According to independent freight specialist Henry Marlow from ERA the key to maximising value is to fully understand a customer’s needs. “The first phase of an ERA project is appropriately called the discovery
phase," explains Henry.“We really need a thorough understanding of our client’s expected
outcomes. Cost is just one component of the equation; we also need to know our clients service commitments to their customers, the sensitivity of the goods, and the spread of the most common destinations.Only then can we begin to form a view how we can reduce freight
costs.
“Unless this phase is thoroughly executed, freight managers can quite easily accumulate unforeseen costs and service problems down the
track" said Henry.
The first thing to understand is that freight costs are made up of transportation, handling and administration of the process.AT ERA we help our clients identify the decision-making criteria that will provide them with a value for money (VFM) solution.These criteria are then ranked and weighted to reflect importance.We also assist our clients to grade offers from freight suppliers to obtain the best VFM solution.
The next task is to match potential suppliers with our client’s needs.All too often we see cases where our clients are paying too much by using an inappropriate service.No matter how good the rate, if the wrong service is used, money is wasted.
Henry expands on this, “In recent years, the transport industry has segmented itself in order to be competitive.The company that offers the best value in one segment may not offer best value in
another. There has been a strong movement in recent years for companies to reduce the number of suppliers, reasoning that this will reduce the cost of administration and provide the opportunity to build strategic partnerships with the survivors.This is not an unreasonable approach and has served the automotive industry by reducing costs and boosting quality performance.But like any business decision, a supplier rationalisation strategy needs to be thought through.There’s absolutely no point in exchanging a benefit in one area by saddling the business with additional costs in another.This sounds a fundamental theory but we see this type of waste all the time.
“The fact
is" Henry says, “that unless the annual freight bill is above two or three million dollars, most businesses can’t justify having the internal resources to stay on top of the movements in the freight sector.ERA performs this service for our customers on a no savings-no fee basis allowing our client’s resources to focus on maximising value for their
customers.
