Reducing Freight Costs – Opportunities are Often Overlooked by Manufacturers
by Dan Mintz
Many Washington state manufacturers just accept that their cost of freight is high when doing business in a global marketplace. Often, these manufacturers experience a competitive disadvantage when competing for east coast business with firms that are closer to their customers, while subsidizing freight costs to obtain business can take a healthy bite out of the bottom line. The good news is that there are opportunities to reduce the costs of your less-than-truckload freight.
There is no single “magic bullet” when looking for freight cost reduction opportunities. Instead, the savings will come from the total result after looking at many different components that affect the costs. For example, there are ways to reduce your product freight classifications – a key component in setting the retail pricing of your freight. Your company may have negotiated a great discount off the LTL carrier’s retail price, but retail price is high if the freight class is higher than it should be. It is also important to identify key areas that you ship to on a regular basis. Specific point-to-point pricing can be designed around your highest volume shipping destinations.
Packaging changes may be made that help reduce freight costs and reduce the cost of packaging without compromising the product protection. The larger freight carriers have resources available for packaging design assistance and testing to ensure minimum damage. We have seen shippers that had utilized a more expensive mode of transportation simply because their packaging wasn’t suitable in the LTL carrier environment.
One of the most overlooked areas is in proper freight bill auditing. Carriers make mistakes, and sometimes pricing is not applied properly on the freight bills. Someone needs to be educated as to the terms of the carrier pricing arrangement so that they can verify the correct pricing on each freight bill before it is paid. We typically see auditing that is done simply to verify that the freight bill should be paid by the company, or that the weight matches that shown on the bill of lading.
Dan Mintz is with NTM, Inc., a transportation consulting firm that helps Washington state manufacturers to reduce their costs of inbound and outbound freight. For the past 23 years, NTM has worked with many firms to design, negotiate and implement freight programs that save money while improving service to customers.
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