Best Practices to Manage Shipping Freight Costs
In a freight market that’s seeing signs of an uptick, a company’s success or failure could come down to a matter of efficient supply chain logistics. Due to rising fuel prices, the cost of maintaining and operating a fleet of trucks has gone up in the past several years. This has affected the next few years of revenue projections for logistic companies.
However, the majority of shippers have managed to dodge the rate increase bullet. This is due, in no small part, to carriers being proactive with their cost management strategies. In these changing economic times there have been some proven practices that help shippers manage their transportation costs. Consider these practices:
Ongoing Procurement and Sales Evaluation
A shipper needs to constantly be on top of their sales and procurement figures. These numbers will have a direct impact on bringing down higher freight fees. Currently, there are many businesses adopting lean initiatives as a way of reducing their inventory levels. In a perfect world, small and consistent shipments would work to provide higher inventory turns. However, as those shipping costs continue to rise, those who embrace lean initiatives will need to find a way to strike a balance between maintaining those minimal levels and their overall shipping costs. Ask yourself, “Are you saving money in one sector, only to lose it in another?”
Review Core Carrier Status
As a concept, utilizing a core carrier shipping mode can provide a level of dependability. However, it can also work against a company when a particular shipment needs to be transported out of the core carrier’s network. For that to be accomplished, the rates will go up. On the other hand, using a secondary carrier to pick up the slack without a rise in costs or breakdown in the supply chain can be an effective practice.
For instance, let’s consider the base tariff. There are many shippers who don’t give those costs a second thought with their core carrier. Yet, those tariffs can add up to a substantial amount. Choosing which of those tariffs can be adjusted by using other carriers could have a positive effect on a shipper’s bottom line. Remember, the goal is to offset as much of these shipping costs as possible to minimize the need for rate increases.
The tide is definitely turning towards reducing freight costs. At boardrooms everywhere, C-level executives are now targeting shipping costs as their company’s prime objective. This shouldn’t be looked at as a belt tightening measure, but instead as a way for shippers to adjust to the changing economic realities. Fuel costs aren’t going to go down any time soon and as economies improve, the basics of supply and demand will kick in to affect. That’s what shipping companies need to contend with in order to stay competitive.