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The following is an opinion piece written by Tanmay Mathur, Senior Vice President Linehaul, XPO. Opinions are those of the authors themselves.
T.According to a recent Bloomberg Intelligence report, the U.S. trucking industry is expected to see revenues squeezed by rising costs in 2023. Rising labor, insurance, and equipment prices and higher maintenance costs are expected to contribute to lower industry margins, while weaker economic activity weighs on top-line growth.
To secure profits and win in this environment, shipping companies must adopt effective cost leadership strategies. However, cutting costs without investing in forward-looking planning can be a recipe for disaster.
True cost leadership involves a focused approach that incorporates smart investments and avoids certain hasty short-term actions taken at the cost of losing customers and jeopardizing the long-term viability of the company. We need a long-term vision. Decisive leadership is essential to effectively manage conflicting priorities within an organization.
Here are five key strategies to keep in mind as you navigate today’s macroeconomic environment.
1. Act early: A strategic cost leadership plan starts with being ready to bite the bullet. Too often, a lack of willpower means that companies take too long to implement cost-cutting measures.
Whether it’s the cost of employee staffing and benefits, capital expenditures, equipment purchases, or any other item, the reality is that the longer it takes to make the cut, the deeper it needs to be.
2. Expanding the supplier base: Diversifying the competition among suppliers competing for your business is a way to actively control prices. Businesses should diversify their supplier base for equipment and services. For example, if he only has one 3PL provider for her in Alaska, the process can take months before he can identify another provider and finalize the deal.
This effort requires investment in a proactive and resourceful sourcing function that is well staffed and supported to offer the best cost options across all supplier categories.
3. Information gathering: access to expert analytics and employee insights important for guiding the decision-making process. For example, investing in building a team of market analysts who can evaluate and compare providers and identify attractive under-the-radar suppliers that might otherwise go unnoticed is very cost-effective. There are cases.
Additionally, third-party market research firms can provide valuable insights and information to better prepare businesses for the future, including macroeconomic factors that directly affect a company’s costs. Even crowdsourced information from your employees can have a real impact. Employee surveys are a near zero-cost means of gathering valuable information. After all, front-line employees are often in the best position to suggest creative ways to cut costs.
4. Invest in technology: The most important component of an effective cost leadership strategy is investing in technology that optimizes costs over the long term. Artificial intelligence and machine learning capabilities deliver far more advanced results than humans can provide.
Given the high fuel and labor costs, strong route optimization techniques are essential. XPO’s models run weekly, daily, and hourly to provide guidance with a high degree of accuracy. These models, for example, actively taught that on low-volume days he should only run 2 drivers, even though the previous week required 4 drivers each day. will give you
Real-time labor management tools are equally important for optimizing daily labor costs. For example, XPO’s smart smart technology can tell you if there are too many or too few workers on the dock at the start of a shift.
By integrating AI and machine learning across your operations, you can reduce your cost per mile and stop. For example, AI-powered load stacking reduces transport distances, dock costs, and reprocessing and unique pick-ups. And our delivery optimization technology, powered by machine learning, predicts pickup density and location.
5. Keep your (financial) friends close: Despite your reputation as a grim reaper, finance is your best friend. The question of cost should never come as a surprise. A good financial partner not only keeps you in check, but warns you before headwinds turn into storms.
Ensuring cost-cutting decisions are well-informed requires an ongoing partnership with finance to confidently weigh priorities and assess where and how much to cut You need to ensure correct current and forecast figures for
Investing in a cost leadership strategy can be burdensome in the short term, but it’s one of the best ways to set up your business to successfully weather any type of economic environment. The benefits of developing a strategy not only protect companies in the face of economic headwinds, but also give them a competitive edge to attract future talent, investors and customers.