13 Strategies to

Reduce Freight
Costs

Change the way you ship

Shippers often work under the assumption that the way they ship

freight (and the associated costs) are pretty much fixed and can’t

change. But just because “it’s always been done this way” doesn’t

mean you shouldn’t challenge the status quo. At Kane Logistics,

we’ve identified a ton of ways to reduce freight costs, with

changes you can begin implementing today.

Some of them are very simple – such as offering night-time freight

pick-ups. A smart approach opens the door to savings that can

reach as high as 50% of “business as usual” freight charges. Below

are 13 specific suggestions to cut those freight costs, including an

estimate of how much you could save.

1. Contract steady lane volume

If your carrier knows he is going to work with you every day, and

is going to get a regular flow of freight in the same lane, he can

market those backhauls and build out his network. As a result,

you’ll pay less because the carrier is more efficient. Furthermore,

with capacity as tight as it is these days, these carriers will focus

on moving the freight of the people who are loyal and have

reliable freight volumes.

POTENTIAL SAVINGS: 2-12% versus traditional lane pricing.

2. Ship on off-peak days

Ship

ping a day later or earlier can yield measurable savings. Friday is

typically an off-peak day for shipping consumer goods because

most customers try to get their product to store by Thursday, so it

can be shelved Friday and ready for sale at the weekend.

Mondays also tend to be low-volume days when carriers are

typically looking for freight. Obviously, it depends on the cargo –

canned goods, for example, have more of a window than fresh

goods. Shipping off-peak is certainly a great option for shippers

of non-consumer type products.

POTENTIAL SAVINGS: 10% versus peak ship days.

3. Find a consolidation program
near you to handle smaller
shipments
Retail consolidation is a no-brainer – you combine your LTL

shipments with other nearby companies shipping to the same

mass retailers and grocery chains for direct delivery,

and everyone wins. Even larger shippers like Colgate and

CVS have gotten into the game. Suppliers like you pay only for

your share of a less-expensive TL shipment. And retailers

receive loads on time and get the same volume of goods in fewer,

fuller loads to keep their dock bays open and cut labor costs.

Where can you find suitable shipper-partners? Local Chambers of

Commerce or other business organizations are one place. You can

also work with a 3PL with a freight consolidation program that

serves multiple companies shipping to the same retail

customers.
POTENTIAL SAVINGS: up to 25% versus the cost of

unconsolidated loads.

4. Don’t be a serial rate

shopper; develop relationships
You may feel obliged to do the yearly RFP dance in order to show

management you’re serious about reducing freight costs, but

severing the relationship and starting fresh with new carriers

every year is not the best approach. It's really the freight

equivalent of "speed dating." When shippers develop more

strategic, longer-term carrier relationships, they create

transportation management advantages that have bottom line

implications. Longer term contracts give the carrier time to mine

for other customers in the area to create a more efficient network

with minimal deadhead miles. A carrier that is maximizing assets

is more profitable and can afford to give you better rates. A

longer-term contract, say 3 years, also locks in that rate for the

contract period, instead of changing – and maybe going up –

every year. Oh, and you get better service, too, from a carrier
you’ve committed to long-term. Hard to put a price on that, but

it’s significant.

POTENTIAL SAVINGS: 3-5% per year, these savings estimates can

easily double when capacity tightens.

5. Increase delivery lead times

Any time you can introduce planning into the supply chain, and

maximize the advance notice to the carrier about future loads,

they are able to maximize assets, including trucks, drivers and

warehousing space. An advance shipping notice allows a carrier to

line up the assets and resources, plain and simple. One of the

biggest costs for carriers is paying for a trailer to sit idle at

someone’s facility, waiting to load up. Having better planning

allows carriers to reduce those costs, then pass some of them on

to you. Planning can be improved on all aspects of the supply

chain – pick up, staging, live-loading. The longer the notice, the

more carriers can do behind the scenes to be more efficient and

come to you with a better price.

POTENTIAL SAVINGS: 5-20%.

6. Reduce dunnage
A lot of products require air bags, strapping, blocking and bracing

to prevent them knocking together during a trip across the ocean

or on a long-distance truck ride. But sometimes shippers go

overboard in trying to protect a product. Carriers can help

you skinny down on that dunnage and reduce shipping costs

– without increasing damage. Don’t be afraid to seek their

advice. Dimensional weight pricing strategies from carriers

rewards shippers for shipping in just the right sized box, which

cuts box weight and dunnage.

POTENTIAL SAVINGS: 1-3% on a per load basis.

