How to Reduce Freight CostsPosted On 5th August 2022
The term "freight cost" is used to describe the expense associated with shipping goods. This can include the cost of the actual transportation, as well as any packaging, handling, or other related expenses.
When calculating freight costs, it is important to consider all aspects of the shipping process in order to get an accurate estimate.
Freight Costs Explained
Freight costs can vary considerably from one shipper to another. It is important to compare rates before selecting a transportation provider or a shipping company. In addition, be sure to ask about any hidden fees that could increase the total cost of shipping.
Charges for shipping LTL common carrier freight generally fall into two categories: base rates and accessorials. Base rates are the charges assessed for moving the freight itself, while accessorials are additional charges for services related to the shipment, such as loading, unloading, or freight shipping insurance.
Freight charges in the common carrier LTL world are typically quoted on a per-hundredweight (cwt) basis. This means that the shipper will charge a certain amount for each 100 pounds of cargo being shipped. For example, if a shipper quotes a rate of $2.00 per cwt and you are shipping 1,000 pounds of freight, your total shipping cost would be $20.00.
Charges for accessorials are typically quoted on a per-shipment basis. This means that the shipper will charge a certain amount for each shipment, regardless of the weight of the cargo. For example, if a shipper charges $50.00 for loading and unloading services, your total cost would be $50.00 regardless of the weight of your shipment.
In some rare cases, freight charges may be quoted on a mileage basis. This means that the shipper will charge based on the distance the shipment must travel. For example, if a shipper quotes a rate of $1.00 per mile and your shipment is going to travel 100 miles, your total shipping cost would be $100.00.
Factors that Affect Freight Costs
There are a number of factors that can affect freight costs, including distance, fuel prices, and demand.
Distance is one of the most important factors in determining freight costs. The further the distance, the more it will cost to ship goods. This is because there are additional costs associated with longer journeys, such as fuel and driver fatigue.
Fuel prices are another important factor in freight costs. As fuel prices increase, so do the costs of shipping goods. This is because fuel is one of the largest expenses for trucking companies. When fuel prices rise, companies must either raise their rates or cut corners elsewhere to make up for the increased expense.
Demand is also a factor in freight costs. When demand is high, companies can charge more for their services. This is because they have the ability to ship more goods and there is a greater need for their services. However, when demand is low, companies may have to lower their rates to attract customers.
10 Tips on How to Reduce Freight Costs
If you're like most businesses, freight costs are a significant line item in your budget. But there are ways to reduce these costs and keep more money in your pocket. Here are a few tips:
1. Use technology to your advantage
Technology can help you reduce freight costs in a number of ways. First, use it to research the best shipping options and rates. There are a number of websites and apps like FreightRun, that can help you compare rates and find the best deals.
Second, use technology to track your shipments. This way, you can know exactly where your shipment is at all times and avoid any delays or unexpected costs.
Third, use technology to automate your shipping process. There are many software programs available that can help you automate tasks like booking shipments, generating labels, and tracking payments. This can save you a lot of time and money in the long run.
2. Find the right carrier for your needs
Not all carriers are created equal. Some specialize in certain types of shipments, while others have lower rates for certain destinations. When you’re looking for a carrier, be sure to take into account all of your shipping needs so you can find one that’s a good fit for your business.
3. Negotiate shipping rates
If you want to reduce your freight costs, one of the best things you can do is negotiate shipping rates with your carrier. While it may seem like a daunting task, negotiating shipping rates can be relatively easy if you know what to do and say. Here are a few tips on how to negotiate shipping rates:
Know Your Shipping Costs
The first step to reducing your freight costs is understanding what they are in the first place. Make sure you have a good handle on your current shipping costs, including both the base rate and any additional fees or surcharges. This will give you a baseline to work from when negotiating with carriers.
Know What You Want
When you're ready to start negotiating shipping rates, it's important to know exactly what you want. Do you need a lower base rate? Are there specific surcharges you'd like to see waived or reduced? Having a clear idea of what you're hoping to achieve will make the negotiation process much easier.
Be Willing to Compromise
While it's important to know what you want, it's also important to be willing to compromise. In many cases, carriers or their 3PL or APPs like FreightRun will be unwilling to meet all of your demands. As such, you'll need to be prepared to give up some things in order to get others.
It's also important to remember that carrier representatives are just doing their job. They're not out to help you reduce your freight costs; they're out to make a profit for their company. As such, it's important to be professional when negotiating with them. Be polite and respectful, and don't try to bully them into giving you what you want.
