When using shipping services, price may be a very important factor to consider. Especially if you have to engage the services of freight forwarders to handle your business.
Customers often think that the way freight forwarders arrange shipments is pretty much fixed and cannot change.
But just because everyone is used to the standard ways of shipping and expenses associated with it, it doesn’t mean that is the only way.
Luckily for you, there are a few to reduce freight forwarding and related expenses.
Here are 8 tips to reduce freight forwarding expenses. Follow these steps and start implementing the changes that will help you today.
1) Evaluate your method of transportation
The first way to reduce freight forwarding expenses is to evaluate and reconsider your mode of transportation.
- If you are shipping a lot of cargo internationally, sea freight is typically a cheaper option than air freight
- If you are shipping freight locally, rail freight or road freight may be a better option based on the products you are shipping and their travel distance.
- You may consider alternate ways of shipping or even a hybrid of multiple modes, if necessary. A combination of air, sea and ground transportation could help you cut costs.
- Take time to do solid research on the advantages and disadvantages of each shipping mode and make your decision.
Secure cost estimates from several different companies and make a comparison. These days you can get this comparison online easily.
In 2021, it is imperative that you also evaluate your mode of transportation based on CO2 emissions. Typically sea freight has lesser emissions than other modes of freight transportation.
2) Ship during off-peak periods
Keep in mind that shipping a day later or earlier can make a difference and reduce freight forwarding expenses.
For example, Friday is typically an off-peak day for shipping road freight. This is because most customers are trying to get their products delivered by Thursday, so it can be on shelves Friday and ready for sale during the weekend.
Interestingly, Mondays can also be slow days, resulting in carriers looking for road freight. Of course, this could be a great option. This depends on the type of your cargo. For example, canned goods have more flexibility than fresh goods.
Where possible, shipping on off-peak days could be an ideal option for the shippers of non-consumer type products and cargo that is not time-sensitive.
3) Become a regular and enjoy the benefits
This may be a good way of getting the best price for services in general, in any industry, really. So, take some time to get to know your shipping carrier(s) and work on building a relationship with them.
Remind your carrier(s) how long you have been using their services and that you are a loyal customer. Once your carrier is reminded of your support and that they have and will continue to have steady business from you, they are likely to offer better conditions.
Hence, rather than switching to a new carrier, develop a good relationship with your current one. You will be surprised how much you can save through a strategic, long-term relationship. Every reliable company will do their best to keep regular customers.
Also, consider getting a longer-term contract as a way to lock in a better rate. This is a much better option than adjusting each year to the rising prices.
A good relationship and communication with your shipping company can improve the efficiency of your operations and reduce freight forwarding expenses. Being a loyal customer with a steady single lane, you can save up to 12% compared to standard pricing. Not bad, right?
Do research on prices, options and combinations of freight shipping that could suit your needs
UPDATE 2021 : The above may have been workable in 2019 when this article was initially published. However, 2021 is an entirely different ball game and it seems that it makes no difference to shipping lines whether customers have been loyal or not.
There have been a range of complaints and accusations against carriers ignoring long term contracts and forcing customers to go the spot market route.
So what do you do in 2021?
Well, at the current moment because of the prevailing market conditions, there is nothing much a freight forwarder can do to alleviate the sea freight rate issues for their clients.
For a BCO, freight forwarding expenses should not increase or decrease based on the freight rates as the freight forwarder still provides them the same set of services whichever direction the freight rate is heading.
In most cases, the freight forwarders would be charging their customers a service charge per container irrespective of the freight rates that are prevalent. Of course there are many different agreements and arrangements freight forwarders may have with their customers, but majority work on above basis.
Since in most cases, freight rates have become non-negotiable, all that the BCOs or freight forwarders can do is to at least ensure that they have space guarantees and confirmations based on their long relationships with the various lines.
Book your cargo way in advance and ensure that those bookings stay on the carrier’s list and is not knocked off. Follow up is crucial here.
For many customers right now, getting their products in the market is more important than the cost they are paying for it. Of course, there are also many customers who will not be able to sustain the high freight rates, but unfortunately, such is the nature of the business.
4) Ship more products, less often
If you can manage to do so, try shipping more goods less often. Because it is a lot cheaper to ship ten pallets at once than to send two pallets every two days. Retailers tend to ship smaller cargoes more often, which only increases their costs. Obviously, some goods need to be shipped more often, but if that is not your case, try this method to reduce shipping freight expenses.
