“Cash is King.” This phrase is often associated with the CFO of any organization. Balancing the general ledger and finding ways for organizations to reduce costs directly and indirectly are daily activities for the CFO. The supply chain and transportation departments are usually left to handle their own, so long as that portion of the balance sheet and the costs associated with it remain around 10-12%. At BlueGrace, we have found that working with CFOs directly has helped turn over that leaf and make significant cost reductions, positively impacting many of our partner organizations.
Here are a few questions to ask yourself:
Has your transportation spend gone up year over year despite fuel costs dropping 34%?
On January 5, 2015 the cost of a gallon of diesel was $3.14 a gallon. On January 25, 2016 the cost of a gallon of diesel was down to $2.08. If your yearly sales were flat or marginally up and transportation costs went up or stayed the same, you should be seeing a big red flag waving.
Do you have access to the business intelligence needed to accurately forecast transportation cost in relation to budgeting?
One of the most advanced services we offer is business intelligence. We perform quarterly business reviews to report on our savings targets, key performance indicators (KPIs), and special project updates. The CFO of a company in particular is able to use these metrics to budget and forecast for the organization moving forward.
What key performance indicators do you currently use to measure your supply chain and transportation departments?
Many transportation departments use multiple providers for the same service. They have daily interactions with multiple carriers, multiple 3PLs, audit companies, full truckload providers and more. “Best Cost” is not an accurate KPI for a Transportation Manager. They are not necessarily concerned with how long it takes their Accounts Payable department to audit and pay these providers. Transportation Managers are also not concerned with a Wal-Mart charge back or the impact of an empty Menards shelf has on opportunity. Our collaborative customer engineering approach helps develop actual reportable KPI’s for our partners.
Freight cost as a % of sales, total landed costs for the purchasing manager, freight costs per pound, chargeback mitigation- these are all important metrics we use to help your team identify what’s most important to your business.
There are many more logistics topics to discuss.
If you are a CFO, VP of Finance, or Controller and would like to have a discussion on cost reduction and allocation in the supply chain please reach out to us today!