A familiar problem for those operating within a supply chain is the rising freight costs, which due to recovery in demand after the initial COVID lockdown in early 2020, have skyrocketed. Controlling freight costs is now more critical than ever, especially if a business hopes to operate sustainably and efficiently long into the future.
In this article, we’ll be taking an in-depth look at creative ways of minimising freight costs throughout the supply chain.
Background
In my role as a General Manager for the UK-based fulfilment company PacWolf, one of the most common themes I run into on a daily basis surrounds keeping costs low and efficiency high, within a supply chain.
As a result, I think it’s best to think about the wrong way to operate, particularly when it comes to freight costs, and work backwards.
For example, the first thing people often highlight is the rate itself, i.e. the price per ton, pallet, or whatever is being paid for. Instead, it pays to think more proactively, to try to reduce the cost to the freight company of shipping your products in the first place, which exactly what we’ll talk about below.
11 Ways to Reduce Freight Costs
#1: Identify Freight Payment Structure
Perhaps, you’re paying a ton rate or a rate appropriate to the kind of products that are being shipped. However, it’s essential to review this from time-to-time, because you may find that your payment structure is no longer complicit to efficient behaviour from your freight company.
For example, you may be paying for deliveries per hour. In some instances, this may be right for your business, but consider the rates you’re paying and ask yourself if what you’re paying is appropriate for your freight profile, whether that’s per ton, container or pallet and decide whether negotiation could be in order.
#2: Carrier Capacity Maximisation
Think about how you’re presenting your cargo to the freight company. Are you making it easy for them to manage and load your cargo? If you’re packing fragile products in a way that means other pallets can’t be stowed efficiently, then bear in mind that you’ll be paying for space within the vehicle without utilising it to its fullest potential.
Similarly, if you’re stacking pallets unevenly, it could make it next to impossible to store other pallets on top or alongside them, and then you’ll be paying for two pallets.
This is why it’s vitally important that you’re presenting your cargo, neatly and efficiently. Making it as easy as possible for them to load their vehicles.
#3: Consider Delivery Cost vs Speed
Are you utilising excessive express freights or air freights when standard freight could work just as well? Look back across your invoices and see how this breaks down, and ensure you’re selecting the most appropriate option.
If you’re using a lot of express freight, for example, sit down and work out whether it is necessary for these shipments. If your product is perishable, for example, then you can justify this extra cost, but otherwise, it may be that you’re paying for a service that you don’t really require.
#4: Consolidate Low Priority Deliveries
Depending on the industry that you operate in, this suggestion may not work in every scenario. Still, you could potentially save a tremendous amount of money if you’re able to consolidate all low priority deliveries without impacting the service received by your customers.
#5: Partner with Other Businesses
If entirely possible, it’s a good idea to at least investigate the chances of partnering with local businesses and shippers to consolidate smaller loads with theirs. In fact, before branching out to third-party local companies, it might be worth taking a look closer to home to partner with businesses that are actually sending products to the same customers as you.
#6: Think About Your Distribution Hubs
It’s always a good idea to periodically review everything within a business – more so when it comes to logistical factors.
In this spirit, ask yourself why your distribution hubs are where they are. For example, did you select them simply because they cost less to lease or offered your business temporary tax benefit? If so, you could be falling foul to false economy.
When selecting your next distribution hub, the best thing to do is to think where the location is in relation to your customer base, since these travel reductions could save significant sums.
#7: Look Beyond Local
There are always plenty of carriers from further afield that are able to operate in your area. Look beyond simply local carriers, since this could be an opportunity to save money, which you had previously closed yourself off to.
#8: Make Your Decisions Carefully
In my experience, when businesses are paying too much for logistical services, it’s most often the case that they are working with the wrong service provider.
An excellent logistical operation should be an extension of your business, and they should be actively offering suggestions on how to streamline your operation and make things just that bit more efficient for both of you.
#9: Investigate Off-Peak Options
Some carriers will offer lower rate options for off-peak periods. If it’s possible for your business explore late afternoon, weekend or even overnight deliveries.
#10: Reduce Dunnage
Every piece of wood, matting, cardboard or any other material you use to keep your cargo in place, takes up valuable space and adds weight – increasing your costs to boot! Think carefully about how this could be reduced, while still keeping your product protected.
#11: Undertake an In-Depth Cost Analysis
When working with carriers, the best way forward is to define precisely what you want from them.
For example, when you approach a carrier and say that you require your goods to move from A to B, they will always come back to you with their standard rates.
As I mentioned already, a good logistics business must be almost an extension of your own business; this is why, rather than standard quotes, you need a far more wide-ranging one.
Any extensive quote should include kilo or tonnage weights, and per pallet rates – this means your quote can be tailored to exactly what your business requires. You can then repeat this method, with every carrier until you find one that seems like the right fit for you.
Jodi Sanders is a supply chain and sustainability expert and the General Manager of fulfilment business PacWolf.