Supply Chain Basics: Building a Clearer Picture of Healthcare Transportation Spend

Most organizations believe they understand their own transportation spending based on the supply chain knowledge they gather from tracked freight invoices. But costs can be fragmented across carriers, suppliers, business units, and shipping methods. Depending on the transparency of vendors and the level of concentration on all shipping metrics, businesses could be spending more than they should on transportation and freight. Read on to see if these hidden costs or gaps are lying within your own freight strategy and how to address them.

The Supply Chain Visibility Gap

As company shipping invoices move across the company and through the accounts payable process, they may be combined or grouped with other similar files, coded differently across business units, or posted a long time after the shipment has occurred. This disconnect can create a gap between operational efficiencies and financial reporting, making it difficult to accurately identify cost drivers and evaluate transportation performance with external vendors.

The gap may become even bigger when multiple decision makers across the healthcare network try to influence shipping decisions. Procurement teams may authorize expedited orders, individual business units may choose their own preferred carriers, and suppliers may manage inbound freight without providing detailed cost information in their invoices or reports. As a result, transportation spend can become fragmented across categories and difficult to analyze in a centralized manner.

Supply chain complexity further complicates the issue. Global sourcing, fluctuating trade regulations, unpredictable fuel costs, and evolving customer expectations continue to create variability in transportation expenses. Without a single source of truth, organizations often find themselves reacting to rising costs rather than proactively managing them.

Inconsistent data processes can leave significant blind spots in cost visibility and compliance management, which can ultimately limit organizations’ ability to identify savings opportunities and accurately allocate expenses.

Where Transportation Spend Hides in your Supply Chain Strategy

Many transportation expenses may never appear in traditional reporting. Some of the most overlooked areas may include:

Supplier-Managed Freight

Inbound freight arranged by suppliers can often receive less scrutiny than outbound shipments managed internally by the organization focused on cost. Costs may be included within product pricing or billed separately, making it difficult to benchmark carrier performance or identify savings opportunities.

Procurement-Driven Rush Shipments

Production delays, inventory shortages, and unexpected customer requirements frequently result in expedited shipments. While each expedited move may seem justified, the cumulative impact can significantly increase transportation costs over time.

Business Unit Shipping Activity

Decentralized organizations often allow individual locations or departments to arrange shipments independently. Without centralized oversight, carrier selection, service levels, and shipping practices may vary considerably across their network.

Parcel and Last-Mile Costs

Parcel shipping has become an increasingly important component of transportation spend as e-commerce and direct-to-customer fulfillment options continue to expand. However, many organizations still focus their cost management efforts primarily on truckload and less-than-truckload (LTL) freight.

Parcel and last-mile delivery expenses can add up quickly. Industry research indicates that last-mile delivery now accounts for more than half of total shipping costs in many networks, making it one of the most expensive segments of the transportation journey in your supply chain.1 Additionally, growing parcel volumes and heightened customer expectations for fast delivery continue to put pressure on distribution budgets.²

The Overall Value of Transportation Spend Visibility

A thorough understanding of transportation spend reveals opportunities for healthcare leaders to consolidate shipments, improve routing decisions, and reduce unnecessary charges.

In addition, complete [PS1.1]visibility allows leadership teams to make informed decisions regarding sourcing strategies, inventory allocation, customer service needs, and transportation investments.

Looking Beyond the Freight Invoice

Organizations cannot fully manage all the elements behind their transportation spend if they cannot see them.

Freight invoices remain an important component of transportation management, but they represent only a small piece of a much larger picture. Hidden costs can exist within supplier-managed freight programs, expedited shipment orders, decentralized purchasing decisions, diversified parcel networks, and last-mile delivery operations.

Building a centralized view of transportation spend can help an organization gain the visibility necessary to identify supply chain inefficiencies, improve budgeting, strengthen partner relationships, and make more strategic supply chain decisions.

The most successful shipping transportation strategies are not built solely on what appears on an invoice. Instead, they are built on understanding the complete journey of every transportation dollar across the organization’s freight network and beyond.

Interested in learning about Owens & Minor’s OMFreight+® capabilities that could help your business gain clarity and efficiency around transportation spend? Visit our website.