How To Strategically Reduce Your Freight Cost
Welcome to another Logistics Monday.
The cost of freight is a significant proportion of the total cost of many products. Reducing the cost of freight can make your business more profitable. Options for reducing freight costs are largely limited to the companies that have not adopted any of the many strategies that would help them save money.
For these companies, the facilities and personnel that manage inbound shipments are typically underutilized and unstructured. Unsurprisingly, few of these companies have made any real effort to gain control or cut costs associated with inbound freight transportation.
Here are the 7 strategies that I’d recommend to help you reduce your freight costs.
- Build relationships
A shipper’s ability to establish more strategic, longer-term carrier relationships creates bottom-line implications in transportation management. The carrier has time to create an efficient network with minimal deadhead miles when it has longer-term contracts. You will be able to get better rates from a carrier that maximizes its assets. In addition, the rate changes every year, and may even go up, if the contract is longer, say three years. Having a long-term relationship with a carrier means better service, too. Hard to quantify, but it makes a big difference.
- Reduce the frequency of shipping by shipping more product
Increase customer orders by encouraging larger purchases. Two pallets every two days is much more expensive than sending six pallets all at once. You need to create incentives to get retailers to take more inventory than they think they need because they tend to look for smaller shipments more often. Sharing freight savings with retailers is one way to do this. A third possibility would be to use vendor-managed inventory, where the retailer does not incur charges until the item is in the store.
- Ship during off-peak days
You can save money by shipping later or earlier. Since most consumers try to have their products to the store by Thursday so that they can be stocked and ready for sale by the weekend, Friday is typically an off-peak shipping day for consumer goods. Also, on Mondays, carriers are usually on the lookout for shipping freight because the volume is low. The window for cargo varies depending on the cargo – canned goods, for example, have a wider window than fresh produce. Shippers of nonconsumer goods certainly have the option of shipping off-peak.
- Consider logistics early in decisions regarding product design, packaging, and carton selection
The cube size of your trailer is impacted by all of these factors. Companies may not realize that packaging is the smallest cost segment in the supply chain, accounting for less than 10% of overall supply chain spending. Therefore, designing packaging and specifying carton sizes for freight efficiency makes sense. Currently, these decisions are made by marketers who aren’t considering freight efficiency. In most cases, companies don’t consider packaging optimization and the effect it has on freight rates.
- Improve lead times for deliveries
By introducing planning early in the supply chain and giving the carrier advance notice about future loads, the carrier has the opportunity to maximize its assets, including trucks, drivers, and warehouses.. Having a trailer sit idle at a facility waiting to be loaded is one of the biggest costs for carriers. As a result of better planning, carriers can reduce costs and pass some of those savings on to consumers. Pickup, staging, and live loading of products can all be improved through better planning. In general, the longer the notice, the more carriers can do behind the scenes to be more efficient and competitive.
- Become known for loading fast
Shippers who consistently perform well during loading times can even get these favorable loading times baked into their rates. Assessorial charges do not have to be chased, which wastes a lot of time. Shipping companies that operate efficiently save money and have carriers lining up to serve them – a win-win situation!
- Have your transportation department outsourced
Carriers on the ball should propose innovative solutions if they are outsourcing freight management. Outsourcing freight management transfers staffing and capital expenditure burdens. Furthermore, carriers will operate more efficiently than you since they can buy things in bulk, such as fuel. Consider parking your trucks and partnering with outside freight companies.
What TGL Offers:
TGL is a logistics company that offers high-quality and affordable services to companies across the globe. As a logistics company, our value lies in our flexibility to provide clients with cost-effective solutions to meet their specific needs. At TGL, we recognize that each client has different needs and so our experts are always standing by to help you every step of the way. We handle our client’s freight with total transparency. By offering value-added services at affordable prices, we help them to reduce their costs and improve their profit margins.
Get in touch with our Experts to discuss your Logistics requirements.
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