Optimizing Transportation Logistics to Increase Profitability

What areas should transportation divisions look to that could both hide wasteful processes and, if maintained properly, significantly optimize processes?

Transporting goods, as a subdivision of a company’s logistics department, has transformed from an ancillary service to one of the most valuable resources in modern commerce.

Though the value of transportation logistics varies across different supply chains and might be difficult to ascertain cumulatively, a William Blair & Company study found third-party logistics companies constitute a more than $500 billion global venture with only 10 percent of the logistics market share. As evidenced, the power of an intelligently managed fleet can yield exciting revenue growth and truly define a business at its core.

That said, operational deficiencies can also turn the best logistics providers on their proverbial ears. Supply chain networks subsist on the fast execution or pertinent tasks and abhor waste in all forms. Depending on where it occurs along the supply chain, even the smallest inconsistency can offset processes down the line and cause subsequent harm, costing several companies considerable revenue all at once.

Best practices always encourage logistics providers to implement verifiable methods of improving operations when it comes to transportation management. In many ways, this is easier said than done. However, what areas should transportation divisions look to that could both hide wasteful processes and, if maintained properly, significantly optimize processes?

Reliance on technology necessitates repair management
As more and more advanced equipment make their way into all levels of the supply chain, manufacturers expand their potential for accelerated growth and enhanced productivity in granular increments to complement positive scalability. However, once any process becomes heavily dependent on technology, it can just as easily fall victim to its limitations. Machinery doesn’t last forever, and eventually businesses utilizing advanced equipment will need to dip into their repair and maintenance allocations. That is, after all, total cost of ownership.

transportation logistics

Big trucks cost big bucks to maintain.

Unfortunately, these R&M costs are not fixed and will require foresight to avoid exorbitant fees. According to a study conducted by the American Transportation Research Institute, the average R&M costs per mile for a single truck grew by 7 percent between 2012 and 2013. When multiplied over an entire fleet and compounded by overall industry growth with expanded services, these operational costs truly stack up. Moreover, the ATRI study also stated fluctuating petroleum prices can impact the cost of tires, an integral and unavoidable resource for ground travel.

On top of all that, these costs don’t even consider the most important ones of all: downtime-related revenue losses. This multifaceted issue affects all aspects of business performance and can ruin profitability across all. Downtime loses companies customers, stifles on-site and off-site productivity, leads to expensive overtime pay for workers, hurts a brand’s image and could possibly even lead to expensive litigation. Though trying to assign a set number value to downtime casts a wide net, Gartner places the figure around $5,600 per minute – or more than $300,000 an hour – on average.

Companies who take their R&M schedule into their own hands can undermine these risks. Logistics providers should be sure to develop strategies that log relevant data pertaining to things like vehicle wear and tear. This can allow logistics managers to address necessary maintenance before the equipment breaks down and the serious costs start piling up. Moreover, this regiment creates an operational framework that accounts for repairs rather than responds to them as best it can.

Closing the skills gap
To maintain a competitive edge, the transportation industry requires a competent workforce knowledgeable about on-site operations, as well as overarching trends in the field. However, many problems stand in opposition of this, ultimately stemming from negative public opinion about the transportation industry and those who are needed to assume its mantle in the coming years.

For example, a study by the Economic Modeling Specialists International found more than half of all truck drivers in Houston, Texas, are 45 years old or older. This is not an isolated issue. Given the size of the baby-boom generation, as these workers retire, others will need to fill the void. Not anyone will do – as stated earlier, transportation has undergone a digital age makeover as of late. With Big Data and the Internet of Things redefining logistics operations, new hires must possess ever-increasing technological knowledge. Ironically, many young people in search of their first careers have been and will continue to be swayed by the incorrect notion that logistics and manufacturing are strictly about manual labor.

To ensure any enhancements to long-term productivity, transportation and logistics providers should never underestimate the value of public relations. Additionally, these organizations should develop new training tools that facilitate an accelerated process that doesn’t glance over the necessities, but provide job candidates with resources that complement their tech-savvy lives and minimize downtime between incoming and outgoing employees.