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How to reduce freight costs

March 19, 2024 / US
How to reduce freight costs

As global trade burgeons and logistical complexities intensify, supply chain managers, operations specialists, and logistics professionals navigate a landscape where every dollar saved in freight expenses reverberates through the bottom line. While the years following the pandemic were historically challenging times to be a shipper, the last year saw freight rates melt as demand fell and trucking capacity increased. 

That said, the shipper’s prerogative with logistics has always been on how to ship freight for less. In this comprehensive guide, we delve into the intricacies of minimizing shipping costs, exploring a myriad of strategies, and expert insights tailored to help logistics management professionals and supply chain stakeholders with ways to reduce freight costs. 

Understanding freight costs

Freight charges encompass a multifaceted array of expenses for freight carriers, including transportation charges, fuel surcharges, accessorial fees, and carrier overheads. The components of freight costs typically include:

  • Transportation Costs: Expenses incurred in moving goods from point A to point B, encompassing factors such as fuel, vehicle maintenance, and driver wages. 
  • Handling and Packaging Costs: Charges associated with loading, unloading, and packaging goods for transportation.
  • Administrative Costs: Overhead expenses related to managing freight operations, including documentation, compliance, and administrative personnel salaries.

Supply chain and logistics managers gain insights into transportation expenses by conducting a thorough freight cost analysis, enabling informed decision-making and cost-saving initiatives. Shipping costs significantly impact business profitability and competitiveness.

12 Ways to reduce your freight shipping costs

1. Conduct freight audits

Regular freight audits help reduce costs by uncovering billing discrepancies and reclaiming overcharges. These audits meticulously review invoices against negotiated rates, contracts, and terms. Identifying errors like duplicate charges or incorrect tariffs cuts down on inflated costs. Rectifying these issues leads to significant savings and improved profits.

Using specialized freight audit services streamlines the process, employing algorithms to find discrepancies and optimize payments, saving resources and reducing oversights.

2. Embrace sustainability to cut costs

Incorporating sustainable practices into freight operations not only aligns with environmental stewardship but also yields tangible cost-saving benefits. Green logistics initiatives, such as utilizing eco-friendly packaging materials and adopting fuel-efficient transportation methods, contribute to long-term savings by reducing resource consumption and minimizing waste. 

By optimizing fuel usage and embracing alternative energy sources, businesses can lower operating expenses and unnecessary costs associated with transportation, thereby bolstering their bottom line.

3. Consolidate shipping

Consolidated shipping presents a compelling strategy for businesses aiming to reduce freight costs by optimizing cargo space utilization. The concept revolves around combining multiple smaller shipments into a single larger shipment, thereby saving money, maximizing efficiency, and reducing per-unit shipping and transportation expenses. 

By leveraging economies of scale, businesses can negotiate bulk shipping discounts with local carriers and capitalize on lower rates per unit weight or volume. Effective freight consolidation strategies involve meticulous planning and coordination. Businesses can explore options for consolidation programs such as grouping shipments by destination proximity, consolidating orders from multiple suppliers, or utilizing third-party consolidation services. 

Additionally, embracing innovative packaging solutions that minimize wasted space and maximize load capacity further enhances the cost-saving potential of consolidated shipping.

4. Intelligent route planning

Intelligent route planning refers to algorithms that help optimize routes taken by vehicles for delivery, offering businesses the means to improve freight efficiency and minimize expenses. Route optimization software plays a pivotal role in this endeavor, leveraging advanced algorithms to analyze various parameters such as distance, traffic patterns, and vehicle capacities to identify the most efficient paths. By reducing unnecessary mileage and optimizing delivery schedules, businesses can significantly cut fuel surcharges and enhance overall operational efficiency.

Moreover, the integration of route optimization software with real-time data enables dynamic routing, allowing businesses to adapt swiftly to changing conditions such as traffic congestion or weather disruptions. This real-time responsiveness further enhances cost-saving potential by minimizing delays and mitigating the impact of unforeseen circumstances.

5. Effective load planning

Effective load planning offers substantial opportunities to increase load capacity and minimize transportation expenses. By meticulously organizing cargo to maximize space utilization within vehicles, businesses can reduce the number of trips required to transport goods, thereby slashing fuel expenses and minimizing environmental impact. 

Moreover, efficient load planning enables businesses to optimize resource allocation, minimize packaging costs, save money, and enhance overall operational efficiency. To improve load planning, businesses can leverage a variety of tools and techniques. 

Advanced load optimization software analyzes factors such as product dimensions, weight distribution, and vehicle constraints to generate optimal loading configurations. Additionally, implementing standardized packaging practices and utilizing load-securing technologies further enhance load stability, minimize costs, and maximize space utilization.

6. Utilize a digital freight booking platform for comparing rates and real time booking

Small to medium sized shippers can streamline their freight booking process and access competitive spot and contract rates by utilizing a user-friendly digital freight booking platform such as Uber Freight’s Shipper Platform. Digital booking platforms simplify the booking process, allowing small shippers to quickly compare rates, select carriers, and schedule shipments with ease.  

They also allow shippers to gain real-time visibility into shipment status, tracking updates, and delivery ETAs, empowering small shippers to manage their supply chain proactively. Digital booking platforms also provide access to a diverse network of carriers vetted for reliability and quality, ensuring shippers find the right partner for their shipping needs.

7. Explore multimodal transportation savings

Diversifying transportation modes presents a compelling avenue for significant cost-saving opportunities in freight operations. By strategically combining different modes of transportation, such as road, rail, air, and sea, businesses can capitalize on the unique advantages each mode offers, optimizing cost efficiency across various legs of the journey. 

For instance, utilizing rail for long-haul transportation needs can yield substantial savings in fuel costs compared to road transport, while air freight may offer unparalleled speed for time-sensitive shipments.