Have a Backup Plan
Finally, it's always a good idea to have a backup plan in place. If the carrier you're negotiating with isn't willing to meet your needs, be prepared to walk away from the deal. There are plenty of other carriers out there, so don't be afraid to shop around until you find one that's a better fit for your business.
Also, of course, if you can substantiate the volume you ship by sending multiple Bills of Ladings or actual Freight Bills to an online freight application like FreightRun, they can potentially make available to you certain wholesale pricing which essentially combines your "annual freight buy" with that of other large shippers and might yield you lower rates than would ever be available if you negotiated directly with the common carriers one by one.
4. Take advantage of volume discounts
If you ship large volumes of goods, you may be eligible for volume discounts from both online 3PLs like FreightRun and LTL common carriers. These discounts can add up to significant savings, so it’s worth inquiring about them when you’re shopping around for a carrier.
5. Use less packaging
One way to reduce your shipping costs is to use less packaging. This can often be done by using lighter-weight materials or by reducing the amount of packaging material you use. Of course, you’ll need to make sure that your goods are still well-protected, but using less packaging can save you money if it makes your freight fit into less space without sacrificing the protection against damage that good packaging provides.
6. Choose the right shipping method
There are many different shipping methods available for businesses to choose from, and each has its own set of benefits and drawbacks. The best shipping method for your business will depend on a variety of factors, including the type of products you sell, your budget, and the speed at which you need your products to be delivered. Here are a few tips to help you choose the right shipping method for your business and reduce your freight costs:
- Know Your Products: The first step in choosing the right shipping method is to know your products. You need to understand the dimensions and weight of your products, as well as how fragile they are. This information will help you determine which shipping method will be able to accommodate your products safely and at a reasonable cost.
- Consider Your Budget: Shipping costs can add up quickly, so it's important to consider your budget when choosing a shipping method. If you're on a tight budget, you may want to choose a slower shipping method, such as ground shipping. If speed is more important to you than cost, you may want to choose an expedited shipping method, such as overnight or 2-day shipping or even direct exclusive use of a truck or a combination of direct trucks to the origin airport, direct as possible air, and direct delivery truck. Speed should always be more important than price if the shipment must arrive for a sales presentation by your CEO, or a tradeshow, or other vitally important shipments which if not on time will reflect badly on the company and its shipping or logistics manager.
- Compare Shipping Costs: Once you know your products and your budget, you can start comparing shipping costs. There are many online tools that can help you compare the cost of different shipping methods. When comparing costs, be sure to take into account the weight and dimensions of your products, as well as any discounts that may be available.
- Choose the Right Carrier: The carrier you choose can have a big impact on your shipping costs. Some carriers, such as UPS and FedEx, offer discounts for businesses that ship large volumes of products. If you're not sure which carrier to use, you can always ask your shipping provider or 3PL or online 3PL like FreightRun for a recommendation.
7. Ship at the right time
Shipping costs can vary depending on the time of year. In general, rates are lower during the off-peak season (January to April). So if you have the flexibility, it may be cheaper to ship your goods during these months.
8. Compare prices between carriers
Before you choose a carrier, be sure to compare rates from multiple companies. There can be significant differences in price, so it’s worth taking the time to shop around. You can use a FreightRun online shipping calculator to compare rates from different carriers.
9. Get creative with your packaging
There are many ways to save money on packaging costs. One is to use recycled materials whenever possible. Another is to get creative with your packaging design. For example, you might be able to use smaller boxes or consolidate multiple items into one shipment.
10. Have a plan B
It’s always a good idea to have a backup plan in case your first choice for a carrier falls through. This could be another carrier that you’ve negotiated rates with or even a different shipping method. By having a plan B, you can make sure that your shipment will still get where it needs to go – without spending any more money than necessary.
By following these tips, you can save money on your shipping costs. By using the right technology, finding the right carrier, and being creative with your packaging, you can reduce your freight costs significantly.
Use FreightRun to Get the Best Freight Costs
FreightRun is an online marketplace that connects shippers with carriers. This allows shippers to get the best rates on their shipments, and also gives carriers the ability to fill empty capacity.
FreightRun offers a wide range of services, including:
- LTL (Less than Truckload) shipping;
- FTL (Full Truckload) shipping;
- Intermodal freight shipping;
- Oversize Freight Shipping;
- Expedited Freight Services;
- and much more.
No matter what your shipping needs are, FreightRun can help you get the best rates. We work with all major carriers, so you can be sure you're getting the best possible price for your shipment.
Ready to get started? Get a free quote today!