Reduce Freight Costs with These Tips

Many shippers believe the big savings in freight only come from big carrier contracts or determined efforts to scour load boards for deals. In other words, the big savings favor the shippers with big budgets and staff bandwidth.

So what can you do if you’re a small to mid-sized shipper that doesn’t have the freight volume or in-house staff for either of those strategies?

Plenty actually. Granted it’s not a one and done strategy. Rather it is a finite set of cost-cutting moves and process improvements that shippers can go through to find opportunities to reduce freight costs.

A carrier’s base rate and fuel surcharges are the two biggest costs to look at. But those are only the beginning and the most basic areas where shippers should look to reduce freight costs.

For insights into these and other ways to reduce freight costs, we consulted WSI’s resident experts, Director of Transportation, Kelley Stiles and Transportation Sales Manager, Scott Van Zeeland.

Make Timely Projections

All right, not the most glamorous cost reduction tip, but Scott puts it at the top for potential savings.  Better planning holds immense potential for reducing freight costs, he says. With accurate projections on production, you can provide timely notifications to carriers that lead to reasonable rates—not expedited ones—and you can control accessorial charges better. (More on accessorials later.)

Check Your Mode

Mode choice can reveal a motherlode of freight savings. Look at your choice of full-truck-load (FTL) versus less-than-truckload (LTL). It’s all math here. Are you doing multiple shipments for a customer by LTL that could be consolidated into a multi-stop full truckload and shipped at a lower cost? Or are you paying for multiple, mostly-empty truckloads that could be shipped by LTL for less? Your answer is sure to change over time, so it makes sense to do the equation regularly.

Post Your Load on a Board

Load boards like DAT and Truckstop let you post your loads and receive bids from carriers. There can be some bargains, especially when the freight market dips. When sorting through the offers, be sure and check carriers’ performance as well as the market rate for the lane you’re running in.

Due diligence is required to make load boards work. “DAT and Truckstop both offer market tools that enable you to check market information and determine whether you’re actually getting a good rate or if somebody is trying to price gouge you,” Kelley advises.

Be sure and provide full and accurate information regarding your load. It will make qualifying bids easier in the end.

Carrier Contracts Save

Reliance on the open market of load boards brings opportunity as well as risk. Shippers take the biggest hit in freight costs when freight rates spike wildly, Scott says. This occurred during the pandemic and it happened again recently when the threat of a port strike was looming.

Long-term contracts with carriers are a way to hedge against having to pay high rates when freight rates rise dramatically. A contract may restrict you from jumping on bargain rates when the market drops; but a contract will also allow you to keep paying the rates you negotiated when the market was stable.

If you don’t have the volume to negotiate a contract, working with a freight broker can enable you to leverage their long-term contracts for favorable rates.

Do Frequent RFPs

Putting out frequent requests for proposals (RFPs) to multiple carriers enables you to lock in rates while reserving the right to reset those rates periodically. RFPs once or twice a year—or even more—provide the stability of contracts as well as regular opportunities to optimize your freight spend.

Use Multiple Carriers

You can choose more than one carrier to contract with. A multi-carrier strategy puts you in a position to negotiate. Having a number of transportation providers to work with also gives you options when capacity is tight. Not every carrier is strong in every lane, so having multiple options enables you to choose the best carrier with the best rate and service for different lanes.

Transportation Management Software

Shippers using a transportation management system (TMS) for load planning and route optimization can achieve an average cost savings of 7.5% according to Logistics Management.

Consolidating orders, maximizing trailer space, and shortening delivery routes hold tremendous promise for reducing freight costs—but the cost for the technology can be a hurdle.

A full-on TMS is a big investment for small- to medium-sized shippers, but a third-party logistics provider (3PL) like WSI can help in this regard. Shippers can often piggyback on a 3PL’s TMS as a way of getting around this. Cloud-based apps are another option. Depending on your company’s size and budget, TMS platforms like Shipwell and E2open may be within reach.

Fuel Opportunities

Fuel surcharges may seem to be out of shippers’ hands, but there are some things that shippers can do to minimize fuel costs.

Removing waste from your transportation program reduces surcharges. Basically, just maximizing load space and reducing your number of shipments means fewer fuel surcharges.

Another basic is staying informed of current fuel prices to make sure you’re not being overcharged. Check the U.S. Energy Information Administration (EIA) index for the latest numbers and work with carriers who are transparent in their calculations.

Fuel surcharges are typically calculated as a percentage of base freight rates and that percentage can be open to negotiation. Locking in rates with carriers for a set period or agreeing to a cap can help shippers attain some predictability in their freight costs, especially when diesel prices spike.

If you have flexibility in your delivery window, shipping during times of the year when diesel prices are historically lower can also translate to lower fuel surcharges. One example is that diesel prices tend to be lower in spring and summer, according to the EIA.

Control Accessorial Charges

Carriers charge accessorial fees for services over and above the pickup and delivery of orders. There are accessorials for everything from liftgate services and residential deliveries to detention charges that are incurred whenever a trucker is delayed.

According to Kelley, the main accessorial for shippers is detention. Delays that hold-up truckers can cost you—but are largely controllable through planning and communication. She recommends shippers always confirm appointment times and delivery windows with the recipient. Coordinating ETAs and notifying parties in the event of delays also helps control detention charges.

Scott adds that planning ahead by having pallets shrink wrapped, staged and waiting for truckers can help avoid delaying a trucker and drawing detention charges.

There are a host of accessorials that can be avoided by providing accurate paperwork. Get the details right for NMFC codes and freight classification when you’re shipping LTL. Ensure you have the right shipment weight and dimensions. And make sure to provide information on how the load will be palletized and any instructions for care.

Accurate information assists carriers and their drivers in doing their job efficiently. When their process is impeded, you tend to pay.

Savings Add Up

Reducing freight costs substantially and consistently requires monitoring and mastering details that are in constant motion. It’s easy to lose sight of the opportunities when you are focused on getting orders filled.

Talk to WSI and ask our team to eyeball your current program. We guarantee we can open new avenues to save and serve your customers better.