How To Bring Stabilization To Your Shipping Fuel CostsWritten by Paul Forand
Did you know that, in most cases, the amount you're paying for shipping is the #1 controllable cost in your operations today?
Most businesses are spending far more on freight charges than they should be. This isn't just a matter of higher fuel charges translating into higher shipping fees. Companies are usually losing money throughout their operations thanks to "nickle-and-diming" and other seemingly-small inefficiencies that add up to large costs in the big picture.
Part of the problem here is that many companies don't even have an eye on the big picture. And if you want to get your freight charges under control, that's the most important thing of all.
The Big Picture: Controlling Your Shipping Costs
For years it has usually been left to individual offices or departments to handle their own shipping, or at least much of it. In many cases, it was difficult or impossible to get any sort of top-down standardization, which is why many companies moved to lay off their "Transportation Manager" or similar administrator in the last decade or two.
This worked in a "buyer's market" full of freight carriers eager for customers. However, now that rates are going up and shipment space is getting tight, you need a better handle on your overall shipping operations if you're going to stabilize prices.
As some suggestions:
1 - Use standardized shipping partners.
You're virtually always going to be able to negotiate a better discount with freight companies if you're giving them most\all of your shipping work. If you're still allowing individual offices to choose their own carrier, you're basically throwing that leverage away.
Contact nationwide carriers, and start negotiating.
2 - Avoid overseas supply lines.
Sometimes a business doesn't have a choice in this matter but, if possible, look to locally-source as many materials as you can. The super cheap per-unit rates from overseas sources are now quickly becoming cost-effective due to the spiraling costs of freight.
If it's been more than a couple years since you've investigated alternative suppliers, start looking for ones near to your existing operations. You may be surprised at how low the total bill will be when shipping is factored in alongside per-unit costs.
3 - Start tracking ALL shipments.
Just as a "data-based" approach is being seen as superior in other areas of business, it can bring huge benefits to your shipping operations. If something leaves an office with so much as a stamp on it, you should be tracking that so you can get a true big-picture overview of your shipping ops and charges.
Ideally, this database should be able to provide a single, unequivocal dollar amount for your weekly\monthly\yearly expenses.
Once you've had a few months or years to build up data, you'll quickly start seeing which departments are spending the most which, in turn, tells you where to start optimizing.4 - Don't be afraid to charge customers for shipping.
Your buyers may grumble, but no one seriously disputes that fuel charges are standard practice and no one can really do anything about it right now. As long as increases are reasonable and well-explained, your clients will go along with modest shipping rate increases.
This is especially true for businesses that have offered free shipping in the past. Unless you have rock-solid numbers showing that this results in a net gain to your income, you’re probably just throwing profits away.
5 - Hire a Third-Party Logistics provider.
An increasing number of companies are discovering that a 3PL is now a much better deal than they might have been in the past. 3PLs operate on large scales and can demand much better prices from shippers than smaller companies can get on their own.
They also bring with them huge databases of prices, carriers, and schedules which allow them to optimize your routing using data you probably don't have access to. In many cases, 3PLs can even help you set up software services to build\maintain your own databases and automate shipping requests.
When compared to a "DIY" approach, 3PLs will save you a lot of time, as well as usually getting better deals than you could negotiate for yourself.
Want to learn more? Just contact ReTrans Freight!