How to reduce transportation cost

how to reduce transportation cost

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

Cost reduction is the process used by companies to reduce their costs and increase their lovemeen.coming on a companys services or product, the strategies can lovemeen.com decision in the product development process affects cost.. Companies typically launch a new product without focusing too much on cost. Cost becomes more important when competition increases and price becomes a. Jan 24, The #1 tip on how companies can reduce logistics transportation and carry costs is The number one thing companies can do to reduce warehouse inventory errors (transportation costs or carry costs or warehousing costs etc.) organizations as a whole have to adopt and apply lean principles to their companys business and workflow processes.

In marketing, carrying costcarrying cost of inventory or holding cost refers to the total cost of holding inventory. This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity costand inventory costs related to perishability, shrinkage leakage and insurance.

When there are no transaction costs for shipment, carrying costs are minimized when no excess inventory is held gow all, as in a Just In Time production system. Excess inventory can be held for one of three reasons. Cycle stock is held based on the re-order pointtransportatikn defines the inventory that must be held for production, sale or consumption during the time between re-order and delivery.

Physical stock is held by consumer retailers to provide consumers with a perception of plenty. Moreover, the carrying cost will mostly appear as a percentage number.

It provides an idea of transportatino long the inventory could be held before the company makes a loss, which also tells the manager how much to order. Inventory is a property of a company that is ready for them what did will smith do to become famous sell.

This would act like a buffer to make sure that the company would have excess products for sale if consumer demands exceed their expectation. For example, candy companies can start tranxportation produce extra sweets that have long duration period. First of all, we need to go through the idea of economic order quantity EOQ.

The total cost will minimized when the ordering cost and the carrying cost equal to each other. While customer order a significant quantities of products, cycle inventory would be able to save cost and act as a buffer for the company to purchase more supplies.

In-transit Inventory [6]. This how to reduce transportation cost of inventory would save company a lot transportation cost and help the transition process become less time-consuming. For example, if the company request a particular what is the purpose of an echocardiogram material from overseas market. Purchase in bulk will save them a lot transportation cost from overseas shipment fees.

Dead inventory or dead stock is consisting of different kinds of products that was outdated or only a few consumer requests this kind of product. So manager pulled them from store shelves. To reduce costs of holding this kinds of products, company could hold discount events or imply transportxtion reduction to attraction consumers attentions. Most businesses see profit maximizing as their primary objective. In order to reach higher profit here are some methods of reducing carrying cost.

Base the amount of stock held on the economic situation : The amount of stock held should be changed with consumers' demand, the situation of the industry and the exchange rate clst the currency. Improve transpogtation layout of the warehouse : Instead of renting a new place, the manager might consider about the idea of rearrange the layout of the warehouse that they owned. To improve the layout the company could either increase the reception area or apply segmentation.

This how to reduce transportation cost become a win-win situation. Also the supplier might be willing to decrease the time period of delivery their products to the warehouse, for example from once a month to once a week. Furthermore, this would also reduce the risks of loss and depreciation of the products. Creating an effective database : The database should include things like transpportation, date, quantity, quality, degree of advertising and the time taken until sold out.

This will make sure that the future employees can learn from the past experience while making decisions. For example, if the manager want to hold a big discount event to clear the products that have been left in stock for a long time.

Then he can go through the hoow data to transportaation out how to write a application for school admission there is any event like this before and reducf was the result.

From Wikipedia, the free encyclopedia. This article is about the marketing term. For the trajsportation term, see Transporration of carry.

Retrieved 31 October Supply Chain World. Vijay Sangam. Retrieved 1 November Retrieved 2 November Jared Tranzportation, Demand Media. Neil Kokemuller, Demand Media. Tompkins International.

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To reduce costs of holding this kinds of products, company could hold discount events or imply price reduction to attraction consumers attentions. Ways to reduce carrying cost. Most businesses see profit maximizing as their primary objective. In order to reach higher profit here are some methods of reducing carrying cost. 1. Dec 26, Section Cost Accounting Standards and Disclosure Statement, the threshold for IHEs to comply with Cost Accounting Standards is raised to align with the threshold in the Federal Acquisition Regulations and the process for Federal agency review of changes in accounting practices is streamlined to reduce risk of noncompliance. ? Transportation industries ? Automotive specialty and after-market parts Hansford Parts and Products works with machine shop owners and head engineers to reduce machining cycle time and total cost through quality parts, machine tool products, and creative solutions to manufacturing challenges.

