5 Proven Ways To Lower Your Freight Transportation CostWritten by Paul Forand
Are rising freight costs getting you down?Companies around the world are increasingly concerned about the amounts they're paying for freight, and for good reason. It's no longer the "buyer's market" of the 90’s. Carriers are operating near capacity, and increasing government regulations along with a driver shortage has the scales balanced in favor of the carriers when it comes to pricing.
On top of that, most companies simply lack the leverage necessary to get top-tier deals. Haggling may reduce your bill a bit, but not substantially. To find cost savings on freight, you've got to dig deeper...
Five Great Ways To Reduce Freight Expenses
1. Charge More For Shipping
Sure, the customers may grumble, but everyone who hasn’t been living under a rock knows that there is a severe driver shortage and there's no immediate solution in sight. As long as the rate increases are reasonable and moderate, most customers will continue to pay when the changes are explained up-front.
Companies who've gotten into the habit of offering free freight may have backed themselves into a corner, so we recommend trying to inch back out of it. Free shipping is not sustainable, and even then, groups like Amazon have started charging "membership" fees to enjoy reduced shipping rates.
Perhaps such an arrangement could work for you, with shipping fees for regular customers, and a premium service that brings lowered costs with it.
2. Move Towards Local-Sourcing
How much of your materials are being transported from overseas, or even from the other side of the country? They're adding huge transportation costs to your budget, due to the fuel and other resources necessary to move them around the world.
In many cases, choosing local providers will be a more cost-efficient option in the long run, even if their base prices are a bit higher. The huge savings in shipping will offset the slightly higher per-unit costs.
This is especially true for companies that tied themselves up in globalized manufacturing and now find they have costly supply lines to maintain. More and more such companies are now looking towards locally-sourced manufacturing and distribution, specifically to avoid globe-spanning transportation fees.
3. Minimize Expedited Shipments
Expediting, especially next-day service, is incredibly expensive... and it tends to be overused. If an expedited shipment is delivered when the intended recipient is out of the office, the money spent getting it there early was basically wasted.
Go through your budgets and shipping reports, and see how much money is being spent on high cost / high speed services, then compare them against the actual items being shipped and the deadlines involved. Paying more to get a shipment delivered one day earlier is rarely a good deal unless it's a true priority.
For more savings, start digging into the "add ons" like insurance. Most of the time they're totally extraneous and simply add to your bill.
4. Audit Your Payments
Internal studies usually put the number of billing mistakes in the shipping industry at around 5-10%. If you've got automatic payment processors that pay bills without looking, you're probably throwing money away.
In other cases, the estimate a shipping partner gives may not be the same as the bill they submit. Is anyone watching out for this? If the final price is significantly higher than the quoted price, something has gone wrong and you need to know!
So strong audit systems on your financial database, which are aimed at shipping charges specifically, can ultimately save you a lot of money. If you can spot billing mistakes, or unexplained bill increases, before too much time passes, you'll start making some big cuts to your unnecessary expenditures.
5. Hire A 3PL
For all the above solutions and more, in one place, look towards a Third-Party Logistics provider. A good 3PL will bring:
- More purchasing power and negotiation leverage
- Guaranteed rates and fuel prices, possibly contracted for a year+
- Advanced data analysis and auditing systems
- Well-established carrier relationships
- Software automation to render your operations paperless
- Direct one-source oversight of all shipping concerns
- Simple, itemized, one-and-done monthly billing
To learn more download our FREE ebook: The Ultimate Guide to Controlling Freight Transportation Costs