Logistics is a constantly changing industry. Through effective supply chain management, companies can move freight shipments from A to B and transport large quantities of goods. However, finding new ways to increase efficiency, reduce costs and increase revenue takes time and attention.
Freight analysis offers great potential for logistics companies here. It enables decision makers to closely examine the cost, resilience and strategy of their operations by revealing insights from data analysis.
However, turning shipping analysis into a comprehensive, long-term action plan requires a solid strategy. In this article, we will discuss building a freight analysis framework to optimize your freight operations and therefore minimize costs.
What is a freight analysis framework?
Freight analysis examines various aspects of transportation to improve overall logistics performance. A freight analysis framework, i.e. a freight analysis framework or freight analysis report, helps to develop an overall strategy.
It collects data from various sources to evaluate expenses and operational optimization opportunities, measured against the company’s Key Performance Indicators (KPIs).
In the US, the government transportation department has its own freight analysis framework “FAF”. Data is analyzed to better understand freight traffic in different states and metropolitan areas.
The official framework is not used in the UK or Europe and its scope is far broader - targeting economic and transport policy across the country. Still, transportation companies can benefit from a framework to analyze what works, what doesn’t, and what could be improved.
What’s involved in freight analysis?
With a structured approach to your freight company’s data, you can find actionable insights into how your transport operations are working. But that’s only one part of the process: you’ll have to assess cost, route efficiency, supply chain partners, and more.
Reliable data
The cornerstone of your analysis is reliable, consistent data, and that means gathering all the information you have for each aspect of the business. The warehousing and packaging costs, idle time for each trip, manifests, GPS tracking—each of these will be invaluable to working out where to drive efficiency, cut spending, and boost performance.
Cost analysis
You may have specific areas of concern over whether operational costs could be optimised. A freight spend or ‘freight cost analysis’ should give you clarity here. For example, analysing invoices, reports, contracts and real-time data can identify any discrepancies and identify where you can make savings. With sufficient data, this can help you stabilise your spending.
Route optimisation
Whether you’re managing road, rail, or sea freight, making sure A gets to B as efficiently as possible is the aim of strong logistics management. Part of your analysis should therefore focus on which are the most optimal routes for your transportation—whether that’s in terms of transit times, cost, or security.
Performance metrics
Your metrics or KPIs give you an idea of how your business is performing against your own set objectives and standards. This could be the rate of on-time deliveries, your fuel efficiency, carbon emissions, or how well warehouse space is being utilised.
Through effective use of KPIs you can not only identify points of delay or congestion (aka bottlenecks) across your logistics network, but you can also create a reference point for operational efficiency to help you to continuously improve.
Tips for a successful freight analysis framework
1. Define your objectives
You could be driving efficiency, on a cost-cutting exercise, looking to speed up deliveries, or indeed all three. The objectives of your analysis will give your framework a sense of direction, for which you can ensure every action you take is aligned to your overarching operations goals.
2. Understand analytics tools available
There are four different types of analytics: predictive, descriptive, diagnostic and prescriptive. Knowing how to apply them will help you analyse logistics performance with precision.
Predictive analytics makes use of machine learning and can help you forecast future outcomes based on your data—such as seasonal demand changes for more efficient inventory management
Prescriptive analytics develops on the scenarios produced by predictive analytics, and recommends different steps to take. For example, identifying the best routes to take in the event of disruption or a sudden spike in the price of fuel
Descriptive analytics takes your company’s historical data to analyse your past performance, e.g. on-time delivery rates over the previous 12 months
Diagnostic analytics uses your data to understand what is causing specific outcomes like late deliveries, empty miles, or higher transport costs. If your company is experiencing a lot of idle time on specific routes, it can help to assess whether this is because of those areas or if it is the result of inefficient load planning, poor forecasting, or other factors entirely
3. Evaluate against market trends
Freight market analysis should account for what’s going on in the wider industry. Fuel prices are a commonly used benchmark, but new tech developments and other factors influencing market dynamics like port closures or geopolitical disruptions are key to making forecasts and more informed decisions.
4. Report
To show your company’s stakeholders, employees, and others the value of your analysis, it’s important to produce a regular freight analysis report. This will help you to keep an eye on the state of your inventory management, resource allocation, and route performance, but also to communicate your progress or any issues identified to the people involved in your organisation. That way, everyone can stay aligned with the wider logistics strategy.
Drive efficiency across your logistics with Amazon Freight
Our mission is to support shippers deliver excellent customer service with timely and efficient logistics solutions. To do this, we’re regularly looking at ways to optimise operations, especially through the power of data.
From machine learning capabilities, GPS tracking and route optimisation, we take strong measures to create accurate forecasts that can help our customers deliver results in real-time and respond to disruptions.
Get in touch today at freight-uk-interest@amazon.com to find out more about how we can help. Or, simply get started by creating your free shipper account and receive an instant quote.