Imagine reducing one of your large inbound freight bills from $1,764 to $307* without having to change a thing about the shipment except how it’s being managed.
Now imagine similar savings on every large freight shipment, every time. This is what supply chain can achieve when it stops relying on a DIY freight management approach and works with a third-party logistics provider such as OptiFreight® Logistics, a Cardinal Health company.
It makes sense to use a freight management provider
Even your most dedicated efforts to compare and negotiate rates and terms among multiple carriers can’t deliver the discounts and other benefits typically delivered by a freight management provider. The most obvious reason is the ability to leverage high freight volume to lower costs, but a freight management provider also has broad carrier relationships with the top national and regional players in the freight industry. Using advanced technology combined with a deep knowledge and understanding of the business gives freight management providers like OptiFreight® Logistics the negotiating power and expertise required to save money and prevent costly mistakes that most hospitals would struggle with alone.
“There are so many things that factor into successful freight management. Price is only a small piece of the puzzle,” said Chris Mathew, Director of Transportation, OptiFreight® Logistics. “People need to be dedicated to managing activities such as auditing freight invoices, paying carriers, resolving issues, working with suppliers to ensure compliance, reviewing program results, evaluating carrier performance, negotiating rates and analyzing all of these activities to ensure ongoing optimization and savings realization.”
But does your supply chain department really have the time, resources and expertise required to do all of that effectively? On the other hand, can it really afford not to? A freight management provider is in the best position to take on that responsibility and drive savings with minimal time needed from your organization.
Where large freight dollars end up — if you’re not paying attention
The first step is to recognize and understand the nuances of large freight handling and use it to your advantage. “Fewer people are exposed to the details of how to ship large freight, so it tends to be something not well understood,” explained Mathew. “Because it’s not as well understood, many customers aren’t as vigilant about ensuring there is program compliance for appropriately using large freight for their inbound and outbound needs.”
For example, “With large freight, there are literally thousands of carriers who have different specialties in either service or geography,” he continued. “Less-than-truckload (LTL) carriers can be national or regional. Most of your shipping may be within a region your main LTL carrier covers. But the first time you have a shipment originating outside of the region they may have no solution to offer, or they may work through another carrier who covers that region at an additional cost. Large freight carriers — even those who operate nationally — tend to have very different cost structures from market to market, so optimization requires working with multiple carriers.”
Another expensive mistake facilities make is treating large freight the same way they do small parcel shipments. Consider the variables involved when ordering different quantities of the same product month to month where you might need 20 cases in January and 34 cases in July.
“Even though one of the shipments qualifies as large freight the customer doesn’t typically view it differently since they are still ordering Product A,” said Mathew. Another common oversight is to use one carrier for every shipment. “They may assume that a national parcel carrier is their only or best option for everything that needs to be shipped regardless of size, weight and service requirements. PCs and monitors are another great example,” Mathew continued. “When there is a capital refresh for a department, many hardware suppliers will choose to ship each item as an individual ground shipment. For large orders, the shipping fees can add up to a significant amount of freight spend. We have had examples where consolidation of those individual shipments to palletized/LTL shipments saved 40 percent or more in freight spend.”
Are you managing your freight budget and related activities as well as you could be? OptiFreight® Logistics saves customers money by bringing visibility to a facility’s freight spend and assisting with a comprehensive analytical review of current shipping strategies, so that better solutions can be identified and implemented.
Know the rules, leverage the language
Understanding how the transportation industry operates — inside and out — is the best way to navigate freight management successfully, but it can get complicated.
“Routing freight requires freight industry knowledge: Hazmat, DOT regulations, seasonality concerns, capacity availability,” Mathew asserted. “Customers must understand specialty equipment that the freight industry uses and the costs associated with accessorial charges: lift gate, inside delivery, trash removal, excess liability, etc.”
It’s also helpful to insert freight language in a prominent place on every purchase order (PO) and supplier contract. Including shipping instructions on the PO holds suppliers accountable and increases program compliance significantly without affecting the activities of procurement teams or buyers.
Sounds like simple stuff, but it’s easy to see how a facility might overlook the practice.
“If a facility did not belong to our program, the buyer would typically not discuss or relay freight preferences or terms to a supplier — or freight may or may not be discussed or negotiated at all,” said Mathew. “The supplier would have control of how the order is shipped and how much they charge the customer for shipping. With our program, the buyer does not change their process. When the supplier is entering the order in their system, the PO note instructs them how to direct the shipment to ensure third-party party billing benefits are provided to our mutual customer.”
It’s time to start managing large freight the right way. Visit cardinalhealth.com/largefreight.
Reprinted, with permission, from sponsored content featured in Healthcare Purchasing News, July 2016.
*Based on an individual OptiFreight® Logistics customer’s large freight invoice savings during April 2016. Individual savings may vary.
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CARDINAL HEALTH, the Cardinal Health LOGO, ESSENTIAL TO CARE and OPTIFREIGHT are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners. Lit. No. 2OFL16-537226 (06/2016)