Establishing key performance indicators KPI derived from the fleet organization, vehicle assets, and vendors, permit effective fleet performance. This allows chief decision makers to observe trends as they evolve over time. Reducing the number of vehicles in any given fleet is the most proven way to reduce overall costs. While removing these vehicles would proportionately eliminate percent of fixed costs, the likely increased workload required of the remaining fleet vehicles will raise the operating costs for those vehicles slightly; however, there will still be a net decrease in overall fleet operating costs.

The number of vehicle miles traveled is one area where fleet managers typically have limited, if any, control. Other than monitoring and enforcing personal-use policies, fleet managers are not privy to day-to-day business purpose data or have the tools to measure the reasonableness and justification for such use. Still, unnecessary trips with little business justification occur and such events drive up vehicle operating costs.

Also, take advantage of technology. Fleet managers should be tasked to work with driver management teams to implement practical solutions to reduce miles traveled and develop return on investment ROI analysis for use of telematics and other technology solutions.

Automakers agreed to the measures, but there will be an interim assessment in to review both the cost and effectiveness of different approaches. Three strategies offer direct means for improving fuel economy and reducing fuel consumption:. Reduce vehicle size and weight. Vehicle downsizing and down-weighting will likely become a critical means of meeting CAFE requirements. As seen with the all-new, aluminum-body model-year Ford F, lightweight materials will play a bigger role and displace traditional materials such cast iron and steel.

Advanced high-strength steel, aluminum, composites, magnesium, and titanium will all be used more and more in automotive components. Fleet managers are actively seeking to reduce vehicle size. To do so, they should invest time into better understanding the functional purposes of the vehicles that they manage.

This requires spending time in the field, an undertaking that many fleet managers fail to do. Only by thoroughly understanding business requirements, can fleet managers begin to appropriately downsize vehicle models, downsize engines, and add suitable options while avoiding negatives such as mechanical failure and downtime. Use Innovative Automotive Technologies. The use of existing engine technologies and the current demand for hybrids are expected to continue; however, while plug-in hybrids and electric vehicles improve fuel economy, higher acquisition costs rarely produce an ROI when using vehicle lifecycle principles.

It appears these alt-fuel vehicles will continue to be a small percentage of overall vehicle production.

Automakers are expected to accelerate their focus on engine improvements that can achieve a light-duty vehicle mileage of 40 mpg. Replacing six-cylinder engines with four-cylinder engines equipped with a turbo or super charger also improves fuel economy, while not diminishing horsepower. Other engine changes that improve efficiency are 7- or 8-speed transmissions or continuous variable transmissions.

As a side note, a number of aftermarket vendors have developed and marketed various fuel additives and devices designed to improve mpg, however, many of these products fail to provide realized performance increases when tested in laboratory settings approved by the U.

Modifying driver behavior. Many organizations with fleets fail to consider the impact drivers have on vehicle fuel economy.

According to the EPA, a driver can impact fuel efficiency as much as 33 percent. Such strategic direction, however, requires collaboration on all levels of management in order to achieve driver buy-in, acceptance, and success. A business case analysis can determine whether investments in these technologies are warranted. Fuel is often the second largest variable expense after depreciation faced by fleet managers. The U. Fleet managers, however, should remain alert for potential spikes and keep a proactive fuel management program in place at all times.

Practices such as acquiring fuel-efficient technologies, vehicles weight reductions, additional transmission gears e. While certain fleets have found savings in natural gas NGV or propane autogas, vehicles, implementing these alternative fuels often requires long-term strategic planning.

Gas reserves have greatly expanded the supply and reduced the cost of natural gas. Other positive developments are increased vehicle availability from OEMs and the availability of support for fleet and infrastructure development. Key NGV users include municipal fleets e. Studies support that the greatest savings opportunities exist with refuse and transit fleets, followed by other medium- and heavy-duty vehicle fleets such as school buses and other fixed route fleets e.

These fleets all share a common operational feature in that the vehicles return to a single location where they are time-filled overnight.

Taxi fleets are similarly centralized. Senior-level executives may see frequent vehicle replacement as an unnecessary cost to the overall fleet budget, instead encouraging fleet managers to retain their vehicles until they reach an older asset age. This practice of utilizing an aging fleet stems from previous practices, a lack of capital funding, or failure to communicate the costs and benefits of timely fleet replacement.

