A driver shortage and increased federal regulations make it difficult for companies to deliver products on time. With instability in the freight market, a global industrial manufacturer looked to NTT DATA to create an optimal transportation strategy that balanced contract carriers and dedicated fleets to improve service and reduce costs.
Evaluating capacity across divisional lines
The freight capacity market is always fluctuating. A driver shortage, increased shipping volumes, or lower margins can tighten capacity and impact a company’s ability to meet its service goals. To offset freight market swings and eliminate margin pressure, many companies choose to employ a dedicated fleet.
A global industrial manufacturer with three divisions across North and Latin America needed to optimize its transportation network and evaluate its for-hire and dedicated fleet. The company had successfully employed a dedicated fleet in the U.S. and believed there were opportunities to improve global transportation operations through dedicated capacity. Convinced this would improve service and reduce costs, the company sought NTT DATA’s transportation expertise to help to evaluate carriage options and identify the potential cost savings associated within each division.
- Adopted strategies to reduce overall costs and maintain targeted service levels
- Planned for seasonality and improved overall load efficiency
- Implemented best practices for managing relationships, routes and equipment
Dedicated fleets guarantee a predetermined number of trucks and drivers every week on a particular lane of service, regardless of market conditions. While many firms employ dedicated carriers to manage the supply imbalance, others use them to gain control of their service levels or to ship unique products that require specialized equipment. Most large companies have some form of dedicated or private fleet, even if it is limited to a particular region or product.
Finding the right partner
According to the company’s head of procurement, “We chose to go with NTT DATA after a thorough bidding process for our transportation optimization project that encompassed all our business units in both the U.S. and Mexico.”
“Although the project was very complex as it entailed different types of specialized equipment that needed optimization, the expertise and the resources that NTT DATA used made a great difference to the results of the project as in a matter of a couple of months, they were able to meticulously analyze our information and came up with an optimal scenario that yielded interesting savings to our bottom line.”
“We wouldn’t have been able to achieve these results without NTT DATA as again their analysis and expertise were second to none. The NTT DATA team was always open to work at our pace and to generate the least amount of disruption from our day-to-day chores.”
Evaluating existing operations
Providing expert talent, proven methodologies, and investment-grade modeling tools, NTT DATA’s transportation mode and fleet analysis allows clients to evaluate existing operations, factor in service demands and design a high-performance transportation network to improve competitiveness. This service combines NTT DATA’s deep domain expertise with powerful advanced decision sciences technology to formulate an improved transportation strategy that optimizes modal mix, fleet size, territory alignment and equipment mix. Using an unbiased approach, the teams identified the optimal transportation operations to reduce overall costs, take advantage of mode shifts or consolidation strategies, optimize dedicated and common carriers, plan for seasonality and improve overall load efficiency.
Creating the optimal transportation plan requires a unique strategy
NTT DATA worked with key stakeholders, teammates and supplier partners to understand the company’s logistics challenges and create a versatile fleet management strategy that optimized resources, reduced costs, and improved service levels.
The company built a baseline transportation model to identify strategies that would reduce overall costs and maintain targeted service levels. Together, the teams looked at dedicated, common carriers and private fleet alternatives. By introducing a proxy fleet, the company could consider the optimal size, lane-specific routes and domicile locations of a dedicated fleet. Where a dedicated fleet was determined to be optimal, the company could determine which lanes could most benefit from freight consolidation and reduced empty miles. The client was also able to evaluate fleet synergies across all global divisions to increase asset utilization.
Using this transportation model, the company realized the deployment of its current dedicated fleet was misaligned. The 28 different types of delivery vehicles currently deployed minimized the ability to capitalize on continuous moves and return lane optimization. By eliminating some specialized equipment, the company could open more capacity for shared trailer pulls and enhance the advantages of a dedicated fleet.
Using phantom models to analyze optimal fleet sizes, the teams created a plan to save one division millions annually through dedicated operations, but NTT DATA’s analysis proved this strategy would not work across all divisions. The company’s Latin American division would only reap a dedicated capacity benefit on less than 2% of its lanes. When the company saw potential for a dedicated fleet where it had large dry van short-haul shipments, the teams established target rates and optimal lane strategies.
Dry van long-haul primed for dedicated carriers
NTT DATA helped the manufacturer create a transportation strategy that factored country-specific constraints and implemented best practices for managing relationships, routes and equipment. Overall, the fleet optimization analysis identified a potential of $7.6 to $10.7 million in annual transportation cost savings.
The company plans to establish stronger relationships with partners and roll out its new strategy with confidence. Through improved freight relationships and streamlined best practice contracts, the company will optimize load tendering, leverage volume and reduce partner mileage penalties.
About this case study
An industrial manufacturer optimized its transportation strategy to improve service levels and reduce costs.