The cost of shipping goods by truck continues to rise as a result of increasing equipment costs, higher fuel prices and truck driver shortages. These costs have a significant impact on the profits of businesses of all sizes.
The common shipping options are Less Than Truckload (LTL) and Full Truck Load (FTL). Less Than Truckload is a shipping method to transport freight that doesn’t use a whole truck. Full Truck Load is used when there are enough goods to fill up a truck.
It’s crucial to implement as many ways as you can to reduce freight costs because they will continue to rise in the coming years. Here are some strategies.
Use regional shipping carriers
See if your delivery areas have regional carriers, also called local trucking carriers, to send goods where your customers are. These regional carriers have a small fleet of trucks to transport freight within a certain distance in a community.
These companies can be great for parcel last mile delivery because they can provide personalized service for customers and often have lower prices than national companies.
Understand shipping charges and fees
Unfortunately, many businesses are hit with surprise charges because they don’t monitor their invoices and aren’t aware of the variety of factors that can trigger additional fees beyond what was initially quoted by a carrier.
The extra fees are called accessorial charges for performing services beyond normal pick up and delivery such as waiting time, handling hazardous material and weight change.
Clarify with the trucking company to see all of the ways to not only reduce or avoid these fees, but also make the delivery as easy for them as possible. Optimizing your shipping schedule can help you avoid storage, layovers and after-hours delivery charges.
Understanding the fees also helps you know when you are entitled for a refund such as when the carrier fails to deliver something to your customer.
Negotiate the shipping rate with trucking companies
Because truck shipping is a competitive industry, you have the power to negotiate your rates to some degree despite the increasing operating costs of carriers. If you’re not sure which company to go with, use a freight broker to take advantage of their wide network of carriers to find the best rate for your truck shipment. It doesn’t cost anything to compare quotes from a few brokers to get the best deal.
By using a freight broker, you will save a lot of time and money rather than trying to do all of the research among many carriers yourself. Freight brokers also play a key role in determining the most appropriate freight class. Not having the right freight class can cost hundreds or even thousands of dollars.
If you’re getting quotes from a broker, make sure you include everything they ask for to avoid surprise costs including these questions:
- What are you shipping?
- What is the size and weight of your packed freight?
- Are there any special handling requests?
- Where is your shipment going?
- How fast does it need to arrive? (Have you compared ground with air shipping? )
- What is the value of your shipment?
As we’ve mentioned, once you choose a carrier, check your invoices regularly to see if there are any accessorial charges or fees you didn’t anticipate getting. Gathering more data over time will also help you renegotiate your contracts with carriers so you can keep getting competitive rates every year.
If you already work with a trucking company that you’ve been using for awhile, negotiate lower rates based on your volumes, especially if you are using their services for all of your shipping orders. In a highly competitive freight industry, a carrier would hate to see you go to another company.
Pack your shipments efficiently
This might sound like common sense but every time you make your packaging more efficient, you will contribute to cost savings over time. Many L2L have moved to dimensional weight pricing system for parcel and L2L shipments. What this means is the price is not determined by weight but also the size and shape of the packaging. Goods that have unusual shapes could cost more.
Make sure that you’re not wasting space by reducing air space. You can talk to your carrier to see if they provide packaging that could help you avoid dimensional fees. If you use your own packaging, you could pay these fees depending on the trucking company.
Consolidate your orders(cost/price)
Businesses that grow in size through increased profitability or acquisitions would benefit a lot from re-evaluating their logistics and freight costs. Because of mergers, some organizations have management and distribution facilities in different locations with multiple carriers.
It’s cheaper to consolidate shipments by having one central place where one person or team can select trucking companies on behalf of the whole organization. This way, a company can better manage the costs and ensure compliance.
Part of this consolidation process includes checking inventory to see if there are enough Less Than Truckload items that can be combined into a Full Truck Load. But if your order volume is not high enough, you can partner with other businesses to reduce the shipping costs.
If you have regular customers that often make small orders and have a good relationship with them, you can ask them to make large orders less frequently.
Ship on off-peak days
If you have a predictable amount of shipments and schedule, you can ask your carrier to tell you what days they are able to ship your orders and change the delivery schedule accordingly.
The more notice you give them to organize their resources, the more they can move freight on off peak days and reduce costs.
Invest in good technology and data
Investing in a transportation management system to minimize shipping errors and manage inventory is essential to reducing transportation costs. A system allows managers to see where a trucking company is not performing and address the problem quickly.
We often hear the phrase “You can’t manage what you can’t measure” because it’s very true. Many companies, even big ones, often have poor shipping data and managers can miss crucial information that costs a lot of money. Poor data includes shipping weights that are entered wrong and a lack of clarity between actual weight and billed weight.
Having good technology also cuts down administrative work by automating manual processes which reduces delays, errors and paperwork.
Leadership in your shipping department
There many factors and processes to understand in freight transportation. To ensure shipping is properly managed, it’s best to have a dedicated expert person or team in charge.
Don’t leave freight management to a finance or general administrative department. There is a lot of data to monitor on a daily basis and missing important information can needlessly cost a business a lot of money.
The cost of shipping goods by truck has increased in the last few years and will continue to do so. But companies can reduce costs by:
- Using regional carriers because they often have lower prices than national companies
- Organizing your shipment the best way you can to avoid additional charges from your carrier
- Negotiating shipment prices with a freight broker or a carrier directly
- Packing your goods as efficiently as possible
- Having one central place to coordinate all of the orders
- Combining orders when it’s possible so you can use Full Truck Load
- Shipping on off-peak days
- Investing in good technology and data to track shipping performance and inventory levels
- Having a dedicated freight manager or team to manage and monitor shipping data