How often should we measure these rules? Ideally we would like to capture these avoidable costs daily if resources and systems are available. By capturing these occurrences daily, we can feed this information back to our vendor partners to speed up the cycle of continuous improvement. But some of the information we are looking for isn’t system generated and won’t be discovered until the physical freight bill is received. For this I recommend a dual approach to capturing freight violations. On a daily basis we capture the system generated violations and feed this back to our vendor partners as quickly as possible to maintain our continuous improvement cycle. Then on a weekly basis, I recommend reviewing the physical freight bills to ensure they are in compliance with our vendor requirements guide. This dual approach will ensure a consistent and thorough view of our overall transportation performance.
Value
The never ending question to the supply chain professional is what is the value of this project versus the other 10 ‘high value’ projects that currently reside on his or her desk today? The easy answer is money and its impact on the income statement, as a reduction in overall transportation costs will flow directly to the bottom line. TMS projects are often easier to approve than other projects for this reason alone. But there is much more value to be had here than a reduction in transportation costs. By tracking our transportation performance, we are adding milestones to our purchase order (PO) lifecycle we discussed in the previous article. Once we understand these and the other milestones along the purchase order lifecycle, the time between them and the bottlenecks that are increasing days in our supply chain we can then take active steps to eliminate them. While reducing our overall transportation expense is certainly desirable for the upcoming income statement, a larger savings will come from having a higher performing supply chain that continuously seeks to reduce our working capital requirements and mitigates margin risk. And beating our competitor to the floor by five days is not such a bad deal either!
Bonus Value
In addition to the value listed above, measuring transportation performance comes with a bonus value that retailers often don’t consider, a reduction in their carbon footprint. Supply chain professionals are often at loss to articulate their sustainability strategy to their board members and customers. Leading retailers such as Wal Mart and Kohl’s consider their sustainability efforts not only important for driving avoidable costs out of their operations, but also strategic to their brand. For retailers who have yet to articulate their sustainability efforts, measuring transportation performance is an extremely easy place to start.
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