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 ten ideas might provide some inspiration when you’re seeking ways to move more for less.
1. Define Your Freight Profile
Are you paying a ton rate or a pallet rate appropriate to your freight profile? For example, if you are paying an hourly rate for deliveries, is that necessarily going to create the right behaviour in the transport company to get your deliveries done efficiently?
So think about the rate structure, whether it is per ton, per pallet, per carton, and try to ascertain if it is the one most suitable for your freight profile. If not, it could be worth renegotiating the structure.
2. 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 one portion of the route and ocean transport for the rest.
3. 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.
4. Choose the Right Service
When people are paying too much for transport, it’s generally because they are buying the wrong service. Are you sending freight out overnight when a two-day service would do? Are you sending it out to be delivered in a couple of hours by courier when next-day would suffice?
5. 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.
6. Maximise Your Carrier Capacity
How are you presenting your freight to the freight company? Is it easy for them to handle and load into their vehicles? If, for example, you have some really fragile products that have been palletised, and they are so delicate that you can’t put other pallets on top of them, you’re going to be paying for two pallets in that vehicle. You are paying for the volume of the vehicle that you are occupying.
7. Negotiate for Off-Peak Times
Some carriers offer lower rates during off-peak times, so if possible, schedule your freight deliveries for late afternoon or early in the week.
8. 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 kilometres can be saved. If you get a good rate on the lease or a tax incentive, consider that a bonus.
9. Perform an In-Depth Cost Analysis
When dealing with carriers, the best approach is to define what you want them to give you. For example, if you go to carriers and say that you need to move goods from A to B, they will come back to you with their standard rate and tariff format.
Rather, go to them and say that you want an extensive quote. Tell them that you need a kilogram rate, or a tonnage rate, or a pallet rate, and then tell them that you also want them to quote from one to five pallets, from six to ten pallets, and so on. Then go to every single carrier with that same methodology.
You must require all of your carriers to come back to you in the exact same format. It will then be easy to analyse and understand who is going to offer the best service and the best prices. You may want to consider freight consulting if you want an expert to do this for you.
10. 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 ten 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.
great ideas and helping a lot .
One of the best way to save on freight cost for Air /Sea/land/rail shipments are carton standardization implementation and providing proper packing instructions to the suppliers . Being in retail fashion , suppliers used to send bulge and oversize carton which are packed in the half empty boxes or with improper packing materials and paying the volumetric freight unnecessary for each consignments . Definitely, this is a sigma exercise and need to drill down and understand many things before you think about standardization .
Good points!