As freight transportation costs continue to rise year-on-year, manufacturers, wholesalers, retailers and any other organisations that are part of a supply chain must think smarter about pushing down the cost of moving goods from A to B. Every shipper’s challenge in freight cost reduction is likely to be unique, but the following five ideas might provide some inspiration when you’re seeking ways to move more for less.
#1: Bring Your Freight Back to Earth (or Sea)
If your company has been using international air freight in recent years, have you taken a look at whether or not that’s still the best option?
Many companies use air freight more for reliability than speed. If yours is one of those companies, it might be an idea to look into the latest “time definite” ocean shipping services that are gaining popularity. Often these services are just as reliable as air freight and they’ll always be a whole lot less expensive.
Another possibility is to consider if you really need to cover the entire shipment distance by air. By doing your homework, you might find it more economical to use air for a portion of the route and ocean transport for the rest or vice versa.
#2: Hold and Consolidate
This method of freight cost reduction won’t work for every shipper and even if it’s a practical option for your company, it might not be appropriate in every case. However, if you can get away with it, without impacting customer service, try holding onto non-urgent shipments and combining them with others to make better use of truck or container space.
#3: Team Up With Other Shippers
Do you have other shippers in the vicinity of your distribution centres? If so, it’s always worth talking with them to see if there are opportunities to consolidate your freight with theirs. This can be especially viable if you can find other local companies that supply your customers with their products. In these cases, customers can benefit too, by reducing the number of inbound shipments they need to handle.
#4: Consider DC location
Are your distribution centres in the best locations, or just the cheapest ones? Selecting DC locations for their taxation benefits or low cost-of-leasing can sometimes be a false economy. If you are looking for a new DC location especially, it might be better to consider how many transportation kilometers can be saved. If you get a good rate on the lease or a tax incentive, consider that a bonus.
#5: Don’t be Too locally Focused
Choosing local carriers may not always be your cheapest option. You might be able to achieve a reduction in freight cost by working with some carriers from other regions that deliver into yours. If you can give them a reasonable volume of backhaul work, they will probably offer you a better rate than local firms.
Never Stop Looking
Freight costs are never likely to fall, so whether any of the five ideas presented here offer any mileage to your company or not, you should continuously seek ways to achieve freight cost reductions. If your company has found any innovative ways in which to do that, we’d love to hear about them and share them with your fellow readers here on the Logistics Bureau blog.