Freight Transportation & Logistics: How to Save Money
If you’re analyzing your operating budget to identify potential areas of cost reduction, you should take a closer look at your total freight transportation costs. Freight transportation is a critical cost driver, and it certainly makes sense as to why; transporting, delivering, storing, holding, using, and selling inventory all come with costs that can significantly vary on a wide array of factors.
Before discussing how to reduce transportation costs, let’s identify which factors affect total cost.
Factors That Affect Freight Rates
Shipment weight and density, distance, package destination, and freight type will determine total transportation costs.
Weight & Density
Your rates are charged per mile when shipping full truckloads (FTL). Rates for less-than-full truckloads (LTL) are calculated by the weight and space your freight takes up inside the trailer.
If your freight takes up more space, the costs will be higher. However, it’s important to note that you benefit from economies of scale; the more your shipment weighs, the less your price is to move that weight for every 100 pounds.
Since costs for FTL are calculated per mile, the longer the distance, the higher your costs. Shorter distances, like state-to-state deliveries, are less expensive than cross-border shipments that go to another country.
With cross-border shipping, each country will have specific material handling regulations. Some destinations are more time-consuming than others and have strict unloading requirements. If your shipment requires drivers to spend a certain amount of time at an unloading dock, then your price will reflect how long the driver must wait or how much time they spend unloading the shipment.
Delivering freight to a construction site or military location is an example of where a considerable amount of time will be spent delivering and unloading the shipment.
Type of Freight
Lastly, freight type will have a significant impact on total transportation costs. Refrigerated or temperature-controlled freight has higher rates than dry van trailers, where temperature control is not a concern. Specific freight categories, like hazardous materials, are also more expensive than flatbed freight because they have specific loading, handling, and unloading procedures. Truck drivers also must have their CDL H endorsements to transport these materials.
Now that you know the four primary factors that affect freight costs…how do you control these costs?
Research & Compare Rates
First, always research and compare rates with different logistics solutions providers. And as important as it is to compare rates, it’s equally important to select a freight carrier that will work with you to help you reduce costs or to offer future cost-saving solutions.
Consider Consolidating Shipments
Consider consolidating shipments if you have established routes where you consistently ship freight to and from a given location. Instead of shipping bi-weekly or monthly, implement less frequent shipments where you can consolidate the weight and dimensions into one larger shipment, which will reduce the per-unit costs of your shipments.
Get Professional Freight Services From TSI
For over four decades, TSI has offered domestic freight and cross-border freight services in the United States, Canada, and Mexico. We’re known for our flexibility, responsiveness, and exceptional customer support. We even employ team drivers to ensure your shipment gets to its destination on time, no matter the deadline. Please contact us today if you need help reducing freight transportation costs or want to learn more about our services and capabilities.