5 Top Reasons Why Freight Cost is High in the Steel Industry

5 Top Reasons Why Freight Cost is High in the Steel Industry

Are you searching for efficient ways to reduce freight costs in the steel industry logistics operations? Companies with Freight as a crucial part of their business must deal with the continuous rise in transportation of steel industry logistics as a whole. 


This is why finding best ways to transport steel to ensure freight charges optimization is becoming critical. It eventually improves the supply chain procedures and saves money for businesses.


Strategies for transport price control can range from streamlining inventory levels, revising smarter shipping networks, providing better processes, improving relationships between suppliers and third parties, etc.


Before looking for the best ways to transport steel cost-efficiently, it is critical to understand the reasons that lead to the rise in Freight logistics costs in the steel industry.


This blog post highlights the reasons behind the ongoing rising Freight costs in the steel industry and ways to reduce freight rate.


A Detailed Analysis of Increase in Freight Cost in the Steel Industry

The increase in freight transport rates in the steel industry can be attributed to various factors. Here’s a detailed analysis:


Trucking Industry Challenges


The specific tools and handling needed for heavy and bulky steel loads raise operational expenses. Demand fluctuation and irregular shipments make it challenging to optimize truck capacity, resulting in underutilized or partially loaded trucks that increase steel road transportation cost in logistics.


Compliance with strict regulations and safety requirements adds additional costs and potential delays in steel road transport.


The broken nature of the logistics in the steel industry creates inefficiencies, coordination difficulties, and information gaps, further impacting freight costs. Increasing fuel prices and driver shortages also contribute to increased expenses. 


These combined challenges result in higher steel transportation charges. Thus, implementing efficient fleet management, optimized logistics strategies, and collaborative approaches to mitigate these cost-driving factors is becoming the need of the hour.


Inventory Level


High inventory levels often lead to fewer but larger shipments, which can increase freight costs due to the requirement for more substantial logistics resources. On the other hand, low inventory levels often lead to more frequent but smaller shipments. 


Although smaller shipments may cost less each, the overall freight cost of steel transportation may increase due to the increased frequency of shipments.


Streamlined Order Allocation and Dispatch


Ensuring seamless order allocation and dispatch is a significant challenge that contributes to high freight charges of steel transportation. The industry’s inefficient supply chain, little visibility and details sharing among stakeholders, unforeseen demand and lead times, manual processes, suboptimal routing and load consolidation, and incomplete data analysis and optimization all contribute to this challenge.


Furthermore, coordinating the multiple components of the supply chain becomes complicated, resulting in delays and inefficiencies. Matching orders with appropriate suppliers and carriers becomes challenging without real-time visibility and accurate information. 


Eventually, more efficient routing of steel road transport, manual processes, and load consolidation lead to more utilized truck capacity and higher transport fee.


Facilitating Open and Clear Communication Among Stakeholders


The complex nature of the steel industry, involving numerous suppliers, manufacturers, distributors, and carriers, makes it essential to have clear and open lines of communication. However, insufficient transparency can lead to delays, misalignment, and blunders in coordinating orders, transportation schedules, and resource allocation. 


With real-time visibility into details such as the availability of raw materials, transport capacities, and production schedules, optimizing order allocation and planning efficient routes becomes easier. 


Eventually, lack of communication leads to underutilized truck capacity, missed possibilities for load consolidation, and suboptimal routing decisions, all contributing to increased freight costs. 


Hence, placing transparent communication channels in place and sharing relevant details among stakeholders is critical to overcoming this challenge and minimizing freight expenses.


Inefficient Route Planning


Inefficient route planning might lead to vehicles not being loaded to their maximum capacity. If the routes aren’t optimally planned to pick up and drop off shipments, the trucks may run partially empty on some trips, leading to wasted capacity and increased per-unit freight costs. 


Additionally, the turnaround time for the vehicles will be higher, leading to fewer trips in a given timeframe. This reduces the overall efficiency and productivity of the transportation assets, increasing costs of steel transportation.


Steel Logistics: Transportation Management Software 


A robust Transport Management System (TMS) for steel logistics to save on freight costs should include the following key components:


  1. Route Optimization: This feature helps optimize efficient routes for transportation, considering factors such as distance, traffic, vehicle capacity, and delivery schedules. It can save significant fuel costs, reduce wear and tear on vehicles, and reduce delivery times.

  2. Carrier Management: This feature helps choose the most cost-effective carrier for each shipment. With such robust features, comprehensive details about various carriers, their rates, performance history, and other information enable informed decision-making.

  3. Inventory Management: A TMS can help maintain optimal inventory levels and decrease associated storage and holding costs by offering real-time visibility into inventory levels and demand forecasts.

  4. Load Optimization: This involves choosing the best way to arrange and load items onto trucks to justify the use of space and minimize the risk of damage. It contributes to efficient vehicle capacity utilization and can decrease the number of trips needed.

  5. Freight Audit and Payment: This feature facilitates the auditing and payment process, helping mitigate the risks of billing errors, duplicate payments, and overcharges. It can also contribute to negotiating better rates with carriers.

  6. Real-time Tracking and Visibility: A TMS should have a feature for real-time tracking of shipments, offering location visibility and shipment status. This can help in proactive problem-solving and improves customer service.

  7. Integration Capabilities: The TMS platform should integrate with other enterprise systems like ERP, WMS, CRM, etc., ensuring seamless data flow across different systems, reducing errors, and improving overall operational efficiency.

  8. Analytics and Reporting: Advanced analytics capabilities help deliver valuable insights for decision-making. This feature allows identifying trends, patterns, and opportunities for cost-saving, helping improve the efficiency and effectiveness of logistics operations.

  9. Compliance Management: Given the importance of regulatory compliance in transportation, a TMS should be able to monitor and ensure adherence to various regulations, reducing the risk of fines and penalties.

  10. Forecasting and Demand Planning: The TMS should be able to predict future demand using historical data and analytics, helping plan transportation needs in advance and optimize resource allocation.


A TMS with these features can significantly assist in managing transportation more effectively, providing opportunities for significant cost savings and improved service levels.


What’s Next? – Road to Technology Transformation Acceleration


To leverage digital technologies capabilities in steel logistics operations workflow, companies must plan a clear roadmap by combining all factors and features. 


Digitization is a journey, not a solution that needs a quick jump. Seamless and fast deployment of some market-proven tools can help solve existing challenges in steel shipping quote, preparing businesses for future large-scale digitization.

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