Finding Hidden Savings in Transportation Costs

Finding Hidden Savings in Transportation Costs

Can you reduce shipping costs, without compromising on service? AFMS says most companies can.

 

In a market where every cent matters, being able to reduce transportation costs, without sacrificing service, could be a game changer for companies looking for ways to improve their margins.

 

“Logistics has gotten a lot more complicated,” said Ken Asztalos, VP Transportation Strategies at AFMS, a company that provides transportation intelligence.  “Today you need to look at your total supply chain.  There are a lot of areas where time and costs can be saved.”

 

AFMS (USA) works with buyers to analyze their current shipping costs and identify key areas where they can reduce costs.  It gives clients what it refers to as a “third eye view of their logistics.”

 

“We first work with the company to gather data, which includes 1-3 months of shipping invoices, electronic bill data from all the carriers they work with, and carrier agreements,” said Mr. Asztalos, explaining the initial process.

 

AFMS next does a contract analysis, a cost analysis, plus package characteristics and a benchmarking evaluation.  Then they review everything, looking for savings opportunities. 

 

“We do these first three steps – gathering the data, analyzing the data and reviewing the savings – at no charge to the company.  We evaluate their transportation spending to determine if there are savings opportunities.  If opportunities exist, the company can then choose to use our services to help them take advantage of those savings,” said Mr. Asztalos.

 

AFMS is staffed with executives who come from the carrier side, bringing hands on industry expertise about shipping contracts and other aspects of transportation.

 

“From working with so many different clients we have been able to build a database of transportation costs. So we can go in and see what a company is spending on any of its transportation, from sea to air, as well as accessorial or add-on charges, and compare that to what other companies are spending for the same service.

 

We know what the market rates are.  If, for example our client is getting a 55 percent discount on a specific service and we know that the market rate is actually a 75 percent discount, we can give our client the tools and the data and the talking points to negotiate better contract rates.  We help them to get ‘best in class.’

 

“We sign an NDA (non-disclosure agreement) so we can comfortably look at their data, what size packages they ship, what weights they are typically shipping, what zones they are shipping to, and so forth,” explains Mr. Asztalos.

 

It takes about 5 to 10 days to complete the assessment.

 

“We then come back to the client and say ‘we think we can save you 10 percent or 15 percent on your contract negotiations better than the rate you have right now.

 

If they want to move forward with us, we sign a contract with the client for something like a 80:20 or 75:25 split  on the savings.  We bring them through the negotiation by giving them all the talking points.”

 

The carrier will know that they did the analysis and they are asking for what is actually the market rate.

 

When the transportation bills come in, we audit those bills for the client and make sure that they are the right rate and we show the client the savings, and then they pay us.  So there is no money paid up front.”

 

Worst case scenario for us, is that we do the analysis and we can’t find any opportunities for saving.  In that case, the client knows that they have the best rates.

 

AFMS can also help smaller companies form what is essentially a cooperative to help them pool their orders and thus be able to get lower transportation rates. 

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logistics