Conducting a Business-Wide Assessment to Lower Freight Costs

   

With the continual increases in the costs of oil and its effect on shipping rates, companies need to conduct a business-wide assessment in order to reduce your shipping costs. Here are 15 short- and long-term options
to investigate:

  1. Review your freight and shipping costs and renegotiate your carrier contracts.
  2. Can you use USPS to your advantage?
  3. Are you using best-way rate shopping?
  4. Consider package weighing, and take out inserts when they push the package into a higher bracket.
  5. Can you leverage economies of scale using the same carriers for inbound and outbound freight?
  6. Investigate the economics of a second warehouse to reduce the distance and cost to ship to the customer.
  7. Reassess your shipping and handling table.
  8. If you’re going to use free shipping, reassess the minimum dollar order value and its effects on your transportation costs. Should the minimum be increased?
  9. Review whether you should use by-item shipping charges in your web and catalog copy for heavy and oversize products.
  10. Can you make use of package consolidators and zone skipping?
  11. Assess your warehouse operations and determine if other costs can be reduced to help offset these increases.
  12. Improve your inventory forecasting and systems to improve inventory position and decrease the cost of back orders; keep in mind the $6.15 Ground residential minimum charge.
  13. From marketing and merchandising perspectives, how can the average order value be increased so that shipping cost is not such a large percent of the average or small order?
  14. Review your policies for giving away free freight to return merchandise.
  15. Is it time to use an experienced transportation consulting company to help you get savings? Or are you big enough to hire an internal specialist to continually assess and hopefully lower your costs?

Contract renegotiation is your #1 weapon. How much can be saved will depend on a number of factors: how well prepared you are in terms of knowing your package shipping profile; knowledge of carrier pricing and what can be discounted and negotiated; the 90+ accessorial
charges and how they make up your total costs, etc. Another factor to consider is how important your account is to the carrier's depot or hub. We’ve learned that sometimes smaller accounts are much more important than management might realize, given the outbound volume.

The most nimble multichannel companies will determine how to offset these foreboding continual increases. We believe it will take all the weapons—both short-term tactics and longer-term strategies—to keep profitability from eroding.