Companies are always looking for ways to save money, and one place they look to make cuts is on freight spend. However, because the market is currently oversaturated with freight, it may take some research to find the best rates for less than truckload (LTL) freight.
3 Tips to Lower Your Freight Spend
There are a few things companies can do to help get the best rates and lower their freight spend, but it really comes down to utilizing the available data and preparing as much in advance as possible. Following these three tips will help companies lower their shipping costs.
Consolidate your freight: When possible, consolidate, pack and stack your freight. If shipments are going to the same locale, box the freight so that it is stackable and palletize it. This makes it easier to move and more desirable to the carrier. Additionally, companies that ship to the same warehouse/location frequently, lessen your number of shipments through consolidation. Increase the amount of freight to bring down the number of trips. Analysts at FreightCenter found the average shipper can save 90% on freight spend by simply consolidating freight onto pallets and shipping it less frequently.
Know your carriers: There are a number of factors that go into how carriers will price loads. A shipper must learn as much about their carriers as possible to ensure it gets the best rates. To do that, a shipper can use historical data aggregated through its TMS or rating API to see which carriers price best on which lanes, what days of the week and times of year. Other useful information comes from simply asking questions and listening to the answers. If a shipper is up front about its freight, carriers will often be receptive to answering questions about which lanes they prefer. Ask carriers to find out where they have difficulty and in what lanes they are most profitable in. Shippers can then use that information to their advantage. If carriers are given the freight that they want in the lanes they want, they will offer the best rates possible, especially if given multiple or frequent loads.
Additionally, carriers have different tariffs, technology and liability insurance. As a shipper, the onus is on your company to know these things and understand how they can impact your freight rates. Take all of this information into consideration when you are comparing rates from carriers.
Get rid of RFPs and rate shop on every load. Because of the guesswork that goes into the RFP process on both the shipper and carrier side of the deal, it often results in higher annual rates. Shippers cannot guarantee freight amounts and carriers cannot foresee what the market will do or how their capacity will be throughout the year, so carriers must assume for all circumstances, which equates to higher rates. And since everyone knows what they say about assuming, this is obviously not the best rate-quoting method. It is just the way it has been done for a very long time. Instead of yearly contracts, it can be much more cost-effective to use a dynamic pricing model, which allows for rate shopping on each load. Through a freight-pricing API, shippers can compare carrier rates for each load all in one place, allowing them to choose the best carrier for each shipment. Additionally, with a dynamic pricing model, carriers can offer real-time discounts on lanes they need to fill, giving shippers lower than expected costs. This pricing model is a win-win.
The Benefits of Lowering Freight Spend
While it may take some research time upfront and may also require some adjustments in warehousing, by getting better LTL rates, you not only save money and increase your bottom line, but you can also improve relationships with carriers and employees by offering incentives for getting on board with finding ways to lower shipping costs.
Rely on data aggregated from the transportation management system and freight-rating APIs to compare and select the best carrier for every load. This will be a surefire way to save on freight or find the best carrier for each shipment.
To learn more about negotiating freight contracts, download Banyan Technology’s LTL Carrier Negotiations Guide: How to Maximize Your Results.