Reducing your freight shipping costs is a constant part of maintaining your business’ bottom line. Freight costs can sometimes creep higher with little notice, eating into your profits unexpectedly. Knowing how to better manage this aspect of your supply chain is crucial.
Key Takeaways:
I’ll go over 10 methods of reducing freight costs that you can employ to keep your shipping budget manageable and streamline your business logistics.
Bulk freight movements within North America generally happen in one of two ways: by truck or by railway. You can also combine truck and rail shipping by using intermodal services.
To determine the best method for your shipment, consider the following:
Once you know these numbers, consider these freight optimization guidelines:
While exclusive use of rail services is difficult, moving bulk orders this way is extremely efficient. As long as the origin and destination points are relatively close to major rail hubs, you’ll be able to keep down costs related to transload services.
Many rail lines also provide the means for whole shipping containers to be transported rather than requiring the goods within to be shifted to a boxcar.
Avoiding LTL shipping when possible is also going to save you money in the long term. While it may mean negotiating different terms with buyers and sellers, paying one or two larger fees for a truckload shipment is still likely to come out less than arranging multiple LTL shipments.
Related: Rail Freight Transport: The Right Track to Cost Savings
Building strategic relationships with carriers and brokers can result in lower rates and better service. This strategy will help you avoid dependency on spot-rates, which are often higher when used as a long-term solution.
A freight broker, especially ones that operate as a third party logistics (3PL) service, will have access to various carrier partners and freight services.
If you are consistently shipping similar volumes on a schedule, you can use the following tips to negotiate long-term deals and build a strong working relationship with your carrier.
Having a freight broker or 3PL service that you can trust will also make it easier to implement many of the other strategies I’ll be discussing in the next sections.
With few exceptions, moving fewer, but larger shipments will cost less per unit than frequent small loads. In many ways, it’s the trucking equivalent of buying in bulk.
It’s common to pass along costs of small, parcel shipments that are part of final mile deliveries to consumers. However, business shipping in bulk, whether ordering for themselves or delivering to consumers, should try to mitigate these costs.
Shipment consolidation helps lower costs in both LTL and FTL freight, provided that you’re shipping materials that are mostly non-perishable.
Consider the following examples when looking for ways to consolidate shipments:
Between reduced handling costs that come with FTL shipping, and fewer accessorial fees due to fewer shipments, it’s possible to cut back freight costs by up to 25% and eliminate unnecessary charges.
Related: Ship on Dedicated Lanes and Cut Costs
Warehouse location significantly impacts freight costs. Maintaining inventory in multiple locations isn't always feasible, either, as it can actually increase your inventory management costs.
Companies looking to move bulk freight benefit more from centralized warehousing, with a focus on one or two locations near major lanes. Combined with practices such as consolidated shipments, you should be able to optimize overall freight efficiency by reducing transit times and improving load planning.
Follow these guidelines to get started:
Other warehouse-specific strategies, such as cross docking services, can also help and are often offered by 3PLs. While the need for at least some warehouse space is often inevitable, minimizing what you need can save money.
Shipping during non-peak hours or days can lead to lower rates and improved carrier availability. This is easier said than done, especially for businesses that rely on specific seasonal peaks.
It’s not impossible, it just requires more planning ahead. While you may still need to occasionally move freight during these fee-heightened times, hopefully you’ll have the bulk of your shipments already taken care of.
Here are some best practices for off-peak shipping:
By shifting schedules strategically, you can save 5-10% on freight costs and avoid premium pricing during high-demand periods. Money saved can then be put towards other business uses or kept within the freight budget for those instances where you can’t avoid the higher fee.
Packing efficiently helps reduce shipping costs by maximizing space utilization and minimizing wasted capacity. This can cover the way materials are packed into boxes at a warehouse or which truckload organization methods you use.
For example, well-packed boxes don’t need as much dunnage and still keep items secure. This saves you money on materials.
When it comes to loading, you may have the option to choose between palletizing your freight or shipping it as floor loaded cargo.
Palletizing is generally seen as the more secure option and allows for efficient movement of bulk goods both in and out of trucks and within the warehouse. This can help you reduce freight costs associated with labor and truck waiting times.
Related: Floor-Loaded vs Palletized: Which is Right For You?
Backhauls can either help you or hurt you. If you need to deliver to an area notorious for bad hauls, you may find yourself paying a higher rate than average to cover the deadhead miles the driver is likely to incur.
On the flip side, if you are located in such an area, you may just get an excellent discount. Carriers often offer lower rates for backhaul shipments, where trucks would otherwise return empty after delivering a load.
Here are some ways you can find potential low-rate opportunities through backhaul:
Does this mean your warehouse should be in such an area? Probably not, since the cons of such an arrangement are likely to outweigh the pros. However, since you are likely spending a decent amount of your budget when you need to bring supplies in, backhaul discounts can at least serve as a method of recouping some of that.
Errors occur in every freight management system, usually when human input is required, although technological glitches do happen. The point is that such errors can result in overcharges, incorrect classifications, and unnecessary fees. Regular freight audits help identify the mistakes that can inflate costs.
Whether you contract an independent service to audit your system, or have an automatic schedule for auditing, pay special attention to the following error-prone areas:
The amount of money a freight audit can recover will vary. If you have a good management system in place already, recovery will be minimal. However, the goal of such a process long-term is to ensure that you won’t have to recover money because it wasn’t spent badly in the first place.
For supply chains that include overseas shipping arrangements and port pickups, there is an additional cost component and transit times are longer. Sourcing products from Mexico or Canada instead of overseas can lead to significant freight cost reductions due to shorter transit times.
You’ll need to deal with U.S. Customs and Border Protection (CBP) and tariff payments either way. Thankfully, these tend to be less when doing business with Mexico and Canada because of the USMCA, as opposed to a place like China whose products are currently under a series of additional tariffs.
Focusing on how nearshoring can help reduce your freight and shipping costs, specifically, here are some of the benefits:
The only downside to consider, especially for people importing large quantities, is that even with rail service available, you may need to ship more frequently. Be sure to examine how much and how often you need to bring in shipments before utilizing this strategy.
Technology-driven solutions can enhance operational efficiency, reducing costs, and providing wide visibility into your supply chain management. Using tools like Transportation Management Systems (TMS) allow businesses to optimize route planning, load consolidation, reduce unnecessary expenses, and more. In short, all the strategies I’ve discussed so far are much easier to implement with the right tech.
Even tools like real-time tracking can help you out, and in many cases can be passed on as features to your clients. Not only will you be reducing your freight costs, but also making yourself a better company to do business with.
While you can certainly purchase such systems on your own, start-up costs are often high. We recommend working with a 3PL for freight brokers who are more likely to have already invested in such technology.
Managing your supply chain costs, especially when it comes to shipping, doesn’t have to be overwhelming. By partnering with USA Truckload Shipping, you can streamline your logistics, access competitive pricing, and improve supply chain efficiency.
Our team offers customized solutions to fit your needs, and a variety of services suitable to various products:
Call us today at (866) 353-7178 to discuss your freight needs, or submit an RFP to see how we can help your business save on shipping costs while maintaining quality service.
R+L Global Logistics
315 NE 14th St., Ocala, FL 34470
