Cost modeling tools can add transparency to a client's shipping environment, identify target areas for savings opportunities and determine the impact to a client's net spend. Among these tools are a contract and carrier comparison model which utilizes a client's volume sample to compare carrier contracts among different carriers. Limitless scenarios may be generated to track changes as new contract offerings are presented. Based on these scenarios, recommendations are made to optimize savings while maintaining service level commitments.

Perhaps the most requested cost modeling analysis in 2015 was to examine dimensional weight exposure. This is not surprising as 2015 marked the first year that FedEx and UPS implemented a significant change in dimensional weight policy. Once a client understands their exposure, they are better equipped to go back to the carrier for concessions. Dimensional modeling also enables clients to evaluate box sizes and packaging changes to determine cost advantages. For example, a mere inch in a measured dimension may increase a package cost significantly, perhaps as much as 100 percent or more, if the measurements qualify for additional surcharges. This information may also be used to ensure a carrier’s dimensional weight scans accurately reflect the true box size.

Cost modeling can also provide beneficial returns for more than 250 surcharges (including value-added services) implemented by small parcel carriers. This interactive modeling integrates with carrier systems to understand the scope of use and, perhaps, uncover alternatives. Understanding how one uses value-added services such as signature requirements and pickup attempts will arm shippers with information to use in small parcel contract negotiations.

Additionally, use of these interactive modeling analyses may reveal a further benefit of trading down on modes depending on a shipper’s needs, time in transit requirements and KPIs. Relocating or placing new distribution centers based on various criteria such as zip codes and service level requirements may also be explored.

Lastly, invoice auditing not only ensures that contracts are correctly enforced and service commitment times are met, but may also highlight operational issues such as when shippers generate multiple labels for the same package, resulting in double billing.

Cost modeling demonstrates the importance of data integrity and the level of collaboration between a client and consultant. Without these two components to the process, the accuracy of any analysis could be suspect. Indeed, collaboration is as important as the data itself by providing context around the data and thus resulting in a more accurate analysis.

The Outlook

Supply chains are becoming more complicated in today’s global environment. As such, the amount of data is on the rise. For companies to maintain agile supply chains, they will need to incorporate data analysis such as cost modeling to improve and maintain efficient practices as well as to control costs.