What is Transportation Optimization?
Transportation Optimization is the process of analyzing the data available to produce realistic load plans that would reduce the overall costs of transportation. The data to be analyzed could include shipments, rates, and constraints such as weight, cube, quantity, temperature requirements, and loading priority. Any factor that shippers encounter when they’re moving freight can become data to be analyzed.
The goal of such optimization is to achieve two things – reduce overall freight spending and achieve higher efficiencies across whole transportation networks.
Where and how does Transport Optimization work?
Transport Optimization can be used in a wide range of situations. It can be used in the initial stage during the procurement process, during the planning process which includes identifying capacity requirements, and during the execution process when you’re building actual loads.
The way it works is very simple. Transportation optimization uses transportation metrics to track performance and identifies areas of waste, overlaps, and large volumes.
Let’s take the initial stage for example. When there’s a carrier bid, a shipper could put in the carrier quotes and rate information of that bid into the optimization platform, which will then simulate the contract and arrive at the true costs of the bid. This way a shipper will know what to expect, think of how to plan, and decide if the bid is worth it.
During the planning process, transportation optimization can identify the future capacity requirement, and run “what if” simulations for fuel costs, changes in the transposition environment, and more. At the final stage of building actual loads, transportation optimization can build actual loads that are optimized based on the factors and constraints used during the sourcing and planning stage.
This way, transportation optimization can be integrated into every step of your process to enable the highest efficiency and continuous improvement across networks.
Transportation Optimization and Managed Transportation
Though transportation optimization and managed transportation might seem familiar at first, they’re quite different.
GlobalTranz says that “Managed transportation is about streamlining and centralizing the whole process of both inbound and outbound logistics, ranging from warehousing through delivery. These processes are intrinsically linked and require shared data and collaboration across all network partners.” And we agree with them.
On the other hand, transportation optimization includes the ability to measure and track the performance of the freight with reports, dashboards, and analytics.
Despite their differences, transportation optimization and managed transportation go hand-in-hand.
Benefits of Transportation Optimization
There are many many benefits of transportation optimization. Some of them are as follows.
- They are for everyone. Whether you are a shipper, a transportation consultant, or a 3PL (third party logistics), transportation optimization is for you.
- Running a variety of scenarios through the optimization program gives you multiple alternative execution plans to get the best possible results without having to do all the maths manually.
- Because of the above reason, transportation optimization saves a lot of labor who could be better employed in some other area of work.
- Transportation optimization evaluates carrier bids with actual shipment data making it easier for you to decide.
- It also identifies network pool points and cross-deck opportunities, as well as determines carbon footprints and savings.
In a nutshell:
Transportation optimization is analyzing data to identify areas of waste, overlap, etc, to reduce overall freight spending and achieve higher efficiencies across whole transportation networks.
While transportation optimization and managed transportation have differences, there’s no denying that they go hand-in-hand. With transportation optimization, you can jump over all the unpredictabilities in freight management and gain an upper hand in your business.
Do you want to learn more about how transportation optimization can better manage your business? Leave a reply, and we’ll contact you back with our best suggestions!
