When your business centers around shipping goods all over the world, freight costs are a huge expense—and a huge opportunity. U.S. companies shipped more than 6.5 trillion ton-miles of freight in 2015, and this is expected to surpass 8 trillion ton-miles by 2040.
Shipping is a huge part of our economy, and for freight-focused companies, it’s a significant percentage of overall expenses. However, a few cost-saving strategies can put you on the right track to reduce freight costs and increase profit. Read on to learn more about ways to save money on freight with strong data, freight audits, and internal adjustments.
1. Refine Your Logistics Data
Shipping operations generate tons of data, tracking everything from mileage and weight to departure times and accessorial charges. This data has huge potential, but it’s only useful when it’s complete, consistent, and accurate.
Data refinery tools help you make sense of everything by processing, validating, standardizing, and correcting raw data. With refined data, you can generate high-quality reports—and make decisions—much more quickly.
2. Put Your Data to Good Use
When your data is clean and standardized, you can use it to make important decisions about the future of your business. Use your refined data to:
- Forecast demand, inventory, and labor needs
- Eliminate costly delays
- Reduce overhead caused by expensive, unnecessary, or inefficient processes
- Control risks in your logistics spend
- Identify opportunities to improve
3. Simplify (and Automate) Data Entry
Manually entering data and running computations takes time and effort, and you can’t discount the power of human error. Take a look at your data entry and validation processes to see where you have opportunities to automate. With an intelligent logistics data platform, you can cut down on errors and inefficiencies that drag down the bottom line.
4. Identify Patterns in Your Freight Processes
Recognizing patterns is one of the most important benefits of clean, actionable data. For example, if you see the same invoice error repeatedly with the same partner, think about how you can address the pattern (rather than each individual issue). Work with the carrier or 3PL to understand the issue—whether it’s an IT constraint, a manual error, or a miscommunication—and see how you can rectify the problem in batches.
Freight Auditing Strategies
5. Conduct a Freight Audit to Look at End-to-End Process
Freight audits are a great way to understand your freight processes from start to finish. Freight audit and payment (FA&P) may seem complicated, but when it’s automated as a “low-touch” service, it’s a simple way to get a better understanding of your workflow (and how charges are assessed).
6. Optimize Freight Routes and Shipping Times
If you have multiple carriers shipping similar products in the same lane, you can likely simplify your routes (and even your data entry). During the freight audit, see if there are ways to simplify your shipping routes and not have multiple carriers—with multiple invoices—retracing each other’s steps.
You can also work with your carriers to see if they offer discounted rates when you ship at off-peak times. If you have flexible delivery windows or certain schedules that can be adjusted, you can save plenty of money by using cheaper shipping windows.
7. Consolidate Shipments
As your freight operation continues to grow, there are likely hidden opportunities to simplify your shipping. Look for shipments with the same dates, destinations, origins, and service levels; these can often be consolidated into a single shipment without impacts to customer service (or requiring a major change from your carriers or employees).
You may need to consider other factors, like which shipments are going straight to customers and which ones come from an order management system, but finding opportunities to consolidate is a good place to start.
8. Review Fuel Surcharges
Fuel charges are always part of the conversation when you’re considering adding a new carrier, but how often are you revisiting these charges? Carriers charge different rates for fuel, but they can also calculate these charges differently. Take a look at the overall amount you’re being charged for fuel, and see if there are opportunities to negotiate the fuel charges (or look at other providers if your current carriers aren’t providing long-term value).
9. Check Classification, Mode, and Service
When you get into a habit with certain carriers, it’s easy to forget that you have options besides “the usual.” Are there shipments where you’re paying for premium shipping, when another option would still get it there safely and on time? Did you set a classification that no longer applies? With clean, actionable data, you can review your history and find opportunities to update freight options you selected in the past.
10. Reduce Rush Shipments as Much as You Can
Rush shipments usually cost much more, and these costs can be burdensome over time. As part of your freight audit, review your processes to see (1) why you are shipping so many rush orders and (2) how you can lower your percentage of rush orders to save money.
11. Conduct Regular Bill Audits
Compare your carrier’s bills against your own information on a regular basis to ensure the contract details are accurate, the contract specifications are being met, the charges are accurate, and the invoice reflects all of this information.
This can be done manually, but it takes time and money to do so—usually around $10 per invoice when it’s all said and done. Many shippers use FA&P software to automate the auditing process and capture the data in a central repository.
12. Negotiate Accessorial Freight Charges
Accessorial charges are what the shipper charges for services above and beyond normal delivery activities, such as storage, notification fees, or reconsignment. These fees, which are usually added after rates are agreed upon, can add up very quickly if you’re not careful.
If a carrier continues to charge you for accessorials that you don’t understand or agree with, work with them to understand why these charges are assessed (and whether or not they will be assessed on future shipments). If accessorials continue to be a problem, make sure you factor that into the overall cost of the provider so you can make a data-based decision when the time comes.
13. Think Holistically About ‘Extras’
Many accessorial charges are a result of having to wait around or having to perform a specialty service. Think broadly about the items you’re shipping, the “extras” that may be involved, and how you can reduce the time to load or ship certain items.
14. Increase Delivery Lead Times
Many shipping partners offer lower rates for deliveries planned well in advance. With longer lead times, companies can organize drivers, trucks, routes, and other details well in advance, and then pass along some of the savings to you.
15. Control Inbound Freight Costs
Most of these cost-saving tips focus on outbound freight, but inbound freight can also be a huge opportunity. Apply the same scrutiny to your inbound freight as you do your outbound freight, and chances are you will find ways to lower your general operating costs.
Saving Money Long-Term With Efficient Shipping
By cleaning up your data and examining your shipping processes, you’ll find some great ways to cut shipping costs. Don’t be afraid to negotiate with your carriers, especially for rates that were established well in the past. As your business changes and your shipping needs evolve, it’s important for your providers to offer value in return.
For more information about reducing logistics spend to increase profit, download our ebook Logistics Cost Savings: Beyond (and Before!) Rate Negotiations.