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Freight Management: Main Processes and Challenges

This is a guest post from GoRamp.

Logistics management and freight management are pivotal elements of effective business operations, especially in the transportation and movement of products across various modes like ocean, air, rail, and truck. The execution of freight and logistics is crucial for brands to streamline their supply chain segments.

In the current economic climate where operational efficiency is essential to thrive, leveraging various logistical freight solutions has become a strategic imperative. As technology continues to advance and complexities grow, freight management systems (FMSs) are emerging as standard digital tools for modern supply chains to optimize their freight management.

This article explores the concept of freight management and its various elements and challenges. It also covers how companies can optimize their freight management to streamline the supply chain, optimize costs, and ensure timely delivery.

What is freight management?

Freight management is the complex process of coordinating, supervising, and optimizing the shipment of products from the point of origin to their final destination. The elements necessary to ensure efficient, timely, and cost-effective transportation of cargo vary according to business size and industry. Freight management includes several steps, such as carrier selection, route planning, documentation management, shipments tracking, and analysis.

The importance of freight management

Freight management bridges supply chain operations by connecting manufacturers, suppliers, and consumers around the globe. With optimized management, you can enjoy reduced delivery and dwell time, lower operational costs, and higher customer satisfaction.

One of its most important characteristics is its adaptability to changing markets. Considering fluctuations in fuel prices, geopolitical shifts, and regulatory changes, effective freight management remains an asset for businesses to navigate uncertainties while maintaining a competitive edge.

Key elements of freight management

Freight management encompasses various elements that play a critical role in ensuring the seamless movement of products at all stages of the supply chain. It begins with carrier selection and ends with analysis and freight management optimization.

Carrier selection and negotiation

Depending on business goals and capabilities, you can take several approaches to freight operations. Some companies opt for private carriage, which entails acquiring their own fleet for direct control over transportation; this is especially helpful for high product volumes or unique destinations. Alternatively, businesses often utilize third-party carriers through dedicated contract carriage (DCC) agreements.

The latter option will introduce you to freight brokers and forwarders. Freight brokers facilitate connections between shippers and carriers and secure the best deals, while freight forwarders take a more active role, handling packaging, warehousing, and paperwork, often operating internationally. Transportation management systems (TMS) are commonly used to manage the relationships between brokers and forwarders. These sophisticated logistical tools integrate with enterprise resource planning (ERP) systems to ensure both parties work together smoothly.

Selecting the appropriate carriers is an important decision and should be based on aspects such as reputation, costs, capability, and service quality. To guarantee reliable and effective transportation services, the negotiations period involves the signing of agreements and building solid partnerships.

Source: Photo by Marcin Jazwiak

Key aspects to consider when selecting a carrier include:

  • Service quality: Evaluate the carrier’s past performance in providing prompt, on-time, and high-quality services.
  • Shipping options: Assess the carrier’s services to ensure they align with your business needs. Consider factors such as shipping times, crisis management, and the availability of other specific services.
  • Geographical coverage: Check the carrier’s network and geographical coverage to determine whether they can effectively ship goods to domestic and international locations based on your business requirements.
  • Cost efficiency: Analyze the carrier’s pricing structure for both spot rates and long-term agreements. The pricing should be balanced with the overall value and service quality.

Route planning and optimization

Optimizing routes, loads, and overall transportation operations is critical to enhance freight management efficiency and cut logistical costs. Beyond minimizing driver time on the road and shortening timely deliveries, it maximizes fleet utilization, improves financial allocation, and increases overall productivity. Efficient route planning contributes to reduced fuel consumption, fewer unnecessary delivery costs, and minimal unplanned delivery routes.

Route automation planning tools like a transportation management system (TMS) are an asset in this regard. A TMS addresses challenges related to vehicle routing and considers constraints like traffic, vehicular limitations, and widespread destinations. Route optimization also involves load planning, which aims to transport maximum cargo with the fewest vehicles possible and fine-tune the unloading processes.

Look at aspects such as real-time traffic updates and fuel efficiency when mapping routes as well. For seamless execution, integrate waypoints or stops into the plan with clear navigation and guidance.

Document management

At the heart of freight management is documentation management. In an industry heavily regulated and steeped in paperwork, the need for a well-structured system is essential. From supporting quick reactions to damage claims to ensuring compliance with regulations, document management plays a pivotal role in maintaining order within the complex logistics ecosystem.

