3 Best Practices for Transportation Network Optimization

Shippers experienced the most volatile energy market on record in 2022. According to Breakthrough data, diesel fuel price movements of over $0.10 per gallon occurred 79 times in 2022, compared to the 10-year period of 2011-2021 when they only occurred 12 times total.

Fortunately, the broader transportation market is returning to a state of relative calm. Freight capacity is stabilizing and diesel fuel prices, though still unpredictable, are softening. All of this means that transportation professionals, who have been primarily operating in fire-drill mode for the last three years, are shifting strategies and taking a longer-term view.

What is Transportation Network Optimization?

Transportation network optimization is the process of streamlining your network of logistics carriers, as well as your shipping methods, and network management processes. Tasked with navigating the new market balance, transportation leaders are looking for opportunities to maximize efficiency and reduce emissions in their supply chains. To do so, they’ll need to explore transportation network optimization tactics to shore up fuel savings, strengthen partnerships with carriers, and make progress toward sustainability goals. And with efficiencies in energy, freight, and sustainability often interrelated, shippers can use comprehensive data to achieve wins across the board.

The new market balance brings new challenges

Given the economic volatility that characterized the last few years, it’s understandable why many transportation teams put network optimization plans on hold to keep inventory in stock and curb costs in the short term. Now the market is stabilizing, but the transportation landscape looks considerably different than it did three years ago. Changes in inflation, employment trends, and consumption habits remain significant concerns. That means traditional transportation strategies are no longer reliable, which makes it hard to act with confidence when contracting freight volume with carriers or predicting supply and demand cycles.

Additionally, sustainability has emerged as a top priority for transportation teams in 2023. A growing number of companies are making carbon reduction commitments through initiatives like Science-Based Targets, which requires participants to publicly report their carbon outputs and emissions progress. As sustainability mandates filter down from senior leadership, transportation managers must find ways to measure and track carbon emissions throughout their networks — even as they contend with macroeconomic budgetary pressures.

Maximizing efficiencies after three years of supply chain chaos

Fuel reimbursements, carrier networks, and emissions outputs are inextricably linked. You can’t optimize for efficiencies in one area without impacting the other two. So, it’s necessary to have a clear, detailed view of your network at all times. With access to comprehensive network data, you can uncover opportunities to save on fuel, increase freight efficiencies, and reduce scope 1 and 3 transportation emissions while working with carriers and other partners in new and creative ways.

Here’s what transportation network optimization looks like in each of these key areas.

1.Fuel

You can’t control volatility in the fuel market, but you can mitigate the impact of price swings on your bottom line. According to Breakthrough data, shippers who use market-based fuel reimbursements save $0.40 per gallon on average compared to shippers who rely on traditional reimbursement mechanisms based on the DOE index.

In addition to the clear cost savings benefits, market-based reimbursements introduce efficiencies into your team’s operations — primarily by eliminating the need to negotiate with carriers seeking emergency fuel surcharges when prices spike. By letting your fuel reimbursements program do the work, you eliminate most reimbursement conversations, improving your team’s productivity while freeing team members to work on other priorities. Additionally, relationships with carriers often improve when you introduce market-based fuel reimbursements because the reimbursement rate is calculated using individual freight movements — not the average fuel cost across the United States.

You can go a step further and use the load-level data that enables market-based fuel reimbursements to create a fixed-price diesel fuel strategy for your transportation network. This creates budget certainty and minimizes the effects of fuel market volatility.

2. Freight

Shippers used to rely on predictable ebbs and flows in annual sales cycles to negotiate contracts with carriers — November is busy leading into the holidays, January less so as retailers clear inventory ahead of spring, and so on. But consumers' changing shopping habits, which are more likely to be influenced by viral social media trends, are throwing a wrench in supply chain planning.

You can more effectively prepare for unexpected demand spikes with the help of a technology and data partner that provides a granular, real-time view of your freight volume and its impacts on your supply chain. Access to broader transportation ecosystem data enables you to identify opportunities to move goods more efficiently by consolidating shipments or contracting with new, more fuel efficient carriers.

This minimizes the chance you’ll scramble to quickly restock in response to an unexpected surge in demand. At the same time, you’ll augment the impacts of your fuel savings strategy.

3. Sustainability

Finding efficiencies in your freight network reduces fuel consumption, which has a direct impact on emissions. But how much impact?

You can’t make progress on climate targets— or report carbon outputs to regulatory bodies — if you don’t have the tools to measure your transportation emissions. Technology and data partners can provide information on vendors’ emissions, including scope 3, to help you establish your emissions baseline, create an actionable plan, and execute emissions reduction initiatives.

Detailed emissions data also enables you to collaborate with partners to act on mutually beneficial emissions reduction opportunities. For example, an auto-parts manufacturer might look at their data and see they could reduce transportation emissions by 2% and costs by 5% if they consolidate loads and switch to intermodal transport. But the shipment would arrive two days later than the buyer, a car manufacturer, requested.

The car maker would typically object to a delayed delivery date. But in this scenario, access to comprehensive network data enables the auto-parts manufacturer to approach the car maker with an attractive opportunity to make progress toward their own sustainability goals without increasing spend.

Get started on transportation network optimization today

If you don't have access to relevant, actionable data and haven't established baseline metrics, transportation network optimization is nearly impossible. But with comprehensive insights into your network, you can simultaneously decrease fuel spend, improve network performance, and make meaningful progress toward sustainability goals. With the right partner, you can immediately gain access to this critical information and begin realizing results faster — without making expensive and burdensome IT infrastructure investments.

Ready to explore the hidden opportunities in your network? Schedule a demo with Breakthrough today.