In most small businesses, freight costs are higher than owners and managers realize.
Shipping doesn't have to be a fixed expense – when every penny counts, freight optimization can deliver a substantial improvement to your bottom line.
Freight optimization is essentially a "right sizing" of your company's shipping activities. Far too many small businesses rely on shipping methods with higher capacities than they actually need to transport their merchandise. The result is a bloated shipping budget that drains the company of much-needed operating capital.
The process of freight optimization begins with assessing your current shipping strategy and identifying areas that are disproportionate to your requirements. Partially loaded trucks, high administrative overhead and mismatched modes of transportation are likely candidates for cost reductions.
- Transportation modes. Small and medium-sized businesses frequently overspend on shipping because they lack the capacity to ship full loads. Consequently, partially loaded trucks are sent out of the warehouse at the same price as a fully loaded shipment. Less-than-truckload (LTL) shipping options reduce costs by pooling LTL shipments from multiple shippers.
- Administrative requirements. Most small businesses lack the resources and people assets to oversee sophisticated shipping activities or LTL shipments. But hiring additional staff may not be the solution. Instead, consider contracting with a third-party shipping provider or implementing LTL software as a way to improve shipping efficiency and minimize overhead.
- Core vs. multiple carriers. Shopping around for multiple carriers on a shipment-by-shipment basis has some advantages. But it also requires more effort and fails to leverage the cost efficiencies of a core carrier contract. By adopting a core carrier approach, you can tighten your process and offload some of the administrative load to the carrier.
- Technological assets. A shipping operation that lacks adequate technological resources is a disaster in the making. Resources like LTL software and other shipping technologies systematize your shipping activities – often at a fraction of the cost of manual freight management.
- Inbound freight. If you haven't considered the costs associated with inbound freight, count on the fact that you're spending too much on shipping materials from your supplier to your plant. Commit to performing an inbound freight optimization process as soon as possible.