Optimizing Freight Spend
Managing your transportation budget is the key to shedding excess cost. Working in today's competitive market provides many options to help slim down freight spend. As freight transportation continues to change, service providers are using technology to improve and meet the dynamics of the supply chain. Tim Quinn, director of procurement for Freightquote, offers the following advice to help reduce shipping costs.
1. Find the right mode. A blend of less-than-truckload (LTL), truckload, and intermodal ensures best price and service. Truckload and LTL are interchangeable depending on load size, and intermodal serves as a truckload alternative. When capacity is good, consider partial truckload. When working with tighter capacity, monitor transit time and cost to determine if partial is still a viable option.
2. Tender freight to the proper carrier. A regional LTL carrier's transit time usually outperforms a national carrier who moves freight through a hub-and-spoke network. That dynamic may create advantages. Due to heavy shipment volumes and lane density, regional carriers sometimes haul empty trailers. To avoid empty backhauls, a carrier may give a discount to a customer with regular freight in these lanes.
3. Optimize by transit days. Many shippers use expedited transportation to make up for inefficiencies and delays. Expedited shipping costs drive up freight spend quickly. Try segmenting customers by service level. Some customers are okay with a longer delivery time when they see a discount in price.
4. Utilize asset-light carriers. Asset-light carriers offer transit at significant discounts by tendering freight to a network of carriers. Density is critical. The more freight you can commit, the better your service will be. An asset-light carrier may offer price incentives or service upgrades in exchange for committed freight levels.
5. Invest in proper packaging. Preparing freight in the right packaging curtails damage claims and makes shipments more suitable for transit. To help keep your items from getting lost, consolidate as much as possible.
6. Review pricing and contracts. Opportunities for savings in your current pricing and contracts are waiting to be discovered. Have the products you ship changed since the last pricing review? Have you discontinued any products? Has packaging changed? These are all key considerations when you review pricing.
7. Avoid accessorial charges. Carriers price accessorials, such as lift gate or non-commercial delivery, at a premium. Remove the charges by passing them on to the consignee or consider the use of a courier or cartage company for final delivery.
8. Prepare and research for savings. Planning can pay dividends. Transportation is often an afterthought to production, and this forces the use of more costly modes such as expedited or air freight. Planning provides more affordable options while still meeting deadlines. It also helps pinpoint the shipping window that creates the most profit.
9. Consider a third-partylogistics (3PL) provider. Bringing a 3PL on board may benefit companies of all sizes. Working with a shipper's carrier network, 3PLs can provide supplemental trucking companies that help optimize transportation by mode, region, and lane.
10. Work with your freight provider. Information your freight provider gives you is revealing. It shows cost, top lanes, and cost by hundredweight. This information is useful at contract negotiation time. When proper strategies are in place, you'll see significant improvement in your bottom line.