Source: Photo by Wesley Tingey

A robust document management system provides a single access point for all team members and stakeholders that facilitates seamless sharing of freight management documents. It eliminates paperwork, reduces the possibility of human mistakes, and automates the overall process. This results in enhanced data security, editing and uploading new documents, faster shipment booking, and business resilience.

Real-time shipment tracking

Real-time tracking technology allows businesses to monitor the physical location of packages, products, and vehicles live. Various options are available to accommodate your unique needs, including GPS tracking or barcodes and RFID (radio frequency identification).

Tracking via GPS uses telecommunications technology to identify vehicle movements in real time. With this technology, you can monitor:

  • Tolls
  • Fuel consumption
  • Driving style
  • Temperature inside trailers

RFID and barcode technologies are both helpful in managing inventory, but they work in different ways. The primary purpose of barcodes is to provide quick and efficient identification, tracking, and management of products with the scan of a barcode reader. Barcode technology is widely utilized because it’s inexpensive, simple, and easy to use.

Source: Photo by Proxyclick Visitor Management System

RFID technology uses wireless communication to identify, track, and manage inventory with the help of RFID tags attached to products. An RFID reader can identify and track a product or item by emitting a radio signal, to which the RFID tag responds with its unique identification number. RFID technology is considered more accurate than barcodes and allows for real-time tracking.

Data analytics

Data collection and analysis in freight management involves gathering, processing, and interpreting data to optimize supply chain operations. Freight management itself involves various stakeholders, including shippers, carriers, and other logistics providers, so it’s important to gather and analyze data from all parties to craft strategies for optimization.

Key aspects to track and analyze include:

  • Carriers’ and partners’ KPIs to identify the best performing ones and those that need more attention
  • Schedule adjustments based on consumers patterns
  • Cost of different transport modes to compare and select the most cost-effective option

Main challenges of freight management

The ever-changing nature of freight logistics gives rise to many challenges in the industry. Efficient freight management thus requires the ability to adapt to changes quickly and search for new solutions. We’ve outlined some of the main challenges you can expect to encounter, along with possible solutions.

Globalized supply chain

The global supply chain brings a variety of obstacles, including diverse regulations, customs and border procedures, and communication barriers due to different languages. That in turn raises the risk of delays, fines, and incompliance with regulations.

To prevent these challenges, you need a comprehensive solution that integrates technology and expertise. That could entail advanced logistics tools like TMS, equipped with real-time tracking, updates, and automated documentation processes. To overcome communication barriers, you could hire multilingual staff and offer regular staff training and encourage professional development.

Transportation costs

Fluctuations in fuel prices significantly impact transportation expenses, which can lead to increased logistics costs and potential losses for businesses. However, logistics software like transport management systems enables businesses to optimize routes and consolidate shipments by leveraging data for informed decision-making. By implementing TMS logistics, companies can reduce mileage, fuel costs, and, ultimately, transportation expenses.

Limited tracking and visibility

Freight management involves a multitude of tasks, from sourcing and procurement to shipments planning and customer service. This process requires timely decision-making, effective communication, and comprehensive tracking, which gets challenging. Introduce an automated logistics software to facilitate better decision-making and tracking of metrics and performance of the supply chain. Be aware, it’s essential to run regular software maintenance and customization to fit the needs of your business.

Inefficient route planning

Driver shortages and high turnover rates can throw a wrench in efficient freight management. For effective route planning, attract and retain drivers by offering incentives that align with their interests and needs. Logistics companies should invest in a positive connection with drivers by emphasizing their value and creating favorable working conditions. A strong relationship between your business and its drivers supports a higher retention rate.

Regulations compliance

Because the logistics industry is a central player in the global economy, it’s subject to various changes in regulations and laws that differ by country. The only solution here is to stay on top of industry news and be ready and able to adapt to any alterations.

Wrapping up — Hone your freight management strategy for more streamlined logistics

Air-tight freight management consists of streamlined communication, improved supply chain visibility, and advanced logistical solutions that fit your unique business needs. Due to constantly changing markets, freight management is subject to numerous challenges that require flexible operations and a strategic approach. By addressing each obstacle systematically, your business can enhance its logistical efficiency, increase customer satisfaction, reduce fulfillment costs, and build an overall successful freight management system.