Increasing efficiency and lowering costs is the mission of logistics. Fewer loads, better driver utilization, mode shifting, and minimizing miles through better routing not only reduce your freight costs, these measures also result in less fossil fuel consumption, fewer emissions, and reduced environmental impact.
Increasing supply chain efficiency benefits more than the bottom line
Logistics management is primarily about finding the lowest cost way to move goods through the supply chain. And since transportation makes up 50-60% of all supply chain operating costs, there tends to be significant cost-saving opportunities related to optimizing (and re-optimizing) your transportation network. The good news: Those efficiencies come with other benefits that are just as important – fewer emissions, a reduced carbon footprint, and lower environmental impact.
The “greener” your supply chain management methods become, the more likely your business will save money and therefore be more economically and ecologically sustainable. It will also make your brand more appealing to environmentally-conscious consumers. Companies with an acknowledged sustainability focus will also become more attractive partners to future vendors and suppliers in the long term. All of these things add up to a competitive advantage and long-term success.
What is transportation optimization and how can it help evaluate cost-saving and sustainability opportunities in your network?
Transportation optimization is a set of tools that provide a “sandbox” to test and understand the vital elements of freight transportation. It helps you evaluate the competitiveness of your existing operations. You can also perform strategic “what if” scenario analyses to review and compare various transportation strategies, modal mixes, rates, and service levels. Many companies take advantage of this type of analysis to create the optimal transportation strategy after a supply chain network redesign or consolidation of cross-divisional assets and operations.
Optimizing transportation helps address a variety of supply chain issues
A variety of “what-if” scenarios can be evaluated using transportation optimization. The most common situations that we help clients address are:
- Determining how to improve overall load efficiency using pool points, zone-skipping, intermodal, or multi-stop truckload strategies
- Simulating the effects of disruptions like a critical port facility shut down and identifying the best contingency should the event occur
- Evaluating significant changes to delivery options brought about by carrier strikes, lane closures, or modal rate hikes
- Understanding internal shifts like volume increases, new customer or supplier additions, or moving from decentralized to centralized distribution
- Determining the impact of regulatory changes like new Hours of Service (HOS) rules, driver shortages, or natural changing market conditions
Leveraging transportation optimization for sustainability
A direct benefit of an optimized transportation network is reduced fuel consumption, fewer emissions and, as a result, a reduced carbon footprint. Less carbon released into the atmosphere supports international efforts to stabilize temperatures and stave off the worst effects of climate change. However, transportation optimization is simply the foundation of an environmentally-friendly logistics strategy.
Many other opportunities to reduce environmental impact can be found throughout the supply chain. Recyclable and reusable packaging systems should be explored, along with lighter materials for both packaging and shipping containers. Participation in pilot programs studying alternative fuels such as biodiesel and hydrogen, as well as fuel-cell technology, should be encouraged. Electrification options for drayage and last-mile delivery should be investigated and readied for quick application. These and other emerging technologies should be examined and applied as part of a comprehensive “green” logistics program.
The challenges of the present can prepare us for the realities of the near future. Chainalytics’ combination of top supply chain talent, proven methodologies, and proprietary market intelligence delivers actionable insights and measurable outcomes. Reach out to us and see how Chainalytics can help optimize your transportation network and realize new, untapped opportunities for fuel and cost efficiencies.
Scott Gowan is a Director in Chainalytics’ Transportation consulting practice. He specializes in providing clients with supply chain planning and optimization, transportation optimization, and logistics management and optimization services to enhance their bottom line.
