The daily operations that are involved in the management of freight can be quite costly. There are plenty of strategies that businesses can make use of that will allow them to reduce their freight costs.
Freight costs are made up of various components such as fuel prices, management of transport and budget planning. There might be an assumption that all these costs are fixed, and there is not much that your business can do to change them, but this could not be further from the truth. There are various strategies that companies could use to eliminate any unnecessary spending, which allows them to save costs effectively. Most of these strategies require the business to look at their freight practices and improve them. Below are some methods that your business can use to reduce freight costs.
1. Consolidate freight
Consolidation is not something that is new as it has been used for over 50 years, and it is known to be effective. Consolidating freight means that smaller shipments can be combined or consolidated to become larger shipments. This method has been proven to reduce freight costs by up to 25% compared to unconsolidated loads. Freight can be combined with that from other suppliers, or you can connect your shipments with other companies who are sending off their shipments to the same retailer as you. You could combine less container/truckload shipments and combine them in order to have larger full container/truckload shipments.
One of the other benefits of consolidating freight is that it reduces the time spent handling shipments, reducing labour costs. Consolidation translates to less time being spent on the road, which further reduces the fuel burned, assisting companies trying to be environmentally conscious.
2. Evaluate modes of transportation
There are mainly three methods that are used to ship goods which are ground, ocean and air. All these methods have their pricing and fees. Ocean shipping is usually the cheapest method that you can use, and it is significantly cheaper than shipping by air. The shipping mode that you will choose largely depends on the freight specifications, such as the package, weight, and shipment destination. It is recommended to mix all three of these transportation modes for shipments to improve delivery times while reducing costs.
3. Be mindful of packaging
One of the simplest methods you could use to reduce your costs is being smart about the packaging you use. The packaging you use plays a huge role in the amount of space that your freight will take. Therefore it is crucial that you eliminate any dead weight. You should ensure that you can minimise the space that a product uses. The best way you can achieve this is by either reducing the size of the package that products are used in or determining whether items used for packages such as airbags, straps, and braces are necessary. It would be best if you communicate with your carrier regarding the packaging required for your product to find the best way to free up more space.
4. Ship less regularly
One of the easiest ways that you could use is encouraging your customers to buy products in bulk or place larger orders. Whenever customers purchase in bulk, they can get the products at a lower price as the carriers will be able to load the freight more efficiently than when there are multiple smaller consignments. There are more significant costs involved for the customer when they order in bulk, such as inventory carrying costs. To encourage them to do this, you should offer them some benefits for doing this, such as reducing the price. Offering them incentives will ensure that they also save some costs and that their business remains profitable.
5. Ship off-peak
The day and time you choose to ship your products will affect the amount you are charged. Therefore, to select the most cost-effective method, you should choose off-peak days such as Friday or Monday. If your business does not supply perishable goods, then you do not need to use on-peak shipping as you will have a larger window. Choosing to ship on off-peak can contribute to savings of 10% compared to when you ship on peak days. You can also choose to make use of backhaul shipping which refers to when carriers are trying to fill up their trucks before they head back to their base. You can contact carriers in destination centres closer to you to determine whether they have backhaul capacity.
6. Become a regular
Building a long-term relationship with your carrier is one of the most effective methods that you could use to reduce your costs. When it comes to backhauls or consolidation, they would likely consider you first as they would aim to provide you with the best possible service for your loyalty. One way to form a long-term relationship with your carrier is by signing a longer-term contract, which also allows you to lock in a better rate with them. In the event that their capacity tightens, they would also focus more on your business as you would have been with them for longer.
Shipping your products does not have to cost a lot. You should always look out for methods to reduce your freight costs to make your business profitable. By following the strategies offered in this article, you can guarantee cost savings and greater profitability.
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