Reducing freight rates is a key way of saving money in the industry. We are going to look at the top ten ways to accomplish this goal. In part 1 of a two part series, we will look at this specific concern in the shipping industry and find the best way to reduce freight rates.
1. Eliminate costs for the carrier and share the savings. It seems obvious: if you save the carrier time and money, you will reap the benefits. For example, Procter & Gamble eliminated the long waits for unloading by providing the customers an incentive to get all trucks turned in two hours. By eliminating hours of hand unloading and counting, carriers turned their equipment faster and had happier drivers. A win for the carriers resulted in a win for P & G and the end result was reduced freight rates.
2. Create continuous moves. In the early 1980's, Xerox started to send trucks on a tour that ultimately ended back at the origin. Xerox paid for every mile driven, and since it was able to keep the trucks loaded, they were rewarded with lower per-mile rates.
3. Fuel surcharges are favoring the carriers at the expense of shippers. The surcharge is based on fuel efficiency (mile per gallon) far lower than the carrier actually achieves. Carriers also pocket the difference between actual fuel costs and the DOT retail price - which may be quite a bit higher.
4. Use software technology whenever possible. It can do away with the administrative work that takes a lot of time. And administrative time is a hidden part of the total freight rate. Eliminating administration can therefore reduce freight rates.
5. Perform routing and consolidation. Face it, doing routing or consolidation manually is not optimal. Again, there are systems that are so much better at that. Let them do it. It will save costs and on average reduce freight rates.
Test your skills and see how efficient you are at managing costs by loading a truck or picking pallets in a warehouse. Visit www.TransportationOptimization.com. While there, ask for a call with one of their premier transportation consultants. Working for many companies in the top Fortune 50 like Procter & Gamble and BP, Transportation | Warehouse Optimization understand your unique problems and know how to solve them. - 15359
1. Eliminate costs for the carrier and share the savings. It seems obvious: if you save the carrier time and money, you will reap the benefits. For example, Procter & Gamble eliminated the long waits for unloading by providing the customers an incentive to get all trucks turned in two hours. By eliminating hours of hand unloading and counting, carriers turned their equipment faster and had happier drivers. A win for the carriers resulted in a win for P & G and the end result was reduced freight rates.
2. Create continuous moves. In the early 1980's, Xerox started to send trucks on a tour that ultimately ended back at the origin. Xerox paid for every mile driven, and since it was able to keep the trucks loaded, they were rewarded with lower per-mile rates.
3. Fuel surcharges are favoring the carriers at the expense of shippers. The surcharge is based on fuel efficiency (mile per gallon) far lower than the carrier actually achieves. Carriers also pocket the difference between actual fuel costs and the DOT retail price - which may be quite a bit higher.
4. Use software technology whenever possible. It can do away with the administrative work that takes a lot of time. And administrative time is a hidden part of the total freight rate. Eliminating administration can therefore reduce freight rates.
5. Perform routing and consolidation. Face it, doing routing or consolidation manually is not optimal. Again, there are systems that are so much better at that. Let them do it. It will save costs and on average reduce freight rates.
Test your skills and see how efficient you are at managing costs by loading a truck or picking pallets in a warehouse. Visit www.TransportationOptimization.com. While there, ask for a call with one of their premier transportation consultants. Working for many companies in the top Fortune 50 like Procter & Gamble and BP, Transportation | Warehouse Optimization understand your unique problems and know how to solve them. - 15359
About the Author:
Tom Moore and his associates at Transportation l Warehouse Optimization will help you reduce freight rates and save you money. Transportation l Warehouse Optimization consults with companies such as PG and BP and many other CPG companies. They can help you reduce freight rates and save money.
