be successful, and that it is working properly. “If drivers go out with a bad truck, they make it worse out of frustration.”
Using technology as a way to drive down transportation costs can't fix basic management problems, emphasized Anicich. “Technology must be viewed as an enabler to make you a better manager. Think of technology as an operations assistant who never goes on break, never complains, always shows up, and never gets sick.”
Routing systems and dynamic routing planners are “very powerful tools to minimize miles,” he noted. Onboard hand-held route accounting can produce big paybacks as they give strong control over disappearance off the truck, help the accounting side, and hold people accountable.
When it comes to vehicles, he said “it's oaky to sweat the small stuff,” as this can make a big difference. To do this, it is essential to have a cost accounting system that can determine what it costs to run a truck.
Know what power units should achieve for costs, according to what the dealer or lessor explained, and compare that to the actual results. Also compare operating costs of vehicles that drive similar patterns.
If the numbers don't coincide, Anicich said action plans ought to be developed for improving driver and vehicle performance.
It is a good idea to track annual costs of older equipment, especially those units that are only used occasionally. “When you factor in such costs as insurance and licensing, it may not be cost effective to keep them.”
Another idea of Anicich's was to “review all bills every month to make sure you aren't buying things or authorizing repairs that you already paid for, such as a repair that should have been made on the last service.” As a for instance: a worn out fan belt that failed 35 miles from a facility that should have been replaced when the truck was in the shop for a PM the week prior.
Noting that there are about 34 KPIs (Key Performance Indicators) for foodservice transportation, Anicich pointed out eight essential ones that will tell a fleet how it is doing:
- Cost per case.
- Cost per mile.
- Cost per delivery.
- Net sales revenue per delivery.
- Net sales revenue per trip.
- Gross margin per delivery.
- Accidents per 100,000 miles.
- Cost per vehicle per mile.
In summation, he said that taking complete responsibility for the fleet, having the knowledge of the KPIs, and then managing the results is the way to make operational improvements.