One of the significant components of supply chain costs for manufacturers, distributors and retailers alike are freight expenses. It is almost always the single largest cost component in a company amounting to around 10% of the revenue of companies under $250 million sales range, an Annual Study of Logistics and Transportation Trends by Logistics Management shows. Yet, how often we see companies who under manage it. In reality, freight expenses are manageable, negotiable and controllable.
Breaking Down Freight Costs
The largest component of shipping costs–Actual Freight Cost. This includes linehaul transportation, delivery and components for pick-up and cross-docking for less-than-truck load or small parcel shipping. This expense also includes administrative costs like billing, PODs and data entry. For LTL and small parcel shipments, this includes the weight of the shipment and the space it occupies in the line-haul unit.
The second largest component is Fuel Cost. This may show in the line hail rate or as a surcharge on a carrier invoice. Discounts and surcharge computation vary with each carrier. When shipping, you must be cautious of the surcharges you are paying for the volume of your freight.
Finally, accessorial charges accounts for other services not included in the line-haul rate or the fuel surcharge. This accounts for deliveries to apartment buildings or job sites, redelivery to a separate location, trailer detention and driver waiting time, among others. Part of these charges may be a sign of poor shipping practices like not providing appointment times for carriers. Over the years, carriers have started to account for all these services that carry some cost from their business.
How To Know If You’re Overpaying for Shipping
With poor or no planning, you can lose sales in your business. For example, high cubing or high claims charges may reflect poor loading and packaging processes. Also, I cannot stress enough the importance of a knowledgeable individual to handle freight management. Things like fuel charges, density of freight, conducting RFPs, correct and efficient management of carriers and modals (e.g. using rail service as a cost-effective plan for delivery instead of truck), in the hands of a poor freight manager will incur you a lot of expenses.
Check Your Insurance Rates
One thing most businesses don’t check is their insurance rates, but it’s something that can save a company a lot of money. According to Hometown Benefits Group who specialize in insurance in Springfield, MO and Missouri car insurance say that they find most businesses don’t regularly check if they can save money by switching their insurance carrier. As a business it’s smart to do this at least once a year to see how new rates can impact your business.
Companies that are successful in managing freight expenses have a solid process in place for managing this high-cost activity. They use essential Technology and Systems like shipment routing and dock scheduling for freight management. Most of all, they have the resource of knowledgeable staff who put in effort and proper planning to control, negotiate and manage freight costs with a third-party logistics provider or carrier.
It’s also important to know that if nobody sees your site then the shipping wont matter so it’s important that you either optimize your website or hire an agency to do that for you. We recommend Vibranium Internet marketing as they are the top SEO agency in Springfield, MO and have helped businesses all over the country get great results as well.