Reducing vehicle lifecycle cost requires the knowledge of how to optimize replacement cycles and conforming to the correct replacement cycles. Best-in-class fleet organizations utilize economic-based replacement planning tools to empirically determine the proper lifecycles for vehicle replacement.

After considering all relevant factors e. The largest component of TCO is almost always the depreciation of any given asset. However, fuel may exceed depreciation for very high-mileage, low-acquisition cost fleets.

At any rate, achieving the lowest vehicle acquisition cost possible is paramount to reducing fleet costs. Even fleet novices understand that the lowest acquisition cost is not necessarily the optimal vehicle to acquire because the resale value of the vehicle plays a pivotal role in TCO. For example, a subcompact sedan may cost less initially than a midsize sedan, but the sub-compact may depreciate more, resulting in a higher TCO. This means starting negotiation with the dealer or lessor, who is acting as the buying dealer at dealer invoice, exclusive of OEM factory holdback, flooring e.

Factory-paid dealer delivery fees should also be negotiated along with receipt of national fleet or retail incentives whichever is lower. Once a transparent net price is established, the fleet manager should negotiate a reasonable flat fee of profit for the dealer.

Fleet organizations should also negotiate volume discounts with one or more OEMs, employing either a single or multiple OEM vendor strategy. These discounts vary widely and are not necessarily dependent on fleet size. Generally, fleet organizations that start negotiations early in the model year get the best opportunity of savings.

Regardless, savvy fleet managers employ lifecycle principles to determine the best deal, using reliable residual value projections from automotie industry resources such as ALG, Black Book, and others. Note, ordering vehicles from the factory vs. The target benchmark for out-of-stock acquisition is less than 1 percent. Previous sections of this article have dealt with the importance of managing depreciation and selling a vehicle at the economically optimal point in its lifecycle.

Corporate fleets typically sell and average of 16 percent of its vehicles to employees 10 percent on the low end and more than 20 percent at the high end, depending on the industry. Fleet managers should have mechanisms in place to prevent drivers from spending for unnecessary cosmetic, non-safety related repairs. Otherwise, true savings can be greatly diminished. Additional ways to increase the resale value is to select only vehicle colors that yield the best return typically white and other neutral colors and to provide maintenance records to potential buyers.

Reducing the cost of sales improves net residual gains. Managing auction and transportation fees can reduce the cost of sale by hundreds of dollars. Often, fleet managers adhere to outmoded beliefs for preventive maintenance PM practices, such as the belief that a PM should be performed every 3, miles.

Many light-duty fleet intervals have been extended to between 6, and 7, miles. Increased use of synthetic oils will also extend PM intervals offsetting the higher cost of synthetic oil. Thus, on-time PMs become more important as intervals between PMs are extended. After many years of ongoing price increases, tire costs were stable in , largely as a result of pricing wars between the tire companies that brought down prices.

A significant factor influencing tire cost has been the increased diameters of OEM-specified tires. These larger tires, however, increase mpg, vehicle performance, and have a longer tread life, which will likely mitigate increased tire cost. The safe operation of employer-provided and employee-provided vehicles is of paramount importance in a well-run fleet organization. An effective safety management program provides many benefits that have a direct impact on profitability:.

The result is the total additional sales revenue the organization must produce to replace lost profits due to fleet crashes. Fleet managers alone cannot implement and sustain a successful safety program. It must be driven from the top and be a CEO and COO priority, as well as being actively supported at all levels of management. Overhead costs, also known as indirect costs, include the cost of management and administrative staff, buildings and facilities, including fuel sites, computer systems, utilities, tools, taxes, and many other factors that cannot be attributed directly to a vehicle.

While no set formula exists for calculating the percentage of a fleet budget devoted to overhead, an Activity Based Costing ABC exercise is useful for identifying the sources of these costs as a first step. Gary Hatfield is a vice president at Mercury Associates. He can be reached at ghatfield mercury-assoc.

She can be reached at jchristensen mercury-assoc. See all comments. Determine the actual cost of owning and running a vehicle in your fleet. Compare vehicles by class and model. Name Please enter your name. Email Address Please enter a valid email address. Please validate that you are human. Fleet Incentives Powered by.

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