Ways to reduce freight costs are often sought after and business executives of a manufacturing, distribution, or any company that ships freight know this very well. Finding a way to reduce freight costs involves more than the hard cost of shipping the freight, or the freight rate. It means considering both hard and soft cost savings.
Here are five factors to ponder on when processing freight shipments.
Not all discounts are the same; Lower Base rate vs. Carrier Discounts
What many do when attempting to reduce freight costs is look at the quote or freight rate given by a carrier during the processing of a freight shipment. All carrier discounts do not have the same value. For example, a base rate for Carrier A could be as much as seven percent higher than for Carrier B. Depending on your shipping patterns, a 45-percent discount from the carrier with the lower base rate can be more beneficial than a 50-percent discount from the other carrier. It’s crucial to always sift below the numbers.
Accessorials Know How
After shipment, a lot of the unforeseen extra costs detected during freight auditing – both manual and automatic through freight technology – come from not understanding and applying accessorials. Knowing how to identify them and understanding when they may occur helps you know more about your own shipping activity and lanes. This also makes it easy to lessen and eliminate these costs adding up in the holy grail of how to reduce freight costs. Some common accessorials to look out for include:
- Residential adjustments
- Weight adjustments
- And Additional handling accessorials.
Being in tune with the possibility of accessorials allows you to better budget your total freight costs. Thorough an analysis of the company’s shipping history and internal characters or with the help of a qualified third party, you are able to note if your accessorials are discounted or waived entirely.
Carriers have different and vastly varying fuel surcharges. With some simple math by using your freight data, level the playing field by proposing a single fuel surcharge that you develop to create an apples-to-apples comparison of these charges. By doing so, you eliminate one variable you have to analyze when comparing carrier costs and seeking how to reduce freight costs.
Mode and Route Optimization
Knowing the right mode and route is one sure way of achieving both soft and hard costs savings. Often, if you can optimize and break out a truckload to LTL or to drop-ship, you can maximize savings by decreasing your overall risk, but also making your freight more attractive to LTL carriers who may give you a better rate as they are looking to maximize profits and capacity themselves. Conversely, if you have specialized or unique freight that weighs below a TL freight shipment, but has say many pallets, a volume or spot quote may be the way to go. The bottom line is to consider what will save you money long-term.
Address Book and Data Entry
Common errors majorly challenge attempting to reduce freight costs. The hours wasted trying to fix errors and reversing incorrect data entries for example cost companies a lot of man time and money. The solution to this can simply be integrating freight technology into the ERP or contact management system to eliminate the need for manual data entry.
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