How to reduce freight costs is a crucial question for any business that relies on shipping products to customers or moving raw materials to their facilities. According to the United States Department of Transportation (DOT), transportation costs can account for nearly 40% of a company’s total logistics costs.
This means that reducing freight costs can significantly impact a company’s bottom line. Here are 12 strategies businesses can use to minimize freight costs and improve profitability.
1. Contract Steady Lane Volumes
When you have a consistent volume of shipments going to the same destinations, carriers are more likely to offer you lower rates. To negotiate a contract, identify the lanes where you have the most volume and contact carriers to discuss long-term commitments. Once you have a contract, maintain steady volumes by communicating with your customers and adjusting production as necessary.
Benefits of steady lane volumes include better rates and more reliable service from carriers. By providing new carriers with consistent business, you become a preferred customer and are more likely to receive flexible rates and service. Steady lane volumes can help improve the overall efficiency of your transportation strategy, as carriers can plan ahead and optimize their routes accordingly.
While negotiating a contract, research and identify carriers specializing in the lanes you need. Contact multiple carriers to discuss pricing and service options, and be prepared to negotiate terms and rates to get the best deal.
2. Ship on Off-Peak Days
Off-peak shipping typically refers to days and times when demand for shipping is lower, such as weekends or early mornings. By shipping during these times, you may be able to take advantage of lower rates and better service options.
To determine off-peak days, analyze your shipping data and identify patterns in your shipment volumes. Once you have identified your peak and off-peak periods, you can work with carriers to schedule shipments during off-peak times. This can help you save money on freight costs while still maintaining high-quality shipping services.
You can also research your preferred transportation industry and supply chain to understand which days are typically slower. Also, consider working with a transportation management system (TMS) that can help you identify the best shipping days for your business.
3. Consolidate Smaller Shipments
One of the most effective ways to reduce freight costs is by consolidating smaller shipments. This strategy involves combining multiple shipments from different shippers into a single, larger shipment, which can significantly reduce the overall cost of shipping. Different types of consolidation programs are available, including pool distribution and freight consolidation.
Pool distribution involves multiple shippers combining their shipments to a common destination, which can help reduce international transportation costs and improve delivery times. Freight consolidation, on the other hand, involves a third-party provider consolidating shipments from multiple shippers into a single, larger shipment, which can offer greater cost savings due to economies of scale.
Research third-party logistics providers and their services to find the right consolidation program for your business. Look for providers with experience in consolidation programs and a track record of delivering quality services. Once you have identified a provider, you can discuss your needs and requirements.
4. Develop Relationships Instead of Being a Serial Rate Shopper
Rate shopping is a common practice in the shipping industry, where companies continuously seek lower rates by switching carriers frequently. While it may seem like a quick fix to save costs, it can cause a lack of trust and loyalty from carriers, which may lead to higher rates and lower service levels.
To avoid this, build strong relationships with carriers. This involves being transparent about your shipping needs, providing consistent volumes, paying invoices on time, and being open to negotiating fair rates. Developing these relationships allows you to establish trust and loyalty, improving rates and service levels over time.
To build these relationships, start by communicating regularly with your carriers and seeking their input on improving your shipping processes. Provide feedback and acknowledge when they go above and beyond. When negotiating rates, focus on building a long-term partnership rather than just seeking the lowest rate.
5. Increase Shipping Lead Times
A great way to reduce freight costs is to increase shipping lead times. Providing carriers with more notice can help them plan their resources better, resulting in lower rates. Also, longer lead times can help avoid rush charges, which are standard for last-minute shipments.
To determine an appropriate lead time, consider transit time, production time, and any potential delays. Communicate these lead times to your customers and ensure they understand the importance of adhering to them. If you need to adjust lead times, do so as soon as possible to avoid disruptions.
To maintain lead times, establish clear production schedules and communicate with your suppliers to avoid delays. Consider implementing production forecasts to help you plan ahead and identify potential bottlenecks.
6. Reduce Dunnage
Dunnage refers to the materials used to secure and protect products during transportation. While dunnage is necessary to ensure that products arrive at their destination undamaged, it can also add to the weight and volume of a shipment, resulting in higher freight costs.
To minimize dunnage, start by analyzing your current packaging practices and identifying areas for improvement. Consider using lighter materials or more efficient packaging techniques that provide adequate protection while reducing overall weight and space requirements.
For example, you can use inflatable airbags or foam inserts instead of heavier materials like wood or metal. You can also optimize the placement of products within shipping containers to reduce the need for excess dunnage.
Additionally, consider collaborating with your carriers to identify ways to optimize your packaging. They may have suggestions on how to improve your packaging to reduce damage and improve efficiency.
