For companies, reducing transportation costs is often a challenge. Why? Because, according to the logistics managers of intermediate sized and large companies surveyed by Generix Group, reducing costs requires an optimization of purchasing costs and an improvement of operational management tools. The main challenges implied are summed up in this infographic.
2 top-priority challenges
Carriers of merchandise face many challenges when it comes to reducing their transportation costs, reveals a study carried out by Generix Group on 217 logistics managers from 6 countries.
In fact, 65% of logistics managers consider that the major challenge is reducing transportation purchasing costs. This figure rises to 71% in the transportation sector and 80% if we consider only survey answers from France.
Furthermore, 60% of managers consider improving operational management tools— mainly TMS— to be a cost-cutting lever. This percentage reaches 79% in Canada, 69% in Portugal and 63% in Spain. Further behind are 31% of managers who also suggest reorganizing the transport business.
Some hurdles remain despite the willingness to reduce costs
Although most managers surveyed agree on the need to invest in a more powerful management tool, many still hesitate to implement a TMS in their company. For 34% of respondents, the number one reason is due to the difficulty in assessing the return on investment of this tool. This difficulty makes it impossible for 31% of them to justify investments of this kind with their superiors.
Other hurdles include limited financial resources and too low volumes for implementing a TMS in 31% of the cases, and even company needs that are too general and do not require a more powerful operational management tool for 19% of respondents.
Reducing your transportation costs: three major levers
According to 217 respondents, three levers can be activated to reduce a company’s transportation costs. For 57% of them, the first lever is optimizing vehicle loading, which requires consolidation, among other actions.
Furthermore, 47% of companies rely on precise costs analyzes to find out which positions need to be optimized, while 44% would implement changes in order to make transportation itineraries more profitable.
In the past, these levers were in the hands of the carriers themselves. They have now been taken over by consignors to streamline their operating processes but most importantly to gain better control over the services they offer their clients. However, these types of restructuring require skill building in order to integrate newly acquired tasks into analysis and optimization axes.
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How much progress is left to make?
There is still extensive room for progress in the sector dedicated to the transportation of merchandise. For 40% of managers surveyed, that progress can mainly be made in transportation performance indicators and in the optimization of itineraries (39%). The latter factor tops the surveys for 3PL and in wholesaling.
Although coming in at the top of the list, these two axes are not the only areas for improvement mentioned. Progress can also be made in other areas such as loading management (29%), ensuring better communication with carriers (24%) and carrier selection (23%).
Massive investment in TMS planned within the next two years
According to the study carried out by Generix Group on 217 logistics managers from 6 countries, 41% of respondents plan on investing in TMS technology within the next two years. With this technology already implemented in their company, 17% will proceed with updating or replacing their existing TMS.
However, we can observe a correlation between the financial resources allocated in companies to transportation and investments in TMS-type solutions. As such, 75% of companies whose budget exceeds 50 million euros plan on implementing this type of solution.
But this trend also seems to win over more modest companies, mainly thanks to the SaaS mode. As a result, 25% of companies whose transportation budget is between 8 and 19 million euros plan on investing in a TMS, as well as 18% of companies in the 3 to 18 million euros range.
TMS: the future of transportation
According to respondents, a TMS is the new must-use tool if you want to reduce transportation costs. For 51% of them, this technology will have the greatest impact on the sector within the next 5 years. It is followed by mobility tools (46%), connected objects (36%) and big data (35%). In fifth position, we have self-driving vehicles (23% of respondents), followed by the use of drones (15%) and cloud computing (14%).
Want to find out more about the new technology logistics managers can use to reduce their transportation costs? Click on the button below to download Generix’s complete study summed up in a Digest!
Download Generix Group's Digest on TMS