5.5 Great Ways to Reduce Shipping Costs
Finding ways to reduce shipping costs is a goal for many companies, however, many forget to do the basic blocking and tackling that will drive cost down. To reduce shipping costs focus on the freight basics listed below.
1. Improve Packaging
The proper packaging will minimize freight damage and fit the goods into the minimum space necessary. Less damage and using less space on the truck will in turn reduce shipping costs. Additionally, good packaging is easy to load, unload and has good label visibility. Questions to consider: When was the last time, you looked at your packaging? Is damaged freight an ongoing problem? Do carriers charge you extra for oversized shipments?
2. Reduce Freight Classification
Freight class is set by the National Motor Freight Transportation Association, and generally determined by freight density (the denser, the better). Improved packaging (see above) will sometimes lower your freight class which will lower your freight costs. Another way to lower your cost is to investigate whether your freight could ship under a lower classification. There are lots of nuances to the freight classifications so do some research and or ask your carrier representative for help. Questions to consider: Does your shipping team understand the correct freight classes for your freight? Does your company ever have freight reclassified by the carrier? Does your shipping team ever calculate freight density?
3. Select the Right Shipping Mode
To reduce shipping costs, shipper need to focus on the freight mode. Freight mode refers to the various shipping methods, which includes: full truck, LTL, small parcel, air freight, and sea freight. Using the wrong mode will cost you money. Oftentimes, Shippers focus on getting the best price for a given mode without considering the opportunity to use a less expensive mode. Questions to consider: Do you have light LTL shipments that could ship via small parcel? Does your company use full trucks for 6 pallets or less? Has there ever been an analysis of the proper shipping modes at your company?
4. Leverage Carrier Preferences
Every carrier has preferred routes where they will offer better pricing. Conversely, every carrier has areas where they do not want to go and of course they charge more for those moves. If you are only using one or two carriers, you might be costing your company money. The best shippers reduce shipping costs by working with the carriers to understand their preferred lanes. Questions to consider: Do you know the carriers with the best coverage for the areas where you ship? Do your carriers have to use partner carriers to deliver your shipments? Does your company regularly meet with carrier representatives to better understand their service offerings?
5. Switch to Longer Transit Times
Shippers often default to the fastest transit time without considering the extra costs. Questions to consider: If the small parcel doesn’t need to arrive until 3:00 pm, why pay a premium to get it there by 9:00 am? Could you ship earlier and use a slower transit time, if it meant a significant cost savings? Would your customer accept a later delivery time if you could reduce shipping costs that you past on to them?
5.5 Hire a Third Party Logistics Provider
I gave this just a half a point because even though it is a valid point, it is self-serving since I am the GM of Rock Solid Business Solutions, a logistics company that manages freight for a variety of manufacturers and distributors. A good third party logistics provider will address all the areas above and usually provide you better pricing even after adding some money for their service. Additionally, some 3PL’s (like Rock Solid) will give you free web based software and expert logistics support. Some questions to consider: Is your shipping team experienced in carrier negotiations? Does your company have the time or the carrier relationships necessary to get the best pricing? Do you have freight software to streamline the freight buying process?
To reduce shipping costs, shippers should focus on the basics of freight shipping, starting with the 5.5 actions described above.