“9 strategies to reduce freight costs
For businesses dealing with large inventories, shipping costs can have a significant impact on profitability and growth. Shipping costs can be mysterious to many businesses because there are many different freight products, categories and highly dynamic costs. While it pays to plan for cost peaks, the best strategy to reduce the financial burden of shipping inventory is to reduce daily shipping costs. Here are 9 strategies to unlock cheaper, more reliable shipping.
1. Rethink your packaging
Packing your shipments more efficiently is one of the easiest ways to keep costs down. Footprint is often a key factor businesses consider when setting shipping rates, so reducing dead space almost always results in lower shipping rates. In some cases, new packaging may increase the rate of breakage or deterioration; while it is often worthwhile to reduce inventory losses, some breakage may be an acceptable price for significantly lower shipping costs.
2. Irregular delivery
Shipping in bulk is often cheaper than shipping the same volume of product in multiple smaller shipments. Because carriers can load containers more efficiently, bulk customers can get cheaper freight rates—in less time because carriers don’t need to handle, load and unload as much customer cargo. On the other hand, regular shipping requires your customers to carry more inventory than they need immediately. This incurs inventory holding costs, so a slightly lower price or other favorable conditions may be required.
For some products, shipping components or ingredients in bulk to assemble and package close to the point of sale also allows you to ship the product more efficiently.
3. Contract stable lane volume
If your carrier knows he will be working with you every day and will get regular shipments in the same lane, he can market those return trips and build his network. As a result, you will pay less because the carrier is more efficient. In addition, these carriers will focus on moving cargo from people who are loyal and have reliable volumes due to the current tight capacity.
4. Ship on off-peak days
Shipping a day late or a day early can lead to significant savings. Friday is usually an off-peak day for shipping consumer goods, as most customers try to get their products to stores by Thursday, so it can be put on hold on Friday and ready to sell over the weekend. Monday also tends to be a low-volume day when carriers typically look for freight. Obviously, it depends on the cargo – for example, canned food has more windows than fresh food. Off-peak shipping is certainly a good option for shippers of non-consumer products.
5. Ship more products, less frequently. Persuade your customers to accept larger orders. It is much cheaper to ship six pallets at a time than to send two pallets every two days. But retailers tend to look for smaller items more frequently, so you need to provide them with incentives to get more inventory than they think they need. Potential savings: Up to 50% savings compared to the smallest LTL load, at which point minimum charges may kick in.
6. Build a fast-loading reputation
When carriers set their pricing, they usually assume a 2 hour loading window. But if the carrier knows they’re picking up where they’re loading within an hour, that can affect the price. It also makes the carrier work with that shipper. Shippers with consistent load time performance can even factor these favorable load times into rates. This avoids the need to pursue assessment fees – a huge waste of time. Efficiently operating shippers save money and have carriers lined up to serve them – a double benefit!
7. Use a load board.
If you have a one-off shipment and put it on a load board, you may experience low rates, especially if the carrier can handle it as a return trip. Carriers love return trips because they are making money, otherwise they would incur costs for empty miles. For return trips, many are willing to offer rates that cover only the cost of fuel, plus a little extra.
8. Find a carrier located near your delivery point
That way, your load is more likely to be their return trip, and you’ll get a lower rate. Filling up empty miles is how carriers make money, and it’s a great way for you to lower your shipping costs. It’s surprising how many shippers don’t investigate carrier terminals near their frequent receiving locations.
9. Use Data to Identify Freight Weaknesses
Modern inventory management systems collect vast amounts of data covering most aspects of a business’s inventory operations. This data can be used to identify poor shipping performance and identify potential causes. For example, shipping records can be used to identify carriers or shipping routes with higher than average rates of breakage or late deliveries.
Reduce shipping costs and challenge the status quo
Many of these solutions may seem self-evident, but shippers often ignore them and end up paying more for shipping than they should. why? The culprit is the blanket acceptance of “”business as usual”” rules and processes between internal departments and between shippers and customers.
See if any of the above suggestions make sense for your business. Then go a step further. Check your freight plan and question every built-in assumption – it has to get there in two days, railroads never work, marketing dictates carton size. Challenge the status quo and watch the savings and appreciation roll in.”
