A driver shortage and increased federal regulations make it increasingly difficult for companies to deliver products on time. With instability in the freight market, one global industrial manufacturing company looked to Chainalytics to help them create an optimal transportation strategy that balanced contract carriers and dedicated fleets to improve service and reduce costs.
The freight capacity market is always fluctuating. A driver shortage, increased shipping volumes, or lower margins can tighten capacity and impact a company’s ability to meet its service goals. To offset freight market swings and eliminate margin pressure, many companies choose to employ a dedicated fleet. Dedicated fleets guarantee a predetermined number of trucks and drivers every week on a particular lane of service, regardless of market conditions. While many firms employ dedicated carriers to manage the supply imbalance, others use them to gain control of their service levels or to ship unique products that require specialized equipment. Today, most large companies have some form of dedicated or private fleet, even if it is limited to a particular region or product.
Evaluating Capacity Across Divisional Lines
Chainalytics understands that an optimal transportation strategy includes evaluating all transportation modes and carriers, including the evaluation of a private fleet. When done correctly, companies can reduce the impact of market fluctuations due to capacity shortfalls or driver shortages.
Chainalytics recently helped one such company evaluate their logistics network. A global industrial manufacturer with three divisions across North and Latin America engaged us to help optimize their transportation network and evaluate their for-hire and dedicated fleet. The company had found success employing a dedicated fleet in the US and believed there were opportunities to improve global transportation operations through dedicated capacity. Convinced a dedicated fleet would improve service and reduce costs, the company sought Chainalytics’ help to evaluate carriage options and identify the potential cost savings associated within each division.
Our Methodology
Providing expert talent, proven methodologies, and investment-grade modeling tools, Chainalytics’ transportation mode and fleet analysis allows each client to evaluate their existing operations, factor in ever-increasing service demands, and design a high performance transportation network to improve competitiveness. This service combines Chainalytics’ deep domain expertise with powerful advanced decision sciences technology to formulate an improved transportation strategy that optimizes modal mix, fleet size, territory alignment, and equipment mix. Using our unbiased approach, we identify the optimal transportation operations to help our clients reduce overall costs, take advantage of mode shifts or consolidation strategies, optimize dedicated and common carriers, plan for seasonality, and improve overall load efficiency.
Creating the Optimal Transportation Plan Requires a Unique Strategy
Chainalytics worked with key stakeholders, teammates, and supplier partners to understand the company’s logistics challenges and create a versatile fleet management strategy that optimized resources, reduced costs, and improved service levels.
Initially, Chainalytics helped the client build a baseline transportation model to identify strategies that would reduce overall costs and maintain targeted service levels. Once this was in place, we helped the client evaluate dedicated, common carriers, and private fleet alternatives. By introducing a proxy fleet, the client could consider the optimal size, lane-specific routes, and domicile locations of a dedicated fleet. Where a dedicated fleet was determined to be optimal, we helped the client decide which lanes could most benefit from freight consolidation and reduced empty miles. As a course, the client was also able to evaluate fleet synergies across all of their global divisions to increase asset utilization.
Using this transportation model the client realized they were misaligned on how they were deploying their current dedicated fleet. In addition, they realized the 28 different types of delivery vehicles they currently deployed minimized their ability to capitalize on continuous moves and return lane optimization. By eliminating some specialized equipment, the company could open up more capacity for shared trailer pulls and enhance the advantages of a dedicated fleet.
It became clear that one strategy across each division would not work. Using phantom models to analyze optimal fleet sizes, we created a plan that would save one division millions annually through dedicated operations. Chainalytics’ analysis proved this strategy would not work across all divisions. The company’s Latin American division would only reap a dedicated capacity benefit on less than 2% of its lanes. As the company saw potential for a dedicated fleet where it had large dry-van short-haul shipments, we worked with the company to establish target rates and optimal lane strategies.
Dry Van Long-Haul Primed for Dedicated Carriers
Chainalytics helped the manufacturer create a transportation strategy that factored country-specific constraints as well as implemented best practices for managing relationships, routes, and equipment. Overall, the fleet optimization analysis identified a potential of $7.6 to $10.7 million in annual transportation cost savings. The Chainalytics team helped the company to exceed its goals, as explained here by the company’s head of procurement:
We selected to go with Chainalytics after a thorough bidding process for our transportation optimization project that encompassed all our business units in both the U.S. and Mexico. Although the project was very complex as it entailed different types of specialized equipment that needed optimization, the expertise and the resources that Chainalytics used made a great difference to the results of the project as in a matter of a couple of months, they were able to meticulously analyze our information and came up with an optimal scenario that yielded interesting savings to our bottom-line. We wouldn’t have been able to achieve these results without Chainalytics as again their analysis and expertise were second to none. The Chainalytics team was always open to work at our pace and to generate the least amount of disruption from our day to day chores. Kudos to the Chainalytics team.
The company plans to establish stronger relationships with partners and roll out their new strategy with confidence. Through improved freight relationships and streamlined best practice contracts, the company will more optimally tender loads, leverage volume, and reduce partner mileage penalties.
