With inflation costs rising and a recession on the horizon, businesses want to know how to reduce shipping costs. Freight costs add to the overall cost of goods and can even cut profit margins for manufacturing, logistics, and retail industries. Trimming out unnecessary processes and optimizing shipping lanes is the best way to lower freight prices.
This blog examines the cost of shipping and ways to reduce freight costs.
Factors that Influence Shipping Costs
Several things can cause increased shipping costs. Carriers want to cover these costs or they won’t make a profit on the load. Some of the primary factors that drive up shipping costs include:
- Speed of delivery
- Terms of service
- Weight and dimension
- Shipping route
- Package destination
- Loading and unloading
- Dock efficiency
- Competing lanes or carriers
- Fuel prices
- Volume and consistency
To read more about the true cost of shipping, check out our blog, “How to Price & Breakdown the Cost of a Truckload Lane.”
10 Ways to Reduce Shipping Costs
As prices rise, more and more businesses want to trim costs wherever possible. Lowering shipping costs helps keep the overall costs down for your customers, helping you grow a sustainable business.
Whether you are looking for how to reduce shipping costs for small businesses or enterprises, it all comes down to thinking about the needs of your carriers. Know your strengths. While large companies might naturally have more volume, smaller companies can often offer more agility. Here are ten ways to reduce freight costs.
Create Lane Consistency
A steady lane contract helps your carriers know what to expect. Build a relationship for a regular flow of goods so that your carrier isn’t looking around for other work. You’ll pay less if your carrier can establish backhauls for the return route.
The more the driver learns the route, the more comfortable they will be with where they want to take rest stops and fuel stops. The process becomes more efficient as the driver gets satisfied with your team and the loading/unloading process.
Offer Dock Efficiency
Is your dock organized and efficient, or are you wasting drivers’ time? Most drivers want to avoid detention and prefer shippers and receivers with a streamlined process. Without the right team in place, unloading and loading goods can take a long time. Asking a driver to help with the process can add additional costs to each shipment.
Modern technology makes it easier than ever to organize your cargo’s arrival. You can use logistics solutions to help you manage your warehouse and on-site team. Building a reputation for a quick dock process will help you form stronger connections with your carriers. Operating efficiently may get you a lower rate and helps your lane become a preferred choice for carriers.
Provide Shipping Flexibility
Are you too rigid on your timeline? Shipping during off-peak days or offering later pickup times are examples of how you can make your loads more convenient for the carrier. Carriers can sometimes make your load fit in as a backhaul if they just have a little more wiggle room.
A carrier might turn down a load if the pickup time doesn’t work with the current schedule. However, a later pickup time may increase asset utilization for your carriers, helping them reduce deadhead miles that increase the cost of their lanes.
Consolidate Smaller Shipments
Are you getting as much as you can on a truck? Load-outs are possible for shippers who don’t have the demand to fill capacity on every lane. Consider how a load-out marketplace helps connect power-only players to idle assets that could be used to compile multiple jobs for consolidated pricing.
Modern technology makes creating a trailer pool and shipper networks easier to reduce shipping costs. For example, several neighboring wholesalers and manufacturers could combine shipments destined for the same chain of grocery stores. You can save a lot by connecting with another shipper and not trying to run a lane you don’t fill out.
Establish Long-Term Relationships
Serial rate shoppers can hurt their relationships by failing to offer consistency. While you should shop your rates first, you must choose a reliable partner to develop a strong business relationship with them.
Constantly starting fresh with new carriers will create a less efficient lane. Creating longer contracts with a favorite carrier gives that carrier a more consistent workload they can schedule around. You want your carriers to know what’s coming down the pike so they can reduce deadhead miles and maximize their assets. You get better service from someone who feels appreciated and respected.
Trim Down Dunnage
Padding is important for keeping your items safe, but it’s possible to overdo it. Try to reduce your dunnage to maximize your space in the container. Airbags, blocking, bracing, and strapping can all take up space that could be filled with more cargo.
Work on choosing the right-sized box and packing things in as tightly as possible. You can even ask your carriers for advice on how to make the most of your space. While carriers want to improve their capacity, they want to avoid running into damaged freight claims.
Pack Pallets Efficiently
Getting the most out of your space to cut down on warehouse and shipping costs means packing pallets efficiently. Logistics teams can often help you max out your cube with the right setup. Your carrier may give you recommendations for improving your pallet loads.
When you put together a smart cube, you can fit more products into your spaces and cut down on the pallet spots needed. Whether you need to stack differently or package differently, work on optimizing for space. Pay close attention to smaller items packed into larger boxes.