Effective analysis and selection of the most cost-effective combination of transport modes require careful consideration of factors beyond freight shipping cost, such as distance, transit times, cargo characteristics, and budget constraints. 

8. Leverage carrier management: negotiate rates, and build relationships

Effective carrier management is crucial for shippers looking to optimize freight costs and enhance operational efficiency. Shippers can negotiate favorable rates by leveraging their shipment volume and establishing long-term partnerships with carriers.

Cultivating strong relationships with carriers fosters collaboration and reliability. Communicate openly, provide feedback, and prioritize mutually beneficial partnerships to ensure smooth operations and consistent service quality. Shippers can also regularly monitor carrier performance metrics such as on-time delivery rates, cargo safety, and customer satisfaction. 

9. Streamline inventory

Efficient inventory management practices, such as Just-In-Time (JIT) inventory, play a pivotal role to minimize storage and reduce freight costs. JIT inventory ensures that goods are delivered precisely when needed, reducing the need for excessive warehousing space and mitigating the associated costs of inventory holding and handling. By synchronizing production with demand, businesses can minimize excess inventory, optimize storage space utilization, reduce shipping costs, and streamline transportation requirements.

The relationship between inventory levels and freight costs is symbiotic. Higher inventory levels necessitate larger shipments and more frequent transportation, leading to increased freight expenses and lower costs. Conversely, lean inventory management strategies enable businesses to operate with smaller, more manageable shipment sizes, resulting in reduced freight costs, reduced transportation costs, and enhanced cost efficiency.

10. Conduct a transportation assessment

Shippers of all sizes and circumstances can benefit from conducting a transportation assessment, which offers evidence-based recommendations from third-party experts, ensuring an unbiased evaluation of a shipper’s capabilities.  From benchmarking capabilities and identifying process gaps, to designing effective cost-saving initiatives, an assessment can surface actionable problems and opportunities at every stage of the transportation process—in effect, delivering a personalized playbook for shippers to drive short-term and long-term stability. 

After developing a baseline, data modeling tools are used to generate analytics and best practice benchmarks, which help identify opportunities for improvement. It’s important to note that transportation assessments can also be part of larger supply chain or logistics assessments, and conducted alongside facility or inventory assessments as well. 

At a high level, shippers can use an assessment to gauge their current state of operations to identify potential areas of improvement, with a special focus on three key areas: people, process, and technology.  Using this three-pronged strategy, a transportation assessment can provide a detailed snapshot of what an organization’s baseline capabilities look like. 

Often, an assessment unearths unexpected opportunities. For example, one large consumer goods retailer initially approached the Uber Freight Consulting team to identify savings programs on more than $400 million in annual transportation spend. However, an evaluation of its entire logistics process helped pinpoint not only cost-savings opportunities, but also specific issues that were causing declining service levels across the retailer’s network. 

As a result, experts were able to come up with tailored strategies for the retailer to optimize full truckloads, implement LTL pooling and load consolidation, expand its dedicated fleet, and apply lane priority to increase use of intermodal transportation. The retailer ultimately received a step-by-step strategy that not only promised annual savings of as much as 13%, but also materialized quick solutions to the issues that were deteriorating service.

11. Leverage a TMS for freight cost optimization

A Transportation Management System (TMS) is crucial in the quest for freight cost optimization, offering a suite of tools to streamline operations and enhance decision-making. With features like efficient logistics planning and real-time visibility, a TMS empowers businesses to orchestrate transportation activities with precision, driving down costs while maximizing efficiency. 

Uber Freight, for instance, offers a TMS software that leverages advanced predictive pricing models to secure cost-effective freight capacity, facilitating optimal route planning and load optimization.  Powered by actionable data and insights, it enables shippers to streamline operations end-to-end, from procurement and execution to visibility and payments.  They can save time and money, improve cash flow, and achieve better business outcomes.  

Moreover, TMS platforms provide robust analytics capabilities, furnishing stakeholders with insights into key performance metrics and cost drivers across multiple carriers. By harnessing these analytics, businesses can make informed decisions regarding carrier selection, rate negotiation, and mode optimization, further enhancing cost savings initiatives.

12. Outsource transportation management

When it comes to steering logistics operations towards efficiency and scalability, outsourcing transportation management can shift businesses into the fast lane. Engaging with a seasoned logistics partner, such as Uber Freight, shippers can tap into a sprawling network of vetted carriers, all while unloading the complexities of fleet management from their to-do list.

This strategic move can revamp their transportation framework, yielding enhanced transport and network planning, fine-tuned landing costs, and a trimmed cost-to-serve metric. It’s like having a logistics co-pilot; shippers can steer their resources where they’re needed most while gaining the agility to scale and adapt to the market’s ebb and flow.

Outsourcing transportation management is more than just a logistical decision—it’s a customer satisfaction strategy. It ensures that goods don’t just leave the warehouse but are delivered on time, every time, bolstering your brand’s reliability in the eyes of your customers.

Implementing a holistic approach to reduce freight shipping costs

As shippers delve into strategies for reducing freight costs—whether through freight audits, intelligent route planning, leveraging a Transportation Management System (TMS) or fully outsourcing their transportation management–Uber Freight provides the technological edge and team of logistic experts for Shipper’s specific needs. 

Ready to revolutionize how you manage freight and unlock significant savings?  Start with a transportation assessment.

Take advantage of our proven methodology to drive visibility and results. The Uber Freight Consulting team provides realistic and actionable recommendations from an industry-leading team. Our collaborative approach helps you assess, design, and implement proactive supply chain strategies.

Connect with an expert to learn more or sign up on Shipper Platform to compare rates today and learn more about our digtial freight shipping services.  

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