Forwarders and shippers tend to consider freight costs to be a major part of their total shipment cost. That's a very understandable assessment; suppliers and shippers are in a constant need for monitoring market conditions and costs to be better prepared for carrier rate negotiations. As businesses seek to streamline their operations, reduce costs, and increase efficiency, challenging the status quo of shipping expenses is an avenue that should be explored. Contrary to popular belief, there are indeed many innovative ways to reduce freight costs – from solutions as simple as using fright cost benchmark and market movement analytic tools, to generally sound approaches such as careful planning and choosing the correct shipment methods, and everything in-between.
Freight consolidation
This simple practice cannot be overstated; consolidating loads can save up to 25% of one's freight costs. Consulting your local business organizations or Chamber of Commerce can set you on the course to finding appropriate freight consolidation options, or even co-shipping options. Products from various suppliers can, indeed, be combined into single shipments – alternatively, one can even combine shipments with other companies in the vicinity to the same retailers.
Incentives to agree to consolidate shipments can be as simple as sharing an agreed percentage of freight savings with retailers, while vendor-managed inventory agreements are also always an option. On the end of customers, it is understandably more expensive to have frequent, small shipments than less frequent but larger shipments – encouraging customers to purchase larger, less frequent loads can thus only be beneficial.
Shipping during off-peak days and hours
This underused practice can save one up to 10% compared to shipping on peak business days and hours, and up to 15-20% off standard shipping rates if one opts for evening backhauls. Adjusting designated shipping times a day, or even a few hours, earlier or later, just enough to enter non-peak days and hours, can have a significant impact on total freight costs. Off-peak days like Friday are likely ideal for this approach, although Mondays are also low-volume days that could be considered.
While perishable items can likely not be given the same treatment, non-perishable goods can lend themselves to shipping changes. Having secured that one's cargo can sustain such an approach, it might even be a viable option to employ backhauls. Namely, offering to employ carriers who will pick up loads into a backhaul during hours when docks tend to be closed – evening hours between 6 p.m and 12 a.m should be ideal. Outside of the potential financial benefit, this can also have a practical effect on helping build a closer relationship with a carrier of your choice. Mid-afternoon hauls may be rejected if they conflict with other runs, but evening backhauls should be able to accommodate your freight just fine.
FCL and LCL
A factor that is strictly dependent on your available cargo, making the distinction between FCL and LCL is vitally important. While LCL is generally to be avoided in terms of cost, the breaking point where an LCL or FCL shipment will prove to be less costly for you will need to be established first – ideally by your logistics partners.
LCL is sometimes unavoidable, even more so in cases where a single shipper's cargo does not fill a container load by itself. Since LCL mandates that the container is then shared with other importers, additional costs occur. The container will need to resort to a CFS to be split, which naturally increases total freight cost for individual importers. Thus, shipping FCL when possible may generally be preferable, but not always so – depending on your cargo and overall freight management, logistics providers may deduce that LCL is preferable, or that the difference between the two is too minimal.
A different, perhaps seemingly unorthodox approach, may be to ask a supplier to truck their cargo in question to a different location, where it can be consolidated with the rest of your cargo. This may seem unconventional in that it will increase trucking costs, but it may actually decrease ocean costs more, depending on how much you may save by avoiding LCL loads this way. It can also fall in line with potential personal relocations, should you be exploring different assistance options for your relocation.
Regularity
The aforementioned factor of close business relations with carriers is far from insignificant; compared to traditional lane pricing, loyalty to a carrier through a steady single lane can save one up to 12% on costs. It is in the best interest of businesses to establish a continuous revenue stream through customer loyalty and uninterrupted cooperation, after all, which in turn can also benefit you by securing more reliable freight loads.
On the practical side, carriers are much more likely to market the aforementioned backhauls and provide superior service to long-term business partners. Longer-term contracts can serve to lock you into better rates, when annual RFPs in search of new carriers can have you keep adjusting to potentially rising prices year after year. An unforeseen general rate increase (GRI) or other market changes may have a drastic impact on overall freight costs, after all – while it is not an unsustainable option to keep tracking the market to anticipate such turns of events, a long-term partner or a lasting contract can be an invaluable safeguard.
Auditing, unnecessary charges
It is far from unreasonable to want to keep a close eye on quotations and invoices; indeed, ensuring that quotations and invoices from carriers are correct can have a very visible effect on total freight costs. Carriers missing out on some shipping surcharges are not entirely uncommon, and such costs may arise after the business has been concluded. This is an unnecessary cost on the end of either you or your customer, and it is naturally not desirable. Auditing your quotations and invoices will thus be very useful in avoiding such unexpected costs.
Similarly, demurrage or detention may cause customers to incur unnecessary POL or POD charges. The main causes of such cases are improper or untimely documentation – indeed, such charges may be high enough to force customers to abandon their cargo altogether. Ensuring proper documentation is thus vital towards avoiding such occurrences.
