Strategies for Reducing & Managing Freight Costs

Optimizing Your Freight Costs

Posted on:
Jul 18, 2022

Freight costs have a substantial effect on profitability and overall business growth. Learn how to optimize these costs to keep your supply chain running smoothly without paying exorbitant amounts for shipping.

How freight costs impact your business

Changes in freight rates affect your business in two major ways.

  1. A hike in freight rates increases the costs of shipping inventory to your warehouse. This increase can cut deep into your bottom line and tighten cash flow. Attempting to maintain your profit margin by raising your products’ prices can be counter-productive as some customers may opt for cheaper alternatives.
  2. Increased freight rates also raise the costs of shipping orders to your customers. This translates into higher shipping fees, which is one of the primary factors that discourage customers from completing their purchases.

Ways you can optimize your freight costs

Business owners often assume erroneously that freight costs are fixed and must be taken “as is.” This assumption is far from the truth as there are several ways to optimize freight costs without complicating logistics. Re-evaluating your freight management processes can help you discover more economical approaches to shipping that can generate long-term savings for your business.

Ship on off-peak days

During off-peak days, the demand for shipping services is lower than usual. Many freight carriers offer lower rates on these days to maintain a consistent business stream. Cost-conscious shippers can take advantage of the cheaper rates and schedule their freight movements on such days. Negotiating with your carrier to ship your freight on their off-peak days can result in significant savings.

For example, Fridays are considered off-peak days for consumer goods because their store managers prefer shipping them on Thursdays. Transporting the goods on Thursdays allows the managers to sort the goods and have them on the shelf on Fridays in preparation for sales during the weekend and the coming week.

Reduce shipping frequency

Minimizing your shipping frequency helps reduce overall freight costs. When you create longer intervals between your shipping schedules, you won’t have to pay freight costs as much as you would if you shipped at short intervals. Also, bulk shipping is often cheaper than shipping the same quantity of items in several smaller shipments. Therefore, it’s best to schedule your freight so your shipments will be transported in groups– not singly. Monitoring your inventory levels and being aware of your production and transportation times helps you schedule the perfect time to ship your products in groups.

Combine shipments

A logistics strategy called freight consolidation allows businesses to combine their less-than-truckload (LTL) shipments with similar destinations onto a single truck. Shipping your freight in this manner is significantly cheaper than paying for an entire truck without fully utilizing the space. With consolidation, you share the cost of shipping a truckload with other shippers and only pay for the space you use. Combining shipments through this process also gives you access to bulk rates that may be inaccessible through traditional shipping methods.

Freight consolidation is ideal for small businesses that do not ship full truckloads frequently or those that mostly ship smaller parcels.

Utilize TMS (Transportation Management Systems)

Transportation management systems (TMS) are software tools that assist businesses in optimizing their logistics process. These tools help companies monitor and control daily transportation operations, plan and execute product movements, and boost shipping efficiency. They simplify the shipping process by providing a platform for users to find and compare freight rates from several carriers, book shipping services, and track their shipments while its in transit.

A TMS combines all logistics-related expenses, agreements, carrier options, and other information into a centralized system. This centralized system provides businesses with data that improves supply chain performance, profitability, and customer satisfaction. Utilizing a TMS lowers freight costs by offering valuable insight into aspects of the shipping process where expenses can be reduced. It can also select the most ideal and affordable freight carrier for your business. TMS does this by analyzing existing data on your shipping needs and the performance of the available carriers.

Reduce freight costs with

GoShip is an online freight marketplace that connects you to over 42,000 pre-vetted, quality freight carriers. We can assist you in finding the perfect carrier to meet your business’ logistics needs at an affordable rate. Being a self-service platform, GoShip eliminates the need for a broker, which further reduces freight costs as you won’t have to pay a third party. We are at your service 24/7 to help you get reliable and cost-effective logistics partners for your LTL or FTL shipments.

Our online quotation tool gives you real-time shipping rates from certified carriers around you. All you have to do is enter your freight details, and you’ll receive a free quote immediately.

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