Dedicated to improving manufacturing efficiency

The logic behind cost efficiency

Tim Fawkes of transport management ­company 3t Logistics has some tips to help manufacturers cut transport costs and improve efficiency

The Road Haulage Association estimates that the expected 3p fuel rise in January would would increase the cost of running a truck by £1,200 per annum.

As the price of energy, transport, labour and raw materials has climbed, profit margins have contracted - and many companies are at a loss to know how to reduce costs any further. Furthermore, businesses are unwilling to compromise on customer service, believing that reducing transport costs will inevitably impact on service. However, by implementing specialised technology and applying efficiency improvement principles, streamlining processes can improve service levels.

The cost of inefficiency

Tim Fawkes says: “In my experience within the transport industry, few companies have strategies in place to accurately measure waste in their transport operations. But, if they are unable to measure inefficiency, how can they expect to identify effective strategies for its reduction?

“Key areas to tackle are reducing empty running and maximising vehicle load fill. Statistics from the Department of Transport estimate that empty running accounts for over a quarter of all kilometres travelled, whilst the average empty running is one third. Addressing these problems not only enables a company to reduce energy consumption, but as a result cut carbon emissions.

“Organisations should know how full their vehicles are when they leave their site and be able to calculate proportions of empty running in their transport network. However, a spread sheet is unlikely to offer the facility to apportion costs accurately - or to provide the flexibility to interrogate information at shipment level. Companies really need more sophisticated software developed specifically for the purpose, such as the system we use known as Solo which can administer a whole range of transport processes.”

Ways of reducing transport costs

• Multiple carriers - using one carrier rarely makes economic sense and is unlikely to reduce empty running. Using a network of quality haulage companies offers more flexibility to fulfil requirements as and when you need it.

• Pricing - does the tariff structure encourage efficiency from your haulier? The wrong tariff may offer few incentives to your haulier to reduce the cost. If you have multiple carriers are you utilising the best option?

• Customer demand - good customer service is important, but if your customers are inflexible, demanding when goods should be delivered and in what quantity, you may need to compromise. Why not offer your client a share in the transport saving achieved by taking a delivery on a set day?

Before the fuel duty rise businesses should maximise the opportunity by using this period to assess their transport costs. The fact is that most companies will be able to find some areas of inefficiency in their supply chain. With a little help from the experts, those companies should be able to put measures in place which will both improve logistics processes and save costs – long term.

3T Logistics

T: 01162 824 111

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