How to Reduce Freight Costs: Strategies & Tips

Prices have risen for goods and services across the country. For many businesses, freight costs are a significant expense—the higher the cargo’s density, the greater the cost. However, with intelligent planning, the right resources, and modern technology, companies can work to maximize load efficiency, streamline logistics, and improve route planning, all of which can help reduce freight shipping costs. Running leaner is increasingly important to a company’s bottom line. Shippers now have many tools at their disposal that can help drive greater efficiency and lower freight expense throughout their shipping operations.

Challenges of Reducing Freight Costs

Reducing freight costs can be difficult simply because of how quickly and how complex shipping transactions are, and that you don’t always get a choice of what you want to ship and when. Common challenges encountered by shippers are:

• Constantly fluctuating fuel prices.

• Supply chain logistical issues.

• Needing to continually work to balance cost savings with maintaining timely deliveries.

• The time and energy needed to try and figure out where and how to reduce freight costs.

With the diversity of available shipping options and the variability in carrier rates, freight cost management efforts can be tough even for companies that have been in business for years. To stay competitive, reducing freight costs is crucial for businesses that want to improve their company’s bottom line and continue to stay in business.

Analyzing Your Current Freight Costs

Conducting a Freight Cost Audit

A freight cost audit is an important first step in identifying opportunities for cost savings. This involves a thorough review of your current expenses, identifying cost drivers, and assessing your current shipping methods. Here’s how it’s done:

• Review Current Expenses: Start by gathering all your freight invoices and analyzing them to understand your current spending patterns. Look for any discrepancies or overcharges. This can be done manually or using modern freight management software, which can synthesize large amounts of data quickly.

• Identify Cost Drivers: Uncover the primary factors that shape your freight costs like fuel surcharges, accessorial fees, or inefficiencies in your shipping processes. Delays, heavy packing materials, and communications issues with carriers can all contribute to freight costs.

• Assess Current Shipping Methods: To identify what’s working and what isn’t, you should evaluate what aspects of your current shipping operations are the most cost-effective and the least cost-effective. Evaluate your relationships with existing carriers, examine shipping times to uncover patterns, and consider that you might not be using the best available shipping modes.

Using Data Analytics

Freight data analytics are used to give you insights into your shipping data that are tough to understand in a micro lens. Using analytics, you can help identify where costs are going and set specific cost-reduction goals. This type of data can be used to identify trends, expose inefficiencies in the shipping process, and flag areas for improvement.

Other best practices when using data analytics include:

• Use data analytics to track key metrics such as shipping costs per mile, carrier performance, and transit times. Analyzing this data can reveal patterns and opportunities for cost savings.

• Invest in freight analysis tools and software that automate data collection and analysis efforts. Modern freight management software can provide real-time insights and help you make data-driven decisions to reduce costs.

Strategies to Reduce Freight Costs

Optimize Shipping Routes

Enhancing how you think about your shipping routes can lead to reductions in travel distances, help avoid congestion points, and ultimately, lead to lower freight costs. Here are a few strategies to consider so that you optimize routes in support of company cost reduction goals:

• Route Planning Software: With modern route planning software, you can map the most efficient shipping routes for any freight. These tools can also help your freight avoid traffic, reduce fuel consumption along the journey, and minimize overall transit times.

• Reducing Travel Distances: Locating warehouses, distribution centers, and other delivery locations that are closer to your customer/destination can help you shorten the distance your shipments need to travel.

• Avoiding Congestion Points: Certain days, times, and routes may regularly slow your freight down. Analyze and identify common congestion points that can delay shipments and increase costs so you can take steps to avoid them by adjusting delivery times or days, or by using alternative routes.

Consolidate Shipments

Gaining control of your shipping activities means working proactively not reactively, so that you can ship smarter and faster. Consolidating shipments can reduce the number of trips needed, leading to significant cost savings. While some of these may be common sense, when you are in reactive mode you respond to every shipment inquiry on an individual basis, whereas looking at your shipments collectively can allow for proactive planning to drive savings.

Group smaller shipments into a single, larger shipment when possible. This can reduce the number of trips and lower per-unit shipping costs. Utilize Full Truckload (FTL) and Less-Than-Truckload (LTL) Options when possible. Choose the most cost-effective shipping method based on your shipment size. FTL can be more economical for larger shipments, while LTL is suitable for smaller loads.

Negotiate Better Rates with Carriers

Improved communications and strategic planning can help you build stronger relationships with carriers. Negotiating better rates with carriers can also lead to substantial savings.

Don’t work on a one-off basis, awarding every bid to a different carrier. Aim to establish long-term relationships with your carriers taking a holistic view of your operations. Reliable partnerships can help you build trust, which can drive better relationships, better rates, and more favorable terms.

You may be able to negotiate bulk shipping discounts for high-volume shipments. Carriers sometimes offer lower rates for consistent, high-volume business.

Don’t forget to read and fully understand all of your carrier contracts. Understand fair market rates, and don't be afraid to negotiate, asking for discounts or proposing more favorable terms for transportation costs. With stronger relationships, carriers may be more likely to negotiate with you.

Implement Technology Solutions

Technology now plays a crucial role in reducing freight costs by improving efficiency and providing real-time insights. Freight management technology is advanced software that can analyze your operations and identify problems, helping you hone in on efforts that can help you reach specific goals. Considerations when evaluating freight management software include:

• Transportation Management Systems (TMS): These systems streamline your freight operations, helping to manage carriers, track shipments, and optimize freight routing.

• Real-Time Tracking and Monitoring: With live shipping data insights, you can use software to track shipments in real time. This can help you identify and address any issues that arise immediately, reducing delays and associated costs and driving customer satisfaction.

• Automation Tools: With machine learning, thousands of data points can be processed in seconds. These tools can be used to reduce manual processes and errors, making the entire shipping process more efficient and accurate.

Leveraging External Resources

Third-Party Logistics (3PL) Providers

Third-party logistics providers (3PL) can help lower your transportation costs and increase efficiency. 3PL providers can bring their expertise, technology, or even economies of scale. But choosing the right 3PL partner is important. Consider their reputation, relevant experience, and capabilities. Do their goals align with yours?

Freight Brokers

Freight brokers can help reduce freight costs. Essentially, freight brokers facilitate connections between you and the best carriers with the best rates. They may have access to a wider network of carriers than you and may be able to negotiate better rates on your behalf. If you’re working with freight brokers, be sure to someone with a proven track record, relevant industry connections, and who provides good customer service—you want someone who is available when you need them, and who understands your goals of hiring a broker.

Reduce Freight Costs with Planimatik

Reducing freight costs can be approached in several business directions, including conducting a freight cost audit to uncover problem areas, leveraging comprehensive shipping data insights, optimizing routes shippers take, consolidating shipments, negotiating better rates, improving packaging efficiency, and leveraging external resources like 3PL providers and freight brokers.

If you're looking to reduce your freight costs, contact Planimatik today for a free demo. Our freight management technology solutions can help you achieve significant freight cost savings and improve your overall logistics efficiency and operations.

See our case study to learn how Planimatik reduced operational costs for ITS Logistics by 20% within the initial six months post-implementation.