Whether you are at the helm of a dynamic small business startup or an established enterprise, the fact remains that among your top priorities — it may even be burned into your job description and performance review template – is to identify ways to “do more with less.” And one of the simplest, smartest and most strategic ways to achieve this critical objective is by evaluating an area that you may have overlooked thus far: your business’s logistics function and overall freight costs.
Why overlooked? Simply because like many managers and executives, you may believe that your freight costs – both inbound and outbound — are more or less fixed. Or, you may be concerned that telling your team to find efficiencies may result in them cutting corners that consequently diminish your overall service, and damage your competitive advantage. Instead of “doing more with less,” you fear that you will face a costly setback.
The good news is that you can indeed find efficiencies, but without putting your service standards or competitive advantage at-risk. Here are four proven ways to save money on freight costs:
- Generate Visibility
The smartest and best place to start the process is by generating visibility with respect to what you are spending on freight. This cannot simply be an aggregate line item. It musts be broken down by LTL, FTL and so on, as well as various related costs such as cold shipping, warehousing and packing. In addition, costs should be categorized by vendor, and reporting should be available on both a scheduled and on-demand basis.
Once you have this rich, accurate logistics data, you will be in much better position to identify benchmarks, baselines, performance and trends that enable informed cost saving decisions.
- Explore Multi-Carton Shipping
If you believe that you must pay for LTL when shipping multiple items, then think again! If you are doing a certain volume of business, you may be able to take advantage of multi-carton shipping. This would allow you to combine packages when shipping items to a single location on the same day, provided that the combined weight is at least 200 lbs.).
Furthermore, unlike LTL, the shipping costs are based on the average weight of your items (without pallets). This could further lead to significant cost savings over time.
- Do Not Overlook Inbound
While it is important to focus on your outbound shipping, keep in mind that you may find some significant efficiencies and cost savings by analyzing your inbound shipping as well. For instance, you may be able to consolidate vendors, or consolidate multiple orders from a single vendor – which, if it does not give you instant access to a lower shipping rate, increases your negotiating leverage that could result in more favorable price positions and/or added services and value. It may also be a good idea in the bigger picture to send shipments from a central hub rather than various stores and warehouses (though this may not be possible if you promise 1-day shipping).
The Bottom Line
When you partner with an order fulfilment company, you have every right to expect and demand support and solutions. As such, invite your 3PL to work with you to find efficiencies and save money. If they push back, then there is a very good chance they are not a partner: they are a problem. If this is the case, then strongly consider making a change. Start by getting recommendations from peers in your industry. If that does not connect you to a new and better partner, you can put together a quality RFP and invite proposals from selected order fulfillment companies.
**Author: C. Weber
I am an entrepreneur with 10 plus years of experience in a variety of industries including finance, marketing and online technology. As an expert in advanced SEO, paid advertising, and inbound marketing I am passionate about sharing my knowledge with others and helping small businesses reach their full potential.