7. Faster Loading
Fast loading is an essential aspect of reducing freight costs, as it minimizes the amount of time that trucks spend at loading docks. The less time a truck spends at a loading dock, the less money that needs to be spent on labor costs for the driver, fuel costs, and truck maintenance expenses.
One way to ensure fast loading is to use technology such as automated loading systems or barcoding. Automated loading systems can expedite the loading process by using machinery to transport packages and goods onto the truck, saving time and reducing the risk of accidents or injuries.
Similarly, barcoding systems can help ensure that packages are loaded onto the correct truck, reducing the time spent manually checking and double-checking loads.
In addition to using technology, ensure that your loading docks are well-organized and that all necessary equipment is easily accessible. This can help speed up the loading process and reduce the chances of delays or errors.
8. Offer Later Pick-Up Times
Offering later pick-up times can help optimize carrier resources and minimize costs. By providing more flexibility, carriers can plan their routes more effectively, lowering rates. Later pick-up times can also help avoid rush charges and improve customer satisfaction.
To negotiate later pick-up times, discuss your needs with your carriers and explore potential options. For example, carriers may be more willing to pick up shipments later in the day if it means they can optimize their routes or avoid traffic congestion.
Consider providing additional incentives such as increased volumes or longer-term commitments to offset potential costs. To schedule later pick-up times, plan your shipments and communicate with your carriers to ensure they have adequate time to prepare. Be mindful of cutoff times and adjust your schedule to avoid disruptions.
9. Minimize Pallet Spaces Needed When Shipping LTL
When shipping goods in less-than-truckload (LTL) shipments, keep the number of pallet spaces needed to a minimum. This can help lower freight costs since you only pay for the space you use.
One way to reduce pallet space is to use more compact packaging or consolidate shipments. Another option is to work with carriers to optimize how they load and arrange your shipments in their trailers.
To make LTL shipments more efficient, you can try several strategies, such as communicating clearly with carriers, being open to flexible pick-up and delivery times, and optimizing the placement of your products within pallets to minimize unused space.
10. Ship More with Less Frequency
You can also consider shipping more products with less frequency to reduce freight costs. You can negotiate better rates with carriers and take advantage of economies of scale when you ship larger quantities. This can help you save on both transportation and drayage costs. By shipping larger quantities, you can reduce handling costs and decrease the risk of damage or loss during transportation.
If you are shipping through Amazon FBA, the larger the shipment, the lower the per-unit shipping cost. This can help you save money and increase profitability. You can determine the optimal shipping frequency by evaluating your production and inventory processes, considering your customers’ needs, and any potential storage limitations.
To make your shipping process more efficient, consider using stackable containers or pallets, bulk packaging, and optimizing your loading process to maximize space utilization. An automated shipment scheduling and tracking system can also help you save time and reduce errors.
11. Optimize Your Packaging
Properly packaging your products can impact your freight costs. Optimizing your packaging can help reduce the overall weight and size of your shipments, allowing you to take advantage of lower rates.
Consider the size and weight of your products when selecting packaging materials. Using lightweight materials and packaging products in smaller, more compact dimensions can help reduce the total weight and volume of your shipments.
Also, ensure that your packaging is sturdy and can withstand the rigors of transportation. Fragile or sensitive products may require special packaging to prevent damage during shipping. Also, use standard packaging sizes whenever possible to reduce handling costs and improve space utilization during transportation.
12. Explore Multi-Modal Shipping Options
Multi-modal shipping involves using multiple modes of transportation, such as rail, truck, and ocean, to move goods from one location to another. This approach can offer several benefits, including reduced costs, improved transit times, and increased flexibility.
One of the key advantages of multi-modal shipping is the ability to take advantage of each mode of transportation’s strengths. For example, ocean freight is more cost-effective for long-distance shipments, while trucking is better for short-haul or time-sensitive shipments. You can optimize your transportation strategy and reduce your overall freight costs by using a combination of transportation modes.
To incorporate multi-modal shipping into your transportation strategy, evaluate your shipping needs and consider the available transportation options. You should also work with a logistics provider or freight forwarder with multi-modal shipping experience to help you navigate the complexities of this approach.
Outsource Your Shipping to a Professional
Outsourcing your shipping needs to a professional can save you time, money, and hassle. Asiana USA is a trusted partner for businesses looking to streamline their logistics operations and reduce freight costs.
With our expertise and network of carriers, we can help you find the most efficient and cost-effective shipping solutions for your business. Don’t let shipping costs eat into your profits—call us today at (855) 500-1808 to learn how to reduce freight costs and improve your bottom line.