Logistics Pricing Analysis: Reducing Cost Per Mile and Price Trending

This post is based in part on material from the 2013 Spend Matters / Procurian research brief: Summer 2013 – Logistics Pricing Review and Outlook (free, registration required). Contributors from Procurian include Ed Sands, Global Practice Lead-Logistics and Scott Youngs, Logistics Category Management Group Leader. Spend Matters contributors include Jason Busch, Executive Editor, and Pierre Mitchell, Chief Research Officer.

There are numerous levers to reduce cost per mile (CPM) in logistics. A recent article on Trucking Info offers up four specific ways to reduce cost per mile in logistics. These are:

1. Reduce fuel consumption

2. Reduce out-of-route miles

3. Develop a comprehensive safety program

4. Reduce on-the-road maintenance

Most of these are what we might term “motherhood and apple pie” when it comes to general transportation savings strategies. But the explanations in the articles are both succinct and sufficiently detailed to make the article a useful bookmark on the topic.

For example, the authors suggest that that out-of-route miles “burn unnecessary fuel, cause unnecessary wear and tear on vehicles, diminish driver productivity, and erode customer service … [to tackle out-of-route miles] create a report that compares actual miles driven with published miles for each trip. Establish a variance tolerance (a percent rather than number of miles). Flag drivers who exceed the threshold and include this performance metric on the driver scorecard. Since this behavior is coachable, it is important to learn the cause of each flagged incident, take corrective measures and track progress.”

Beyond implementing CPM reduction strategies within a logistics sourcing team -- as well as the recommendations above -- tracking cost per mile is a useful metric for understanding overall price trending in the market. In the report, Summer 2013 – Logistics Pricing Review and Outlook, Procurian and Spend Matters offer a view into quarterly CPM price trending going back to the spring of 2012. The findings might surprise some, with CPM data trending upwards thus far in 2013.

For the full analysis of CPM price trending, we encourage our readers to download the report here (free, registration required). In the analysis, we also explore regional city pairs price trending data for the past four quarters and intermodal adoption data trending.

First Voice

  1. Kevin Zweier:

    Be careful with CPM price trends. You have to also take into account that lengths of haul are coming down in almost all industries. Shippers are designing their networks to get closer to their customers since fuel costs are high and likely staying that way. Recent CPM trends overstate the level of true rate inflation in the market due to this issue.

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