Design Packaging for Freight Efficiency
Your marketing team needs to consider the shipping process when designing the packaging. Yet, packaging costs are only a small fraction of the overall product cost. While packaging might make up less than 10% of your supply chain dollar, transportation can cost more than half, and warehousing can make up a quarter of that cost. You can reduce the larger part of the price by planning ahead with efficient packaging.
Create packages that work well with carton sizes and pallet packing. Many companies only design for package optimization or realize it’s a problem once they deal with high shipping costs. You can get a foot up on the game by working with your team to fix this issue early in development.
Increase Volume and Reduce Frequency
The larger your loads, the fewer you have to take. Therefore, getting more into each shipment reduces how often you need transportation. If you can get retailers or customers to order in larger bulk, you can get more into each load.
With larger orders, you can often offer lower shipping costs by reducing the trips and hassle. Over time, larger orders will save you money and improve your profit margins.
Help Carriers set up Backhauls
Deadhead miles signifcantly impact the price of shipping. Drivers don’t want to spend their time without a load. Most return trips don’t offer pay, and driving an empty truck can be dangerous on the highways—especially in windy weather or icy roads.
If you want to reduce shipping costs, you need to have a way for your carriers to relocate any remaining trailers or find a nearby trucking line that aligns with their return trip. If your carriers can connect with nearby shippers, you can strengthen your working relationships and reduce costs.
How to Negotiate with Carriers for the Best Rates
Supply and demand come into play when you’re negotiating rates. If a carrier notices a lane has lots of loads listed, but only a few are interested, they may try to negotiate a higher rate. There will be more room for you to negotiate if more trucks are interested in the lane.
Of course, the carrier has to calculate the actual cost per mile before agreeing to any load. They may find they need to make more with the current suggested rate. If they get too optimistic about their margins, they might lose profits. There are several ways you can
Sweeten the Deal by Providing Better Lanes
Your rate will also hinge on your ability to work with a shipper. Long load times and unorganized docks can lead to detention costs and annoying carriers. The more you streamline your process, the more carriers want to work with you.
Volume can also be your friend. The more you can offer for lane consistency, the more familiar carriers will become with your routes. Brokers and owner-operators like to have loads they can rely on to help keep capacity full.
How vHub Provides Shippers with Better Negotiation Power
Carriers can use vHub to help optimize routes and increase capacity when they are short on trailers. Shippers can help connect carriers with asset owners to establish more effective lanes. Utilizing load matching, vHub users can set parameters for their trips and see the best match for nearby carriers and rates needed for their loads.
vHub gives you the power to negotiate because it helps you establish a better plan for your carriers. Through vHub 2.0, you can communicate with your carriers and discuss rates before you agree to anything.
Reduce CPM with an Organized Trailer Relocation Strategy
The easier you make things for your carriers, the more bargaining power you have to get reasonable shipping rates. There are two ways vHub helps carriers get better rates and reduce trailer relocation costs per mile (CPM). These solutions help reduce deadhead miles for your carriers, increasing their overall profitability and willingness to negotiate rates.
Load Outs: A driver could make a better profit margin by running a relocation job with a load out of your products. Relocation jobs don’t often pay a full rate, so a driver is motivated to fill it with goods for a more efficient trip. Since they will get a certain amount per mile, the cost of moving your goods could be significantly lower, and the carrier would still have excellent margins.
Drop and Hook: On the other hand, shippers can also use vHub to help organize a drop-and-hook process to streamline the carrier’s lanes. You can use vHub to keep your trailer pool straight and help drivers plan efficient return routes.
How Carriers Use vHub to Add Capacity for Shippers
Can you help your carriers improve fleet efficiency? If a carrier has a power unit with nothing to pull or a trailer sitting idle, they are wasting part of their fleet. Shippers can help connect carriers to vHub to get more use out of every asset.
vHub simplifies and oversees the rental process to help eliminate confusion, risks, and time-consuming tasks. With smarter tools, carriers can quickly see which listings would work best for their next route. Carriers can list their assets for a specific time, allowing power-only units to use their idle trailers for load-outs or helping them relocate trailers at better prices as a load-out.
Idle assets are just hemorrhaging profits. With a smarter platform for helping carriers manage their fleets, shippers can build beneficial relationships for a stronger carrier network.
Are you ready to try the power of vHub? Sign up today for your FREE account to see how our tools eliminate the hassle of finding ideal listings and the best rates for your needs. We are reengineering fleet management and optimization one logistics player at a time.
