For many companies, freight costs represent one of their five largest expense items. Unfortunately, many executives view freight costs as a fixed cost, a necessary evil and do not take advantage of the many opportunities available to achieve savings. While freight bids have become one of the most popular methods of achieving cost savings, here are some other options to consider.

Packaging

Wal-Mart has launched a major offensive, under the guise of a “green” initiative, to reduce the costs they incur in paying for freight by challenging their vendors to develop more cost effective packing. They are clearly on to something. There are consulting companies that specialize in this field. They will come in to your company, analyze the packaging of your products and develop methods of removing air from your consumer packaged goods. If you calculate the cost of adding one or two more pallets of freight to a truckload shipment, the annual cost savings can be enormous.

Loading

Since you are paying for space occupied on a trailer or container, there are situations where new loading processes or changing pallet dimensions can replace the “air pockets” in a trailer with more freight. In some industries, this represents a significant cost savings opportunity.

Customer Order Sizes

There are situations when a customer order does not fill a trailer or boxcar. Some customers can be convinced to take additional freight to fill out the space available. This will produce additional revenue and reduce your freight costs as a percent of revenue.

Establishing Best Practices

Many accessorial charges imposed by carriers are a direct result of poor freight handling processes. Some companies do not have driver appointment times. This may cause loading or unloading delays as trucking companies line up to make their pick-ups or deliveries. Poor planning can lead to trailer detention, another popular accessorial charge. Creating and maintaining best practices can eliminate some of these unnecessary costs.

Modal Choices

There can be big cost savings in switching from expedited freight to standard ground, from small parcel to LTL, from LTL to truckload, and from road to rail. While these changes may not be acceptable to customers in all instances, it is at least worthwhile having a dialogue with your customers and with production to see if earlier order notification, a change in production scheduling coupled with a switch in modal choice can save you and your customer some money. You will never know unless you ask. Since your customers are probably looking for cost savings as well, these types of decisions may improve your company’s competitive position.

Take advantage of Consolidation and Polling Opportunities

Have you looked into consolidating freight and shipping to certain geographical areas on designated days, moving freight to “pool” points where the freight can be disaggregated and shipped to customers in larger more cost effective lot sizes? Have you looked at combining supply chains and taking advantage of the higher shipping volumes to specific locations? Have you thought about combining your freight with your sister companies or even competitors to increase shipment sizes?

There are a multitude of cost savings opportunities out there for enterprising shippers that are willing to challenge the status quo and try some new freight handling processes.