Optimizing Your Freight Spend

Jun

30

Optimizing Your Freight Spend

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“How do I optimize my freight budget?”  This is one of the first questions every business owner asks a logistics professional, and the first step is educating yourself about your specific needs in the current freight environment. All too often, businesses treat their transportation budgets as a chore or an afterthought, but they can be ripe with opportunities to save money and become more competitive.

When analyzing your freight budget, try to see it with new eyes, and be willing to rethink any area that is no longer giving you the efficiency you need. Start by asking what value you want your freight spend to deliver. Are you looking for delivery speeds that outpace the competition? Is final mile and customer experience important? Are you searching for ways to reduce your company’s carbon footprint? Can you plan your shipments months in advance or do you need to be able to respond to quickly changing conditions? The answers to each of these questions will help determine the best ways to allocate your budget, but be aware that they may not be the same answers as they were the last time you planned your freight spend.  Your answers are highly interdependent on market conditions.

Your freight budget needs to be re-examined and updated frequently, to reflect both your business’s needs and the changing logistics climate. For example, trucking, intermodal, and ocean carriers are currently locked in a tight struggle to provide capacity at profitable and competitive rates, meaning it behooves shippers to sign short contracts that allow them to take advantage of the best deal in the moment. Keeping an eye on industrywide changes--whether it’s the coming trucking capacity shortage predicted with the ELD mandate, or the savings offered by megacarriers moving through the recently-improved Panama Canal—can help you make the most of innovations, and not be blindsided by rising costs.

In choosing which carriers to work with, remember that data and accountability go hand-in-hand, so seek out carriers that are investing in tracking technologies that allow you to monitor your deliveries. By the same token, make sure your own accounting and freight management systems are fully integrated, allowing you to sort through all your data to find what is and isn’t working. Optimizing efficiency at your own facilities can be a big money saver too, ensuring that neither your goods nor drivers are sitting idly around. 

Packaging is another area where it pays to stay on top of the trends. New packaging techniques and materials make it possible to cut down on cargo space and/or weight, which offers huge savings potential. Minimized packaging may increase the risk of product damage, but weighing those risks should be a part of your budgeting process. When it comes to cargo loss, damaged, or stolen shipments, examine your contracts with carriers to make sure you have right level of liability protection relative to the value of your goods.  There are lots of surprises when a claim comes around about what is and is not covered.

For most businesses, the smartest way to get the most out of your freight budget is by developing dynamic, flexible strategies with multiple modes of transport. A diverse freight spend incorporating truckload, less than truckload, and intermodal will allow you to navigate both shifts in your volume, and industry wide capacity crunches. Many carriers provide discounts to shippers who can guarantee consistent shipping patterns, but it’s crucial to keep an eye on spot rates and have an expedited shipping plan in place for when things (inevitably) go wrong. When possible, choose regional carriers or brokers who can offer both faster delivery times and more personal attention to your business.

The savings offered by an optimized freight spend are only as great as your company’s willingness to take advantage of them. Fortunately, we live in a time where technology gives shippers access to huge amounts of data from carriers, logistics professionals, and customers. So make sure to ask questions of all parties, and be willing to dive into the details in order to reap the rewards.


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CEO of Red Arrow

S. Kling, President, UAM

“Red Arrow Logistics is always very helpful, accommodating and extremely responsive with each project we bring to their team.”

S. Kling, President, UAM

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Optimizing Your Freight Spend

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