How To Reduce Freight Costs?

Introduction

Over the last few years, the logistics industry has grown by leaps and bounds. The sharp increase in demands have led to a steeper rise in shipping costs. The lockdown during the pandemic have made the situation even worse with many stakeholders and third parties revising their rates based on travel restrictions and strict guidelines.

Control of freight costs is more critical than ever, especially since it directly impacts your profit margins. It often takes a bit of diving deep and figuring out clever strategies to keep costs low and efficiency high. Such strategies often involve figuring out weak points in your supply chain and work backwards to improve them. Sometimes addressing the weak points may involve small alterations to your operation plans. While this might seem overwhelming and counter-intuitive but in the long run, you’ll have a sustainable, long running and efficient business model that is resistant to fluctuations.

There are some how to manage freight costs to get you started and that’s exactly what we’ll discuss below.

Eight proven ways to reduce freight costs for better profits

1. Its Time to Re-Strategize the Locations of Your Delivery Hubs

Before getting to the roads and fleet let’s pause for a while and look at our maps. Logistics thrive on connectivity and the more we are present along key points on a route, the better our coverage and even better our reach.

But more is not always better. Some hubs might not be serving a purpose any longer. Some may be there to save taxes. Some hubs might even be there as a symbol of your presence (trust us. This actually happens.) As grand as that sounds, it might not be financially and logistically practical.

Take some time off your schedule to carefully think & reconsider. Ask yourself, why and how many distributions hubs are there and where they are?

Ensure that your hubs are located close to your customer bases so that travel costs can be significantly reduced.

2. Delivery Cost Vs Delivery Speeds – Which Should You Prioritize?

The logistics business is always a race against the clock. But like all other businesses it’s always a race for larger profits. Striking the perfect balance between speed and costs is the key.

Analyse if you are using too many express freights or air freights when standard freight could work just as well? Go back to your invoices and re-calculate how this breaks down for your business. This way you can be sure that you’re selecting the most appropriate option.

If you’re using a lot of express freight, for example, work out whether it is really very necessary. For perishable goods this this extra cost is well justified, but otherwise, it may be that you’re paying for a service that you don’t really require. Change your shipping method accordingly.

3. Re-Assess Your Freight Payment Structure

You maybe paying a rate per ton or a rate appropriate to the kind of products that you are shipping. It’s essential to review this from time-to-time, because you may find that your payment structure no longer applies to the efficiency of your company.

Let’s take a simple example. You may be paying for deliveries per hour and in some instances, this may be right for your business, but consider the rates you’re paying for once and ask yourself if what you’re paying is appropriate for your freight profile, whether that’s per ton, container or pallet. Check to see if any negotiation can be possible.

4. Cleverly Maximise Your Cargo Capacity

Think about how you’re shipping your cargo. See if it’s easy to manage and load your cargo without much adjustments. If you’re packing fragile products in a certain way, that means other pallets can’t be stowed efficiently. In that case, bear in mind that you’ll be paying for space within the vehicle without utilising it to its fullest potential.

Similarly, if you’re stacking pallets unevenly, it could block the store other pallets on top or alongside them. This is going to make you pay then you’ll be por two pallets.

This is why it’s crucially important that you’re stacking your cargo, neatly and efficiently. The goal is to make it as easy as possible for them to load their vehicles such that more cargo can be carried.

5. Ship Low Priority Deliveries Together

Depending on the industry that you operate in, this suggestion may not work in every scenario. Still, you could potentially save a tremendous amount of money if you’re able to consolidate all low priority deliveries without impacting the service received by your customers.

6. Try to Reduce Dunnage for Better Carrying Capacity

All kinds of packing materials including wood, matting, cardboard or any other material takes up space and increases weight. This in turn, increases your costs significantly. Carefully think about how you could reduce dunnage, while still keeping your product protected. One idea can be to use modern paper based dunnage which occupies lesser space. However, finally this depends upon the type of product being transported.

7. Investigate Off-Peak Options

Rates are normally lower during off-peak periods. If it’s possible try exploring odd timings such as late afternoons, the weekend or even overnight deliveries.

8. Invest in Technology

You may be familiar with excel spreadsheets and thick paper files but technology has made all of these redundant. Today many software and tools offer much more convenience and efficiency.

Try investing in transportation and warehouse management systems, yard management systems, and other technologies. These help in reducing costs in today’s supply chains and refining your operational strategjes. Modern technology can also automate invoices, generate manifests, compliance requirements, complicated cross-border paperwork, and other important. This then significantly reduces labour costs and delays in shipping.

Using a Transportation Management System you can easily understand operational costs to every tiny detail. Today’s advanced TMS’ uses the power of Artificial Intelligence and data driven insights to narrow down your search for problem areas in your transport strategy.

This helps you focus on the most essential areas so that you can improve faster and earn more right away. Not only that, a good TMS also helps you plan carefully for better Delivery Lead times.

Try investing in a system that lessens administration, eliminates POD requirements, and makes sure your stakeholders are paid promptly.

Conclusion

If you think about it, a good logistics plan must be almost an extension of your own experiences. Your services should mirror your own expectations.

Any extensive plan should include kilo or tonnage weights, and per pallet rates. This means that your quote can be tailored to exactly what your business requires. You can then repeat this method, with until you find one that seems like the right fit for you.

Check this blog: Some Tactics To Cut Down Freight Cost