How to tell if you’re over spending on freight

A 2012 study conducted by Logica found that, "most US-based organizations overspent by an average of 13% on their annual shipping costs." Their Director of Logistics and Supply Chain Services, Thomas Andersen, went on to say this: "What worries me more is that companies aren’t aware of the problem [...] From my experience, more than 90% of shippers could make minor changes that would generate double-digit savings. If they began to analyze the details of their transportation costs, it could make a big difference in their overall shipping spend.”

Since the study was conducted in 2012, costs have only continued to increase. In 2017, the Wall Street Journal shared the findings of a logistics study from the Council of Supply Chain Management Professionals, which stated "that total spending on shipping costs rose to a record of $1.5 trillion in 2017, upping 6.2 percent from the year before." They expected "rising interest rates, higher costs of fuel and impending tariffs [to add to] business expenses."

Most recently, e-commerce has skyrocketed due to the emergence of COVID-19, which has forced  businesses to be more agile and begin implementing change much faster than they previously did before. In regards to the effect left by the pandemic, CNBC has published this recent report statement from Jefferies analyst Janine Stitcher: “The recent growth in shipping costs has been fueled by the surge in e-commerce penetration, which has created a significant supply/demand imbalance and left carriers capacity constrained."

Clearly this is a widespread issue. Business owners may realize that they can save costs in certain areas, but may have trouble pinpointing exactly where they can increase their benefits. What can you do to lower your costs as a shipper during these times? Go down this list with us and find out. 

Automate Manual Processes

Are you still using spreadsheets? Do you still do your paperwork by hand? If the answer to those questions is yes, one of the first ways you can begin saving money is by automating these manual processes. Switching to a document management system will cut down on labor costs and shrink your margins of error, as well as save you from hours of writing, filing, and organizing. Find a good management system to help you with your record and bill keeping, and reap the profits of more time and higher accuracy. 

Use a Third-Party Logistics Company

The world of supply chain and logistics is fast moving and competitive. When you have a hundred other things to think about, it would be prudent to consider the services of a third party logistics company. They have years of experience in streamlining the processes giving you trouble, and they also have access to technology that can truly optimize your freight experience. What would be most helpful is a logistics product or service where they can help you analyze and combat your pain points. This can range from alerting you of upcoming market trends to which lanes are the cheapest and most consistent. 

Minimize Shipping & Packaging Costs

Spend some time looking at your minimal expenses. Can you switch from a heavy packaging option to something light and inexpensive, like bubble mailers or envelopes? If not, start buying your shipping supplies in bulk and save on packaging expenses. Buy a scale and pallet if you don't own one already, and make sure to weigh your shipments before they leave the warehouse so you can avoid reweigh and reclassification costs.

The actual cost to wrap and ship your packages have a plethora of tiny costs associated with it, which are based on parameters such as packaging type, shipment weight, tariffs, etc. These costs are relatively tiny, but tiny costs add up, and that is extra money that could be spent elsewhere in your business. You should also consider reusing and recycling where you can, which is cost-friendly and sustainable. 

Reduce Returns

Another way to reduce your costs as a shipper is to start identifying when your product is not returning profit. Whenever your product is damaged in transit, or is returned by the customer for related reasons, the costs of having shipped the product still chips away at your profits. You can reduce your returns by investing in tracking tools for your shipments. Both you and the customer can have access to a real-time, reliable stream of information about the status of the shipment. Having visibility and being able to see each step of the delivery process will provide a definitive improvement in satisfaction levels. 

Optimize Your Transportation Selection

With a reactive market and shifting prices, it is in your best interest to periodically assess your transportation costs. If the conditions are right, renegotiate prices for transportation mode or routes so that you are not being overcharged. This is even something you can do in advance. Make sure to distinguish between your transport costs and landed costs in order to give you the best overview of your actual transport spending. Avoid lock-in by checking if other reliable carriers that fit your needs have lower costs, and switch over. 

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Sources:

https://www.businesswire.com/news/home/20120501005093/en/New-Study-Companies-Overspent-on-Shipping-an-Average-of-13-in-2011

https://www.wsj.com/articles/companies-are-spending-more-on-shipping-and-thats-not-changing-soon-1529413500

https://www.cnbc.com/2021/02/18/online-shipping-costs-expected-to-increase-further-into-the-pandemic.html

https://www.mixmove.io/blog/5-signs-that-you-are-spending-too-much-on-delivery-costs

https://www.simplfulfillment.com/blog/youre-probably-overspending-on-shipping-lets-change-that