April 2011 | How-To | Ten Tips

Reducing Ocean Freight Costs

Tags: Ocean

The best way to maximize ocean freight purchasing efficiencies is effective planning. Get a clear understanding of your shipments’ scope, frequency, and quantity, then cement relationships with carriers to better plan your containers, advises Mark Malambri, senior vice president, global ocean products for Houston-based CEVA Logistics. Malambri offers the following tips to help shippers reduce costs and increase efficiencies when purchasing ocean freight services.

1. Minimize less-than-containerload (LCL) and 20-foot container use. Costs decrease drastically when you use larger equipment.

2. Consolidate LCL freight to full 40-foot and high-cube containers. When multiple shippers send freight to the same destination, combining the shipments can create savings.

3. Bypass U.S. distribution centers (DCs) and ship directly to stores. When buying from several vendors in Asia, for example, don’t ship the containers to a U.S. distribution center to be stored as inventory until orders are picked and packed. Avoid warehousing and DC costs by consolidating shipments in Asia with other shippers and delivering directly to retail outlets.

4. Transload operations to inland U.S. destinations. Once shipments arrive in the United States, send them to a transload facility to be repacked and loaded on trucks for delivery to inland destinations. This helps reduce costs and expedite shipments.

5. Forecast to the volumes by lane for your carrier base. Forecasting starts at a high level, usually annually, but should be fine-tuned to a monthly or weekly forecast so carriers can update their allocation models. Providing lane and equipment information helps carriers align on a finite level and builds your credibility and reliability.

6. Make round-trip opportunities available. Balance is key to maximizing efficiency. Providing inbound and outbound flows from a location allows carriers to make optimal use of equipment. If a carrier has to reposition empty equipment back to its destination, it could lose revenue. Providing round-trip opportunities is a strategic way to increase efficiency.

7. Build strong, long-term relationships with your carrier base. To strengthen your relationships, develop annual commitments, provide forecasting accuracy, and offer volume guarantees and import/export opportunities.

8. Review your carriers. Maintaining good communication pays off. Hold quarterly or semi-annual review meetings with your carriers to discuss performance and market trends.

9. Know the market. Assess current market prices, fuel costs, capacity, and demand. Your company will achieve best pricing by setting reasonable targets. Plenty of data is available to help build your knowledge of how the market is moving.

10. Pay carriers on time according to agreed terms. Fulfilling your carrier commitments influences factors such as pricing and service.