One of the best ways to provide an excellent experience for your customers is to offer convenient and affordable shipping. Freight costs are one of, if not the largest logistics costs in the supply chain. In 2017, companies in the United States spent $1.49 trillion in shipping costs. With continued challenges faced by the transportation industry, businesses might assume that the only way to reduce freight spend is by negotiating with their carriers. However, there are several other ways to reduce freight costs that can have a positive impact on the bottom line.
A Canadian Shipper Report estimated that transportation spend is between 10-11% for business with less than $250 million in sales. Reducing that percentage can result in positive results for a company. To boost your bottom line, we listed nine valuable tips for lowering freight shipping costs for your business.
Choose the Best Mode of Transportation
There are three main ways to ship your freight; either by the ocean, air or ground. Depending on the type of goods you are shipping, and where most of your orders get shipped, it is important to research which method of transportation will be most cost-effective. Knowing your transportation costs will help you understand the best choice based on budget and deadline. For international freight shipping, for example, ocean shipping is cheaper than air but will take longer to arrive at the destination. A mix of the three types of transportation can translate into savings.
Work with Volume
If much of your freight is shipped in the same lane, work with your carrier to get a volume discount. If you can consolidate or combine your freight, you might be able to reduce the number of lanes that are run. Small shipments that can be combined into a larger one for less frequent shipping is easier for the carrier to work with. The carrier will be more efficient with fewer lanes and more freight. This results in further savings for you, estimated to be between 2-12% as compared to traditional lane pricing.
Dimensional Weight
Dimensional weight (DIM) can be a shipping pitfall. If you have not factored in the DIM weight fees, you are probably paying more for your shipping. Carriers use both a DIM weight and actual weight calculation, with shippers paying whichever is higher. This greatly affects large, lightweight packages so overall size and weight must be considered to keep shipping rates lower.
Be Aware of Surcharges
Chances are good that you have been charged accessorial fees and gotten invoices that were higher than expected. Some common accessorials include lift-gate, oversize, limited access, and fuel surcharges. A simple review of your invoices will indicate the ones you pay most often so you can work on decreasing them.
Optimize Your Shipping Strategy
E-commerce retailers might feel pressure to be able to offer free shipping on orders. Instead, consider some options that will give you a balance in your shipping strategy such as:
- Free Shipping on Domestic Orders
- Free Shipping Over a Certain Among
- Free Shipping for Return Customers
- Free Shipping for a Minimum Number of Items
Offering affordable (but not free on every order) shipping keeps your business competitive with others.
Conduct an Audit
Freight invoices include errors from time to time. You might not have the time to go over every single invoice, but you can hire an auditing service that will do it for you and take a percentage of the savings. This is one of the simplest ways to find savings and be able to recoup money.
Ship Off-Peak
Carriers will charge less if you ship on an off-peak day. When scheduling shipments, aim for an off-peak day like a Friday or Monday. Depending on the type of items you are shipping, and if the shipment is not time-sensitive, you can schedule to save money. This can save you as much as 10% as compared to peak shipping days.
Automate
Use technology to your advantage to automate manual processes. This will reduce paperwork, prevent delays, and save you money. A TMS (Transportation Management System) is a logistics software that automates the transportation system of a company. A worthy investment, this software helps to move freight from one location to another in an organized and economical manner.
Be a Shipper of Choice
The more attractive your freight is to transport, the more likely a carrier is to work with you. Create a driver-friendly environment that gives drivers somewhere to wait, have something to eat, and use the facilities. It is also important not to make the drivers wait any longer than necessary. Carriers usually build a two-hour window to load, but if they know that their cargo will be loaded faster, it can affect the price. Shippers who have consistent load times get favorable load times built into the rate. The more loyal you are to your carrier, the better they will be to you.
There are many ways to reduce freight costs. Whether you ship internationally, domestically, or both, it is your responsibility to research the best options for your company. Utilizing a third-party logistics company (3PL), such as Red Arrow Logistics can help you figure out which options will work best for you.
Your Trusted Partner
At Red Arrow Logistics, we provide expertise and white glove customer service with fast-growing, complex, and high-value supply chains. As the next-generation model of logistics companies, we offer tailored transportation and logistics solutions — from single shipments to complex over-dimensional and international orders.
Red Arrow offers the scale and scope of services including air, ocean, and ground transportation to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email us at [email protected] or give us a call at 425-747-7914.
