Banishing Supply Chain Plagues, Part 2: Rogue Spending and Premium Freight

To remain competitive, it is essential that companies improve and maintain the health of their supply chain. After all, the supply chain is to a company what the blood vessels are to a human body. Even a small blockage can wreak havoc on the heart.

Silos and spot quotes, a recent post explains, frequently hold companies back from being best-in-class. Companies can also help their supply chains to heal from two more common logistics plagues—premium freight and rogue spending.

The high, hidden cost of premium freight

Most organizations spend too much on freight. Poorly negotiated contracts, spot quotes, and unexamined route inefficiencies all drive costs up and eat into profits. But one of the biggest and most unnecessary causes of high transportation spend is an over-reliance on premium freight.

Premium freight certainly has its place, such as mitigating the impact that natural disasters can have on global supply chains. But while events like that are rare, unpredictable, and require an emergency response, many companies find themselves turning to premium freight logistics to solve problems that were entirely avoidable, or nonexistent.

The fact is, most premium freight spend is entirely unnecessary—and it quickly adds up.

A world-class transportation management system (TMS) can help companies standardize and automate their shipping processes to avoid the kind of delays and inefficiencies that make premium freight seem more attractive.

Additionally, companies can consider putting a premium freight approval process in place. A consistent approval process prevents individual employees or locations from operating in a vacuum, ensuring that the decision to use premium freight services is only made when absolutely necessary.

A TMS also significantly increases visibility, offering a big-picture view of the company’s shipping patterns. When leaders see how much they’re spending on premium freight, this can encourage more moderate use of these services.

The secret to reducing rogue spending

Since it encompasses any spending outside of the managed structure and procurement policy, rogue spending should be easy to spot. Inevitably, though, rogue spending is a systemic plague of supply chains everywhere. And the problem, again, is a lack of visibility.

Setting up a spend analysis to examine every spend category for inconsistencies (or worse, inefficiencies) can help companies identify potential rogue spending sources. It also pays to overhaul any corporate procurement policies. Miscommunication is often due to a lack of clarity and consistent information.

Without clear spend analyses and easy-to-understand procurement procedures, rogue spending can lead to strained resources, too many contracts (and lost discounts), high transactional processing costs, and wasted money from compromised forecasting and planning.

Healthier supply chains require a wealth of information

Behind many common supply chain problems is a lack of visibility. Luckily, that can be easily rectified, with a little help from the experts.

At CTSI-Global, we help companies audit and improve their supply chain operations with holistic tools and expert support. We leverage our expansive network and wealth of expertise to help companies banish the problems that plague them and get things back on track.

Keep your supply chain healthy and humming at every stage. Contact us today.

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