BlogSupply Chain: Lowering Your Total Cost of BusinessFreight Cost Reduction Strategies

Vaccines and warmer weather continue to steadily reopen the world economy. There are increasing crowds in brick-and-mortar stores, restaurants, and other public places of business, and consumer confidence appears to be surging. Meanwhile, analysts predict digital buying habits shaped by the COVID pandemic are here to stay, meaning we can still expect robust demand for products ordered online and shipped to consumers for the foreseeable future.

All this should be good news for any companies involved in shipping products, whether to other businesses or directly to consumers. Unfortunately, these companies all face rising freight costs due to a number of interrelated factors. Manufacturers have not yet caught up with higher-than-expected demand and there are not enough shipping containers, leading to delays and product saturation at ports and distribution centers. The trucking industry is struggling to supply enough drivers to meet increasing demands as its workforce ages and it falls short in recruiting efforts. Shipping problems have led to a shortage of transport trucks due to a lack of material and equipment needed to build new ones.

Companies seeking to stay competitive in the emerging post-pandemic economy can implement the following strategies to help reduce freight costs.

Consolidate Loads and Ship in Bulk

Freight costs are driven in large part by how many vehicles and personnel a company puts into transit at any given time to ship its goods. To reduce freight costs, companies should strive to ship more products on fewer trips.

Depending on their products and the structure of their supply chain, businesses could reduce costs by investing time and energy into consolidating multiple loads within one geographic region into a single shipment. That load would then be sent to a single destination point before being broken up for final deliveries. Freight consolidation can lead to scheduling complications, particularly if there is high, continuous demand for a product. But when implemented under the right circumstances it can effectively reduce freight costs.

Companies should also encourage their customers to buy products in bulk, or at the very least buy products in larger quantities, whenever possible. Shipping 20 pallet loads on one trip will consume less fuel, require fewer hours of employees and vehicles, and cost less than shipping five pallet loads over four trips to the same customer.

Manage Packaging Efficiency and Reduce Load Weights

Companies can also reduce freight costs by becoming more efficient with the shipping and packaging material they use. Whenever possible, using packaging and shipping material should be kept to a minimum, especially if that material will be discarded after one use. As alternatives, businesses can explore shipping equipment and methods such as airbags, strapping, blocking, and bracing to protect their products in transit. Using less packaging and shipping material means spending less on these materials, and possibly having more space for products on shipping loads. It is also more environmentally friendly, as not all these materials are recyclable.

Companies can also decrease shipping weight to reduce freight costs. It requires more fuel to ship heavier loads, resulting in higher fuel expenses. These expenses could increase in coming months due to spiking gas prices caused by a lack of truck drivers in the United States needed to transport fuel out to gas stations.

Companies can easily reduce shipping weight by using lightweight pallets for shipping. Whenever possible, they should avoid using heavy wooden pallets and utilize plastic pallets that are up to 35 percent lighter.

Picking the Right Supply Chain Partners

One of the most effective ways to reduce freight costs involves picking the right supply chain partners. This is particularly true for companies that might find it more efficient and cost-effective to outsource a significant portion of their supply chain operations.

A good freight carrier, for example, should be able to offer more than just ready access to the customers a company needs. They should be able to help businesses reduce costs through methods such as minimizing “dead miles”—the time a vehicle spends in transit while carrying no loads—and providing significant discounts for bulk shipping and off-peak hours shipping.

Companies engaged in shipping products can also partner with a pallet pooling company  instead of buying and managing a supply of shipping pallets. This saves a business from having to manage its own pallet supply and can reduce the costs and complexity of pallet procurement and recovery, as well overall Total Cost of Business (TCOB). With the right partner, pallet pooling can be a very effective way to reduce freight costs.

As world markets reopen, freight costs continue to climb for businesses engaged in shipping products. Companies that implement effective strategies to reduce freight costs will stay competitive in the emerging post-pandemic economy.

Companies can reduce freight costs by using lightweight iGPS plastic pallets for all their shipping needs. Our pallet pooling program helps lower fuel expenses and reduces Total Cost of Business. For more information, contact us at 1-866-557-0047, email a specialist at [email protected], or visit ourcontact page.