Freight costs can be a significant burden, impacting your overall profitability. Have you considered the best ways to reduce these expenses?
Many face the same challenge, struggling to keep costs under control while maintaining service quality.
In the video below, we explore practical strategies and insights to help you tackle this issue head-on.
Let’s dive into strategies for reducing freight costs—a frequent concern in logistics. Recently, during a webinar on logistics cost savings, freight costs were a major topic of discussion. Despite covering this issue before, it’s important to revisit seven key strategies that can help you reduce your freight expenses.
Avoiding Common Misconceptions About Rate Cuts
A common misconception is that the best way to reduce freight costs is by pressuring your carrier for a rate cut. However, because transport operations typically run on thin margins, this approach is rarely effective. Instead, it’s more sustainable to change the task—how you present your freight to the carrier and what you ask them to do.
Leveraging Volume for Better Rates
One effective strategy is volume leveraging. Companies often use different carriers for various branches, leading to inconsistent rates. By consolidating freight needs and working with fewer carriers, businesses can secure better rates due to increased volume. For example, if multiple branches of a company use the same carrier but at different rates, pooling their volume can result in significant discounts.
Matching Transport Resources to the Task
It’s essential to ensure that the transport resources you’re using are appropriate for your needs. This includes selecting vehicles of the right size and considering necessary attachments like cranes or tail lifts. When renewing contracts, assess whether the resources provided by the carrier match your requirements, as this will impact the rates you receive.
Choosing the Right Rate Structure
Understanding and selecting the right rate structure is critical for managing costs. Different rate types—such as per ton, pallet, full truckload (FTL), or less than truckload (LTL)—can greatly affect your expenses. It’s crucial to align the rate structure with your shipping patterns. For instance, if most of your shipments are single pallets, focus on securing a competitive single pallet rate rather than a full truckload rate.
Ensuring Effective Service Agreements
Your service agreement with the freight carrier is another area to review. Make sure you understand the services being provided, including any additional costs like fuel levies. Clearly defined performance metrics can help ensure that you get the value you’re paying for.
Choosing the Right Service Type
Finally, consider the type of service you’re buying. Whether it’s same-day, next-day, or a longer delivery time, make sure it aligns with your customers’ expectations. Matching the service type to customer needs can avoid unnecessary costs and improve satisfaction.
Related articles on this topic have appeared throughout our website, check them out:
- 10 Freight Management Mistakes and How to Avoid Them
- Freight Benchmarking: What Is It? Why Do It?
- Why Containerised Freight Shipping is Daunting for SMEs
- 12 Smart Ways to Reduce Your Freight Costs
- There’s a Less Frustrating Way to Negotiate Freight Contracts
