3 Best Practices for Transportation Network Optimization

As the Great Freight Recession extends into 2025 with continued lower freight rates and soft volumes, shippers are left wondering how long it will last. Excess capacity, weaker demand, rising costs, and inflation continue to pressure carriers while economic and policy changes add uncertainty. Likewise, shippers are encountering these same challenges and are concentrating on controlling costs and addressing risks within their organizations.  As these shifting dynamics continue to unfold, a pressing question emerges: Is a market turn on the horizon? As transportation professionals, shippers are seeking strategies to boost efficiency and mitigate risk as they prepare for the evolving realities of a new market landscape.  

What is Transportation Network Optimization?

Transportation network optimization is the process of streamlining your network of logistics carriers, 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.

Strategizing for the new market landscape

While shippers have normalized to reasonably stable freight rates over the past year, few can forget the challenges of the post-pandemic experience, and this new normal won't last forever. Factors such as inflation, employment trends, consumer resilience, and policy variability related to international trade are key considerations for both shippers and carriers. Forecasting supply and demand cycles is complex, making informed decisions amid shifting market trends challenging. 

Additionally, senior leaders and transportation managers must consider their organizations' specific supply chain priorities and objectives, whether focused on cutting fuel consumption, streamlining freight operations or lowering both direct and supply chain-related emissions through initiatives like Science-Based Targets. Although these objectives can serve as valuable guiding principles, achieving them in practice with a supply chain content often presents significant challenges. 

Maximizing efficiencies after 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 20% 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 reimbursement 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 tend to base contract negotiations with carriers on regular patterns in annual sales cycles. For example, increased activity in November before the holidays and a slowdown in January as retailers clear inventory for spring. Currently, changes in policy, such as tariff adjustments, are affecting supply chain planning and requiring shippers to respond promptly to shifts in the market. 

You can more effectively prepare for unexpected demand spikes with the help of a technology and data partner that provides and granular, real-time view of your freight volume and its impact 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 unexpected shocks that impact your supply chain. At the same time, you'll augment the impact 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 that 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.