Reducing Freight Costs
Transportation prices have risen over the past year, but shippers can cut those costs through smart planning. Tim Benedict, senior director of transportation at APL Logistics, offers the following tips for reducing freight costs.
1. Don't wing it. Electing to use international air instead of expedited ocean for the majority of hot shipments could leave a boatload of savings on the table. Consider time-definite ocean shipping—it typically costs 75 percent less than air, and is often just as reliable.
2. Ship air-sea or sea-air. Even when circumstances require the use of international air, don't rule out ocean shipping. Depending on when your goods are due to be delivered, it may still be possible to fly them a portion of the journey, then load them onto an ocean vessel for the rest. The result is fewer miles for your products to travel, and lower freight bills.
3. Let transportation drive your warehouse selection. Choose your distribution centers (DCs) for their transportation efficiency rather than their attractive leasing rates or tax incentives. If a low-cost location adds too many miles or hand-offs to your supply chain, higher shipping bills will offset any location savings.
4. Take advantage of DC bypass. If your company sources globally, but only operates DCs hundreds of miles inland, consider a deconsolidation center near your ports of entry to direct-ship products to nearby customers. This will reduce redundant transportation expenses.
5. Seek savings a la mode shift. Typically, companies that use LTL instead of truckload will pay 10 to 30 percent more. It is beneficial to negotiate with customers who consistently require multiple small deliveries to see if they will switch to less frequent delivery schedules.
6. Fewer trailers equal more savings. Trailer cube utilization tools are only as good as the dimensional data being entered. Double-check the accuracy of your measurements by gathering highly specific information about the contents of the latest outgoing truckloads. Use the refreshed data to run improved trailer cube utilizations.
7. Go back to class. Many companies overlook that they might be shipping their cargo via outdated, and more costly, classifications. If your business has experienced a substantial change in products or packaging, find out if you can qualify for a less expensive product class.
8. Take control of inbound transportation. A top priority for suppliers is providing products—not negotiating the best shipping rates or encouraging collaboration. When possible, take responsibility for optimizing your inbound deliveries yourself, or find an engineering-savvy third-party logistics provider that can do it for you. Make sure you have the final say about which carriers handle your company's products.
9. Centralize transportation procurement. A singular, focused transportation procurement effort paves the way for analytical, strategic, and relational advantages that a more decentralized approach can't touch. Advantages include better optimized transportation, an improved ability to track costs, and an enhanced ability to negotiate more favorable volume discounts.
10. Analyze. Asking logistics personnel to participate in Lean transportation projects or analyze shipping patterns may feel like a luxury your company can't afford. But it usually winds up paying for itself in the form of improved insights that lead to greater potential economies. Some of the biggest transportation savings can come from logistics teams doing their homework.