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What REALLY Impacts Carrier Rates and Service—Lead Time

Chapter 1: What REALLY Impacts Carrier Rates and Service—Lead Time.Transportfolio

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Truckload service may seem like an art to some. But it’s most definitely a science. Over time, you develop ideas about how to improve a process. But until you can actually prove it, it’s just a hypothesis. That’s why truckload and supply chain research is so important. Because the findings can actually prove (or disprove) a theory. The results can improve your truckload rates and services and ultimately help you develop better working relationships with carriers.

C.H. Robinson and TMC, a division of C.H. Robinson, teamed up with students from MIT to research lead time. Here’s a quick overview of some of the top findings from that research:

*Click below to view larger image.
leadtime_infographic-2

As the infographic above indicates, there are many ways you can use this research in your own supply chain.

  1. Create visibility to shipments with early tenders: Increasing average lead time to between 2 and 5 days markedly reduces transportation costs. Consider 2-3 days a reasonable target with good results.
  2. Collaborate across transportation and other supply chain functions: Collaborative planning may yield opportunity to add days into your tender lead time.
  3. Estimate the savings: Small changes make a big difference—especially in tight markets. Research shows that you can save roughly $15 per load by increasing lead time from less than 2 days to more than 3 days. Save $15 on 40,000 shipments per year, and you’ll save $600,000 in total transportation costs.
  4. Measure tender acceptance: While your business may have different savings opportunities than the research suggests, a key metric to understanding the impact of advancing tender days is the average depth of the route guide. For example, moving average acceptance from a depth ranking of 2 to 1.25 could offer both material savings and better service because your preferred carrier is accepting your shipment tender more often.

If you really want to dig into the topic of lead times, there’s more information available in the white paper, Increase Lead Times, Decrease Costs, which is a summary of the original thesis.

Comments

Mike

Neat infographic, calculating accurate freight rates can be a challenge sometimes. It is also evident that minor changes in operations can contribute to more profits and increased savings.

12.7.16

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Mark Sims

Increasing lead times is useful for the transportation company as it provides certainty with respect to resource allocation and asset utilization; however longer lead times are the enemy of overall supply chain performance as the differential in both supply and demand between forecast and actual activity levels between the traditional order commit point and actual movement compound during the longer lead time. There is a way to reconcile these two issues but it requires a new transportation process model: predicting & committing to transportation movements in a parallel and concurrent process with the process that involves placement/commit point of specific orders for product movement.

8.24.17

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