The impact that cost of goods sold (COGS) has on a company’s bottom line cannot be understated. Yet, for all of the attention that businesses dedicate to traditional COGS elements such as manufacturing, materials and labor costs, one key area is constantly overlooked when it comes to COGS planning, strategy and execution -- transportation.
For decades, transportation has been viewed in its own separate silo, and therefore has largely not even been considered when it comes to COGS planning. However, transportation can have far-reaching operational and financial impacts on COGS given it directly ties into the health of a company’s supply chain. In fact, companies have been able to break away and rise to the top because of the amount of investment they have put into their transportation operations, especially from a technology perspective.
With that in mind, here are three ways technology is helping businesses tackle their transportation challenges and further optimize their COGS as a result.
Better business decisions
Finding success in the modern supply chain world depends on how well a company is able to adjust to evolving market conditions. And given how rapid the supply chain landscape evolves on a daily basis, businesses must have the most up-to-date data and insights available across their entire operations. Unfortunately, this simply isn’t possible without the proper technology infrastructure in place.
Luckily, however, modern technology solutions enable businesses to collect, synthesize and act on data much more quickly than they were previously able to. This allows businesses to be able to adapt on the fly when a disruption occurs or to be able to capitalize on an opportunity that may suddenly arise. Furthermore, businesses can get a better sense of the fallout each decision may have on another so that they can make sure each decision fits nicely with short-, medium- and long-term COGS KPIs.
Opening up capacity
Every day that a product sits unshipped on the loading dock it is losing company money and gumming up the efficiency of a company’s overall supply chain. Additionally, if a delay is too long, businesses run the risk of imperiling their service-level agreements with customers which can result in lost revenue due to service fines in the form of chargebacks, or worse, losing business to a competitor. Therefore, it is imperative that businesses prevent bottlenecks or overcome any that do crop up as quickly as possible.
By embracing next-generation technology such as artificial intelligence (AI) and machine learning (ML), businesses can scan for, and procure, an alternate carrier in a fraction of the time they would be able to through the broker market. This allows businesses to keep goods moving so that they can avoid incurring delay discounts or letting goods go to waste.
Cutting out the brokers
The broker market has long been a transportation pain point for businesses both in terms of transparency and cost. And, while the broker market may have been a necessary evil in previous decades, thanks to the growth in modern technology, businesses are no longer beholden to the high-cost broker market when a primary or secondary carrier is unable to accept a load.
Instead, shippers can now use technology to circumvent the broker market entirely; enabling them to directly find the best qualified carrier and best price for each rejected load. This lets businesses get the best bang for their buck, and also allows them to get better market visibility around what the “true market rate” of a load is -- without the opaque broker fees that are typically factored in and obscure the total cost.
In order to truly optimize COGS operations, businesses must begin to include transportation under their COGS umbrella. Furthermore, businesses must embrace technology to help them make their supply chains -- including transportation -- more efficient and agile. By doing this, businesses will not only save costs, but will also be able to lay a more sophisticated business intelligence foundation throughout their organizations.