7. Develop a reputation for
loading quickly

When carriers develop pricing, they typically assume a 2-hour

load window. But if the carrier knows they’re picking up at a place

where cargo will get loaded in an hour, that affects the price. It

also inclines the carrier to work with that shipper. Shippers with

consistent load time performance can even get these favorable

load times baked into the rate. This avoids the need to chase

down assessorial charges – a huge time drain. A shipper that

operates efficiently saves money and has carriers lining up to

serve them – a two-fold benefit!

POTENTIAL SAVINGS: Depends on your current reputation. You

can safely figure a carrier has at least $40 an hour factored into

their rates for each hour it typically takes you to live load them.

8. Offer later pick-up times

This may give carriers an opportunity to make your load into a

backhaul by offering them pick-up times after most other

shippers have closed the dock – 6-12 p.m. For example, a carrier

might turn down a load that’s requested for a mid-afternoon pick-

up because it conflicts with another run. But a later pick-

up allows him to make the delivery and fill his backhaul with your

freight. This is yet another way of helping the carrier maximize

utilization of assets, especially on longer hauls.

POTENTIAL SAVINGS: 15-20% off standard rates.

9. Minimize the number of
pallet spaces needed when
shipping LTL
Optimizing the cube of a product, stacking the product so you

take fewer pallet spots, even boxing it differently, all help make it

easier to get more cargo packed onto a pallet and into a trailer.

For instance, if you put a small component in a large box, you

can’t get that many on a pallet, but if you have them in small

boxes, you can load the pallet out and save pallet spaces. Ask

your carrier for a recommendation on building more efficient

pallets. The recommendation will depend on the type of product

being shipped.

POTENTIAL SAVINGS: up to $150 per pallet space.

10. Ship more product, less
often
Encourage customers to take larger orders. It’s a lot cheaper to

ship six pallets at once than to send two pallets every two days.

But retailers tend to look for smaller shipments more often, so

you need to create incentives to take more inventory than they

think they need. One way is to agree to share freight savings with

the retailer. Another is to consider Vendor Managed Inventory,

where the retailer is not charged for the item until it’s on the

shelf.

POTENTIAL SAVINGS: up to 50% versus the smallest LTL loads,

when minimum charges may kick in.

11. Look for carriers based near

your ship-to points
That way your load is more likely to become a backhaul for them

and you’ll get a lower rate. Filling empty miles is the way carriers
make better money, and a great way for you to reduce freight

costs. It’s surprising how many shippers don’t investigate carrier

terminals near their frequent ship-to locations.

POTENTIAL SAVINGS: 20% versus a non-backhaul rate for that

lane.

12. Get logistics involved earlier

in decisions about product
design, packaging, and carton
selection

These are all things that impact the ability to max out the cube of
your trailers. What many companies don’t realize is that

packaging is the smallest cost segment in the supply chain,

comprising less than 10% of each supply chain dollar. In contrast,

warehousing is about 25% of the cost and transportation 60% of

the cost. So it makes sense to design packaging and to spec

carton sizes with freight efficiency in mind. The marketers

currently making these decisions won’t have this mindset. Most

companies just don’t think about packaging optimization and

the impact on freight rates.

POTENTIAL SAVINGS: 10% when comparing the total cost of

packaging, warehousing and transportation.

13. Outsource your

transportation department
For smaller companies especially, freight management is not a

core competency. Hiring, training and maintaining a

transportation staff, and keeping up with systems requirements,

can be expensive and time-consuming. Add to that hiring,

managing and retaining a driver force. Outsourcing freight

management transfers the financial burden of staffing and capital

expenditures and also opens the door to innovative solutions that

on-the-ball carriers should be suggesting. Also, carriers will simply

operate more efficiently than you because they can buy things,

like fuel, in bulk. If you own your own trucks, consider parking

them and investigate outsourcing freight to outside experts.

POTENTIAL SAVINGS: 3 to 5%. Shippers who own their own fleet

of trucks are often paying at least a 25% premium over the typical

cost of outsourcing delivery needs to reputable and reliable

carriers.

To Reduce Freight Costs,

Challenge the Status Quo
Many of these solutions seem self-evident, and yet shippers often

ignore them, and end up paying more for freight than they

should. Why? The main culprit is blanket acceptance of “business

as usual” rules and processes – between internal departments,

and between the shipper and the customer.

See if any of the above suggestions make sense for your business.

Then go a step further. Examine your freight program and

question every built-in assumption – it has to get there in two

days, rail would never work, marketing determines the carton

size. Challenge the status quo, and watch the savings, and the

appreciation, roll in.