The supply chain forecasts shift daily, leaving many transportation providers wondering, what can be controlled? More importantly, what costs can be contained? Time is of the essence. To be nimble and fiscally conservative has never been more important, nor more challenging.
Despite the fast-emerging hurdles they’re having to overcome – carriers may have the ability to implement significant cost-containment measures to quickly re-align their profit margins with their refocused 2020 business strategies.
Donna Kintop, SVP of Client Experience, dissects the role of cost containment within the present-day trends of this time-critical freight industry.
Q: What are some costs that can be contained?
A: When looking at slowing or stopping bleeding expenses, carriers should take into consideration a variety of costs such as infrastructure, real estate, leadership, wages and benefits, cost of recruiting and training, attrition, etc. When a decision is made to partner with a vendor (like a software provider or business process outsourcer/BPO), most of these costs will be positively impacted and significant savings can be realized. They no longer need as much office space and infrastructure costs drop. Additionally, carriers can see labor savings in the cost of wages/benefits, a reduction in HR costs for hiring and training as well as retention efforts.
Q: Why are these costs easier to contain with a vendor?
A: These costs are easier to contain with a BPO partner because these costs are included in a single price, and you can budget for Cost of Living increases and expansion without having to budget increases for the remainder of the areas.
Q: Which processes should carriers and 3PLs consider outsourcing to help control costs?
A: A wide variety of processes are suitable to outsource due to improvements in and availability of technology as well as acceptance across the country of the use of outsourcing partners. Back office processes such as Order to Cash and Rate Auditing, and front office processes, such as Appointment Setting, Track & Trace, and Inside Sales are recommended options for LTLs and 3PLs.
Q: What are the key benefits of signing long-term contracts for BPO?
A: Most long-term contracts provide for yearly cost reductions to help contain costs. This allows for the carrier to closely monitor and maintain a lower headcount of employees, thus producing significant cost savings in labor arbitrage. Additionally, an outsourcing partner should invest in technology and process improvements to contain and reduce their internal costs, in alignment with the reduction in price. Finally, a BPO solution can help lessen the learning curve as the tenure of the team members provides distinct advantages in delivering better accuracy and helping to improve the relationships with clients.
Q: What problems can we expect to see regarding manufacturing and the global supply chain?
A: With the slowdown of manufacturing and exports from China, our imports are quickly drying up and inventories of critical products are being exhausted. Now that manufacturing in China is starting again, we will see a brief drop in the import volume – meaning less cartage out of the ports and less LTL. Once the manufacturing industry regains its standing in China, and the US starts to place orders again, the orders for goods and raw materials will likely be larger than normal, causing congestion in our ports. Moving product out of the ports and across the US will test our capacity and most likely drive pricing upward. However, this may be beneficial to the LTL carriers to help them recoup any losses previously experienced.
Q: Any other advice for transportation companies looking to improve their financial fitness for future business health?
A: This year will hold several challenges and unusual situations – such as COVID-19, the drop in oil prices, and the focus on short-term prioritization of the shipment of medical supplies, consumer goods, and food. It’s going to be difficult for carriers to successfully execute long-term plans for the remainder of this year, and it appears they will need to rely on their ability to pivot quickly to make the most of the volatility in the market.
Being able to react quickly enough to manage capacity and staff as we progress through the pandemic timeframe will continue to be the biggest challenge for transportation companies in 2020. Implementing the right BPO solution can help with cost savings, and in many cases, long-term cost containment. The right BPO partner will utilize innovative technology to ensure faster processing and better quality – all at a lower price point.