The Pragmatist’s Guide: 10 Simple Strategies to Reduce Freight Costs Now
Freight transportation is your biggest logistics expense, so it’s likely that you’re under constant pressure to drive down these costs. Here are 10 ideas to consider as we head into 2017. Some of these strategies may encounter resistance from the "not the way we do it here" crowd. But let’s face it, any meaningful cost reduction initiatives will require change. Savings estimates are not cumulative.
- Contract steady lane volume. If your carrier knows he is going to work with you every day, and is going to get a regular flow of freight in the same lane, he can market those backhauls and build out his network. As a result, you’ll pay less because the carrier is more efficient. POTENTIAL SAVINGS: 2%—12% versus traditional lane pricing.
- Ship on off-peak days. Shipping one day later or earlier can yield measurable savings. Friday is typically an off-peak day for shipping consumer goods because most retailers want product to the store by Thursday so it can be ready for sale at the weekend. POTENTIAL SAVINGS: 10% versus peak ship days.
- Invest in relationships, not RFPs. Don’t do the yearly RFP dance in order to show management you’re serious about reducing freight costs. Instead, forge strategic, longer-term carrier relationships. This allows carriers to mine for other customers in the area to create a more efficient network with minimal deadhead miles. A carrier that is maximizing assets is more profitable and will give you better rates. POTENTIAL SAVINGS: 3%—5% per year (these savings can easily double when capacity tightens).
- Reduce dunnage. A lot of products require air bags, strapping, blocking and bracing to prevent them knocking together during a trip across the ocean or on a long-distance truck ride. But sometimes shippers go overboard in trying to prevent damage. Carriers can help you skinny down on dunnage to reduce costs—without increasing damage. POTENTIAL SAVINGS: 1%—3% per load.
- Use a load board. If you have a one-off shipment and put it on a load board, you’ll probably catch a low rate, especially if the carrier can handle it as a backhaul. Carriers love backhauls because they’re making money when they would otherwise incur costs for empty miles. For a backhaul, many are willing to offer a rate that simply covers fuel costs, plus a little bit extra. POTENTIAL SAVINGS: 20%—40%.
- Offer night pick-ups. This may give carriers an opportunity to make your load into a backhaul by offering them pick-up times between 6 p.m. and midnight. For example, a carrier might turn down a load that’s requested for a mid-afternoon pick-up because it conflicts with another run. But a later pick-up allows him to make his delivery and fill his backhaul with your freight. POTENTIAL SAVINGS: 15%—20% off standard rates.
- Ship more product, less often. Lobby your customers to take larger orders. It’s a lot cheaper to ship six pallets at once than to send two pallets every two days. But retailers tend to look for smaller shipments more often, so you need to create incentives for them to take more inventory than they think they need. POTENTIAL SAVINGS: up to 50% versus the smallest LTL loads, when minimum charges may kick in.
- Look for carriers based near your ship-to points. That way your load is more likely to become a backhaul for them and you’ll get a lower rate. It’s surprising how many shippers don’t investigate carrier terminals near their frequent ship-to locations. POTENTIAL SAVINGS: 15%—40% versus a non-backhaul rate for that lane.
- Load smarter. Maximizing the cube of a product, stacking the product so you take fewer pallet spots, even boxing it differently, all help make it easier to get more cargo packed onto a pallet and into a trailer. Your freight’s footprint will impact the cost. Ask your carrier for a recommendation on building more efficient pallets. POTENTIAL SAVINGS: up to $150 per pallet space.
- Outsource your transportation department. For smaller companies especially, freight management is not a core competency. Hiring, training and maintaining a transportation staff, and keeping up with systems requirements, can be expensive and time-consuming. Outsourcing freight management transfers the financial burden of staffing and capital expenditures and also opens the door to innovative solutions that on-the-ball carriers should be suggesting. POTENTIAL SAVINGS: 10%—35% off the current cost to manage.