One of the most significant components of the supply chain expense is the cost of shipping, which is why, regardless of the size of your business, you must attempt to optimize it so that you pay the least without sacrificing the quality of service. The following tips will help you to reduce your shipping costs:
Know Freight Rates Are Volatile
The extent of supply and demand has a direct effect on shipping rates. There can be a swing in the rates depending on the season and the point of origin. For example, the freight rates to western nations and the U.S. see a surge in the months before the holiday season when all manufacturers are trying to ship goods to fulfill the expected demand. By studying the demand-supply impact on pricing on the routes, you need to ship and the frequency of your shipments; you will be in a better position to decide if you benefit more from buying space in the spot market or negotiate a guaranteed contract with the carrier. A guaranteed contract offers a fixed freight rate for a specific capacity regardless of the prevailing market rates. Spot rates are better suited for small shippers who can’t guarantee a volume large enough for negotiation on quotes for shipping.
Benefit from Collective Buying
Small shippers who cannot negotiate rates because of the small volume can benefit by joining freight buying groups. If you are a small shipper, you can benefit from the cumulative buying power available to these groups.
Leverage Freight and Logistics Data
You will have a better insight into your requirements by analyzing your freight data, and thus will have better power to negotiate. However, since the carriers also have access to the same data, you cannot pull a fast one on them. Access to the details of your freight operations will also allow you to become aware of terms that are seemingly attractive but don’t add value. These include steep discounts on routes you don’t use or don’t take into account the fall in spot rates during off-peak seasons.
Compare Offers from Competing Carriers
It is a good idea to get the details of offers from different carriers before you sit down to negotiate. In addition to comparing the rates, you should also update yourself on other factors like insurance, transit requirements, weights and dimensions, accessorial fees, fuel costs, etc. If carriers see you as a valuable customer, they will be willing to negotiate to win your business, however, it is important not to focus only on the rates and overlook the value of the services. According to Forbes, the trick is to find a balance between keeping your costs low and customers satisfied.
Your ability to negotiate better rates depends on several factors, including shipping volumes, routes, and time. It is important to work with a reliable and flexible carrier even if they charge higher rates. You are likely to benefit from a long-term association with a carrier rather than changing carriers every time you get a marginal rate reduction. Working closely with your carrier can help you service your customers better.