Any goal is nearly impossible to achieve unless you have performed an honest self-assessment to figure out what your problem areas are and discovered ways in which you should attempt to change. The same thing is true when it comes to making changes at the company-wide level. Transportation spend accounts for a significant amount of money, so any money that might be saved from that expense could provide a big savings to the company’s bottom line.
A transportation self-assessment is a great way to get started. Here are five steps in a transportation spend self-assessment that can put your company on the right track:
Step 1: Stakeholder Interviews
The first step in this self-assessment is to conduct stakeholder interviews. This is important because it makes sure you have a transportation strategy that is in alignment with corporate objectives. This step is more than just merely being told what is important, there needs to be a suitable knowledge of the core business to understand exactly how transportation enables the company to succeed in that core business. Once you can be sure that everyone knows the organizational goals, such as those set in service level agreements, you can move forward.
Step 2: Spend Diagrams
A Spend Diagram depicts all of the company’s transportation spend on a single page and allows you to “find the money” and from where savings can be gleaned. A Spend Diagram captures spend across upstream activities through downstream customer deliveries. Other logistically relevant information, such as mode, types of carriers, amount of facilities and equipment and business constraints should be summarized as well. Once the numbers are aggregated and prioritized, the most important elements are clearly visible. What is necessary? What can be cut or streamlined? This process enables subsequent steps. This data is most often aggregated from your accounts payable department, your freight auditor, and your carriers. Carriers typically understand data better than even the shipper because they compile information on your freight beyond what is shown in the invoice.
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Step 3: Process Documentation
The next step is to understand how transportation planning decisions are made and executed. This is accomplished by following processes from end-to-end, incorporating physical, data, and financial flows. You can create process flows with horizontal swim lanes for each actor in the process. This allows people to understand and segment the action by who owns each role and find integration points.
Step 4: Integration Flow Diagrams
The last step before getting into analysis is to understand the technical environment at more than a high-level by producing an integration flow diagram. These diagrams show how information flows amongst existing systems and are a good way to understand the functional capabilities of existing systems, as currently configured. If you cannot show how systems work together there is probably an issue.
Step 5: Analysis
Once the first four steps are complete, you can move into the analysis stage to find areas for savings. Create a Venn diagram to find the overlap of corporate objectives, money, and process and application weaknesses. Focus on where those align to find your biggest potential for savings.
High transportation costs are a good way to know something is wrong, but that doesn’t tell you anything by itself. An assessment allows you to find out what exactly is plaguing the business and to set a plan to improve the situation. An assessment ultimately allows you to communicate the next steps to those in charge.
To learn more about how a Spend Diagram can help you “find the money” in your transportation operations, click here.