The COVID-19 pandemic, labor shortages, and logistical challenges shaped today’s supply chain challenges for distribution companies.
These obstacles have made effective freight management in distribution even more critical than ever before, including optimizing transportation routes, using technology to track and monitor shipments, and adopting flexible logistics strategies to respond to changing market conditions.
What is Freight Management?
Freight management refers to the process of efficiently and effectively planning, organizing, coordinating, and controlling the movement of goods from their point of origin to their final destination. This involves:
- Carrier selection
- Shipment scheduling
- Load optimization
- Documentation management
- Customs compliance
- Tracking and monitoring of shipments
The goal of freight management for the distribution industry is to ensure the safe and timely delivery of goods, while minimizing costs and maximizing efficiency throughout the supply chain.
Inbound vs. Outbound Freight
Effective freight management solutions require optimizing both inbound and outbound transportation to reduce costs, improve delivery times and enhance customer satisfaction.
Inbound freight refers to the goods coming into your warehouse. Effective inbound freight management involves optimizing transportation, minimizing lead times and accurately calculating landed costs. This may include selecting the best transportation mode, coordinating with suppliers, and tracking inbound shipments to ensure they arrive on time.
Outbound freight refers to the finished goods leaving your warehouse to go to customers or end-users. Like inbound freight, effective outbound freight management involves streamlining transportation, reducing delivery times, and ensuring timely delivery of products to customers.
Key Components of Freight Management
The following are the steps involved in effectively managing inbound and outbound freight:
Effective freight management requires selecting the appropriate carrier based on various factors, including the type of goods, destination, lead time, cost, and environmental impact. For example, shipping bulky or heavy items over long distances may be more cost-effective by sea or rail, while time-sensitive or high-value goods may require air transportation.
Route optimization is a critical component of freight management that involves planning and executing the most efficient and cost-effective transportation routes for goods.
Advanced routing software and analytics tools can help distributors analyze transportation data, such as shipment volume, delivery destinations, and shipping lanes, to identify the most efficient transportation routes and modes.
Documentation and Regulations Management
This refers to the various documents and regulations required for international transportation of goods, including bills of lading, commercial invoices, packing lists, customs declarations and other documents required for customs clearance.
Effective documentation and compliance management requires a thorough understanding of transportation regulations, trade agreements and customs procedures. Failure to comply with documentation and compliance can result in delays, penalties or even seizure of goods.
Tracking and Tracing Shipments
Distributors can use technology to track the movement of goods and monitor the location, status, and condition of their shipments in real time.
This helps distributors identify potential delays or issues, proactively address them, and provide more accurate delivery estimates to customers.
Data Collection and Analytics
Data collection and analytics play a crucial role in freight management, helping to identify inefficiencies, and supporting informed decision-making.
By collecting and analyzing transportation data, distributors can also enhance communication and collaboration, ensure compliance with transportation regulations, and mitigate risks such as cargo theft, damage, or loss.
Freight Management Challenges for Distribution
Effective freight management can help distributors streamline transportation, reduce costs, improve delivery times, increase order accuracy, and provide better visibility and communication with customers, among other benefits.
That said, because freight management involves so many moving parts, it comes with challenges, including:
Complexity: Freight management involves various stakeholders, including shippers, carriers, freight forwarders, and customs authorities, making it a complex and often challenging process.
Cost management: Although proper freight management can lead to cost savings, managing transportation costs can be challenging, especially in volatile markets or when unexpected disruptions occur.
Regulatory compliance: Transportation regulations and customs procedures can be complex and constantly evolving, requiring expertise and vigilance to ensure compliance and avoid penalties.
Technology integration: Freight management requires the integration of various technologies, such as a transportation management system (TMS), GPS tracking and electronic data interchange (EDI), which can be costly and challenging to implement and maintain.
Security: Cargo theft and other security risks pose a threat to the transportation industry, requiring measures to protect shipments and prevent losses.
Tips for Improving Freight Management
Distributors can optimize shipping and receiving by:
Developing strategic partnerships: Strategic partnerships with carriers, freight forwarders and logistics providers can help distributors improve their freight management.
Selecting the appropriate transportation mode: Consider the type of goods, destination, lead time, cost and environmental impact to optimize transportation processes and reduce costs.
Improving documentation management: Effective documentation management can help distributors comply with transportation regulations, reduce delays and penalties, and improve customs clearance.
Utilizing technology: Technology can help distributors streamline their freight management by automating manual tasks, improving communication and providing real-time visibility.
Leveraging real-time data analytics: Take advantage of cost-saving opportunities, improve delivery times, and enhance customer satisfaction.
Clearly, using technology and data analytics is crucial to effective distribution freight management. That said, many distribution companies have older or non-integrated TMS solutions, and, in turn, can’t efficiently communicate with freight carriers or pull in real-time data.
This is where the transportation management feature in the Microsoft Dynamics 365 Supply Chain Management platform comes in.
Master Transportation Management with Microsoft Dynamics 365 Finance and Supply Chain Management
If you’re like most distributors, you’re concerned with maximizing loads to keep freight costs down. The transportation management functionality in Dynamics 365 Supply Chain Management makes it easy to find the most efficient and cost-effective route in which to ship goods to your customers. Manage the freight and rate tables, run rate calculations, and more.
If you want to pull in and manage real-time freight rates at a granular level, you can integrate your instance with a third-party solution based on Zip code, what you’re shipping, load weights, and other criteria.
Our experts can help you maximize the functionality of your Dynamics 365 Supply Chain Management transportation management solution, as well as integrate seamlessly with solutions that can help you maximize margins. Reach out to our team today to get started.