One of the most common challenges companies are confronted with is how they can reduce their freight costs.
The first thing people generally do is try to negotiate a lower freight rate; specifically, the dollar per ton or the dollar per pellet.
For example, let’s say you’re paying $25 per pallet for delivery. Most business would try to negotiate $24 or $23 per pallet which really is not the best approach because freight transportation is a very low margin business. If you just try to negotiate a better rate, you’re most likely not going to achieve the best possible cost savings.
What you should really be trying to do is come up with ways in reducing the cost for your freight company to ship your products so they can lower their price to you.
The following are three starter tips on how you can reduce your freight costs.
1. Understanding your Freight Profile
Are you paying the right rate structure? By that I mean are you paying a ton rate, pallet rate or carton rate and is that appropriate for your freight profile?
For example, if you’re paying an hourly rate for deliveries, is that necessary going to create the right behavior with transport companies to get your delivers done efficiently. Think about if your have the right freight structure and determine if that is appropriate for your freight profile.
2. Speed of Deliveries
Is the priority you’re paying for freight appropriate? Are you using excessive amounts of air freight or express freight when generally round shipments will do? Go back through your invoice history and determine the different priorities your paying for and make sure the freight your paying for is truly a priority. Very often the people booking the freight often use a higher priority then really needed.
3. Maximizing Carrier Capacity
Think about how you are presenting your freight to the freight company. Is it easy for them to handle or load your freight into their trucks?
For example, if you ship fragile products, are palletized products so fragile that they can’t put other pallets on top of it? If this is true, then it’s likely you’re going to be paying for two pallet spaces in their truck. In other words, your paying for the volume you are occupying. Likewise, if your pallets are stacked where they are not even on top, again you’re going to be paying for two pallet spaces. Think about how you are presenting your freight to your transport company and look for ways to make it as easy as possible for them to maximize the capacity of their vehicles.
In summary, lowering your freight cost is not often best achieved by negotiating a better rate with a Freight Forwarding company. Make sure you are paying for the right rate structure; insure your freight priority is appropriate and think about how you can present your freight to maximize the volume for your freight carriers’ vehicles.