3 Ways to Reduce Freight Cost Unrelated to Rates!

Posted by Marc Wojnowich on Jan 21, 2019 3:57:56 PM
Marc Wojnowich
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Tired of fighting with Carriers over discounts, minimum charges and accessorials? Given the economy, capacity pressures, and LTL carrier's current perceived leverage, you may be more successful reducing your freight cost by taking a deep dive into your organization's shipping processes.

 Freight cost can be measured in various ways. Some executives choose to view LTL freight cost as a percentage of sales or purchases for inbound. Others may look more operationally at cost per pound. Both are useful. Understanding the drivers of LTL cost as described in a previous post is helpful in targeting areas where they can reduce the burden on the carrier. What can a shipper do outside of their relationship with the carrier?

Here are 3 Ways Shippers can reduce their shipping cost unrelated to Carrier Rates:

1.  Eliminate multiple shipments to the same destination on the same day or even back-to-back days.
This seems incredibly obvious. Combine two shipments on 1 BOL and now you have a higher weight, reducing Cost per Pound. If it is so obvious, why does ReconAnalytics reporting show in almost every monthly report, clients shipping numerous loads to the same customer on the same day.
The overwhelmingly most common excuse is, "The customer called with another order after the 1st was pulled. It's too difficult to find the order and change the paperwork." Is that acceptable? Is it really that difficult or better? What's that effort worth in savings?ReconLogisticPrincipal - ANALYTICS
Also heard regularly, "The customer wants each PO on a separate BOL." Obvious question, "is the customer paying for the freight?" I get that we want to serve our customers, but inevitably, the concern was never posed to the customer. If that customer is being billed freight, and they knew it could reduce their cost, might they consider changing their demands? Or is there are legitimate reason they prefer the carrier? So frequently, the question is never asked.
Combining two or oftentimes, more shipments could reduce cost from 20-50%. Is it worth the effort to change the paperwork or worth having a conversation with the customer?
2.  Understand the NMFC / Classifications and Density Impact of your Product
If you don't have good guidance on how your products' NMFC Classification impacts your cost, stop reading and skip to the bottom of the page and schedule time with me now!  
Let me use an example to demonstrate how big of an impact NMFC understanding can have on your cost. The class of Ice Machines recently changed. In the past, all Ice Machines shipped at class 92.5. Now, if the density of the shipment is less than 6 PCF, the class jumps to 250! 
Considering how density is calculated - measuring the dims of the entire shipment including the pallet - simply using a pallet sized to the actual dims of the machine, could take a shipment from a PCF less than 6 (CL 250) to over 10 PCF (CL 92.5). This real life example prevented a $250 shipment from costing more than $825
Are you clear on how the pallets, crates, or packing can impact your freight cost?
3. Accountability & Understanding Carrier Selection
Fundamental to Recon's value to our clients is providing tools of accountability. Reporting on Carrier Selection and Carrier Performance are two of these tools and the value of each merge to an extent when evaluating the use of the Lowest Cost Carrier.
First, let's immediately eliminate the explanation, "We don't choose economy carriers with poor performance to save money." Let's assume that we are choosing carriers from a lineup that includes all carriers which you would accept delivering to your clients.
So what are the reasons for not using the Lowest Cost carrier on a particular lane? Customer Request seems to be the most common. This begs the question, "How much is that customer choice costing you?" Are you billing the customer the freight? If not, I'd bet a lot of money the sales rep did not account for a carrier selection that is 20%+ higher than your expected delivered cost. 
In reference to carrier performance, a shipper may certainly find that a particular carrier does not perform well on a given lane. That happens even with the best of carriers. So long as the Carrier Performance reporting is consistent with the explanation, it's a perfectly valid reason. 
The real question is, are you capturing reasons why a Low Cost Carrier option isn't being used? While it may sound pessimistic, I was introduced to the value of a third party freight expert Pizzawhile I was working in textiles. Our office enjoyed pizza every couple weeks, delivered by the LTL carrier rep. He sure was nice... then a friend in the freight world asked to quote a shipment only to save us more than 55% on the load. Expensive pizza, huh?
What's the first thing you can do to take advantage of these three opportunities? If you aren't capturing data and reporting on these details, you must! Data drives actions. ReconAnalytics provides regular feedback to clients on where these soft opportunities exist.
Schedule time via the button below if you have questions on how you can implement some of these methods.
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Tags: Freight Terms, Density, LTL Pricing, Accessorials, Freight Tariffs, LTL, Freight Rates, Freight Management, Ship Smarter, Freight Data, Logistics, LTL Carrier, Reweigh, Reclass, Carrier performance, Freight Audit, Freight Pay

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