5) Be aware of additional charges
Maybe you didn’t know this, but carriers often perform other services than just driving. They may have to load or unload the cargo, wrap some pallets, or make additional stops.
Such services are often not included in your cost estimate. Consequently, customers sometimes end up being surprised when they receive their invoices. For this reason, make sure you ask the company about all the extra fees you can expect.
Some of the most common unforeseen fees come from not understanding and not applying accessorial fees. In order to learn to recognize these services that may be extra charged, consider learning some of the shipping jargon.
The more you know about how to identify them, the easier it is to reduce and eliminate these costs. Some common extra fees are:
- Weight adjustments
- Residential adjustments
- Additional handling fees
6) Go hybrid
In order to reduce freight forwarding expenses, you can try to use a mix of transportation. A good combination of ground, air, and ocean transportation can reduce transportation time and cost accordingly.
Try to use the best of every transportation mode. For example, if air shipping is proving to be too expensive for you, but shipping via ocean will last too long, make a combination including ground shipping as well, if necessary.
Not all discounts have the same value, so make sure you do the math
7) Hire carriers based near your ship-to points
If your ship-to points are on their regular route, it is more likely to get a lower rate. Reducing the miles is a great way for you to reduce freight costs.
8) Choose your discounts wisely
The first thing you should look into when you want to reduce freight forwarding expenses are the rates given by a carrier.
Not all carrier discounts have the same value. For example, one carrier can have a higher base rate than the other one.
As a result, a lower discount from the carrier with the lower base rate can be more beneficial than a higher discount from the more expensive carrier. Therefore, remember to always do the math and find the offer that gives you the best price.
What methods do you use to reduce your freight forwarding expenses?
Article reposted after some critical updates
Very interesting and easy “digestible” post – I like it! I have relatively lengthy set of questions or better to say a broad discussion topic related to freight expenses and commodities prices. My main point of interest is to understand metals supply chains i.e. copper, zinc, etc. (dry bulk and container cargo) and how can traders mitigate risks associated with freight expenses. Do you think we will see new hybrid intermodal supply chains emerging because of those port congestion problems (US/China), geopolitical risks and zero covid policy in Chinese ports? Also among those proposed tips I think “Ship more products, less often” could be a viable solution for larger bulk deals as well. What about changes in payment terms and pricing related to transportation and commodities itself? Do you think we will see explosion of popularity of freight derivatives and legal actions such as activating force majeure clauses if a shippers won’t be able to offload the ship or guarantee on time deliveries. Super interested to hear your comments!
Hey, an excellent article about freight forwarding. I have also experienced some companies for this purpose. My experience was very good with them because they are very cheap and good at their services.
Great. Every new importer/exporter should know about how to reduce the extra cost of freight and customs and which freight like Ocean freight or Air Freight would be the best according to their freight or business.
It’s of paramount to reduce freight rate forwarding expenses by all means, because every organization are in business to generate revenue and maximize profits.For this to be achieved, the freight forwarding operations has to be cost effective in order to avoid revenue and profit erosion. Strategically,the above 8 tips should be effectively implemented for a desired result.
Reducing the rates definitely drops on our benefits but to be careful not based on work quality.
Not sure I can answer your question briefly, but I will do my best 😉
I am not sure how to read tip 3 and thus unable to conclude whether I agree. Yes, it definitely helps to build good relationships with transport suppliers and not shop around for every single transport; however, staying too long with one supplier, without putting your volumes truly in the market, is at the same time a short cut to increasing costs!
You are a couple of times hinting to two of the three points I believe is the most relevant…time and insight into the transport industry (and the one not mentioned – objectivity).
Many organisations has cut their staff count so low that the logistics staff do not have time to do proper freight tenders and they do not even know their own transport patterns (a fundamental part of getting the right price and service!). They do not have time to keep track of what is happening in the market and (probably due to the stress) do not consider alternative suppliers objectively. The result….higher freight costs.
Of course, guess I shouldn’t complain because I am making a living out of helping companies to reduce their freight costs, without compromising service level.
Some very valid points here Hans.. Thanks for the contribution.. In the end, I believe there has to be a good balance between all the tips mentioned in order for optimisation in the business.. 🙂