How to Reduce Transportation Costs

Shipping freight is often a large and crucial part of a company. To make a profit, you need to get your customers the right product at the right time, and for the best cost. If not managed properly, your transportation can cost you substantial money. With costs rising recently, it’s easy to see why the challenge for many companies has been to reduce their transportation costs. Are you taking the proper steps to do so?

WHY COSTS ARE RISING

Before we jump into how to reduce your transportation costs, it’s essential to understand what factors are causing them to rise. 

CUSTOMER EXPECTATIONS CONTINUE TO INCREASE

Consumers’ demand for faster delivery times is affecting everything from food and more. It’s forcing shippers to try to keep up to retain their customers. The so-called “Amazon effect” is alive and well as the world of e-commerce and faster shipping times grows. 

HIGHER DEMAND

As noted, e-commerce was growing steadily before, but the pandemic only accelerated it. Consumers are ordering and demanding more, delivered right to their doors. Demand is far exceeding supply, and this trend is expected to continue through the rest of 2021. 

TIGHTER CAPACITY

With such overwhelming demand, there are not enough drivers or labor to keep up. These shortages are impacting every mode of transportation, causing delays, and raising rates higher. 

RISING COSTS FOR DRIVERS

Drivers are also experiencing rising costs. Fuel prices have been increasing, and tolls have risen; truck costs and insurance prices have gone up. All these costs roll over to their trucking rates. 

STEPS TO REDUCE TRANSPORTATION COSTS

There are several ways to reduce transportation costs while also improving your logistics.

CUT YOUR MANUAL PROCESSES

Chances are, you’ve been doing things the same way for so long, you don’t even recognize there’s a better way to do them. We’ve all been there, and while change can be challenging, noticing you have room for improvement is the first step towards growth.

Automating your manual processes will help reduce your transportation costs. With automation, you’ll streamline your operations, allowing for better management while creating and improving your efficiencies. As a result, you’ll end up saving time and becoming available for your more important tasks.

USE ANALYTICS TO IMPROVE OPERATIONS

Reviewing historical records and analyzing trends can help uncover any slow processes and extra costs. For example, you may discover that one carrier consistently adds accessorial charges while another compatible carrier does not.

TRY DIFFERENT MODES OF TRANSPORTATION

Trying different modes of transportation could help you offset your costs. Shipping freight by sea could be less expensive than by air. Intermodal transportation is another option that you may not have considered. Shipping intermodal is usually less expensive than trucking. Even using a combination of the two could reduce your cost. Keep an eye on the transportation costs for different modes and don’t be afraid to make the switch. Being more flexible with your freight shipping could give you some financial benefits. 

SEE IF YOU CAN CONSOLIDATE

Are you making the most of every truck moving your freight? Your shipment planning team should analyze current and future orders to build your shipments in the most cost-effective manner possible. Less-than-truckload (LTL) shipments are cost-effective for smaller weights. Yet, consolidating your shipments into one full truckload could have you seeing savings. With consolidation, there will be fewer trips, meaning you’ll see lower rates on one bulk shipment versus many small ones. 

BID MORE OFTEN 

To offset tight capacity and rising shipping costs, shippers should go out to bid for new transportation contracts more than annually. This allows you to find the best rates and avoid potential disruptions from transportation shortages.

GAIN CONTROL OF YOUR VENDOR-ROUTED OR CUSTOMER-ROUTED SHIPMENTS 

Depending on your customer, sometimes you have your hands tied when it comes to logistics. For example, you may be required to use their specific providers as a condition of doing business with them. However, there are instances where you may be able to gain control of these opportunities for savings. Don’t you wonder about the potential for savings if you controlled this section of your business? 

By leveraging ALL of your volume, you could qualify for some decent savings with LTL and truckload providers. Additionally, you’ll gain control of your shipments, which equals control of the quality of the provider, saving you money by retaining happy returning customers. You can better measure service performance and rates to ensure your best interests are being cared for when the ball is in your court.

INCREASE VISIBILITY 

Without visibility, costs can begin to sneak in like stealth monsters that eat away at your bottom line. True visibility is using a best-in-class TMS that enables you to see all your transportation network. You can track and manage control over your products, see service disruptions or shipment delays in real-time, find optimized routes, and work with the best carriers. You’ll not only reduce your costs but increase your service levels and improve your relationships with all stakeholders. 

PREPARE AHEAD

The more time you have before your shipment gives you more options in carrier selections and the chance to find a decent rate. Or look into another mode, as mentioned earlier. It also gives your provider more time to prepare themselves and let you know of any upcoming circumstances that may increase your logistics costs, giving you more time to consider making any changes. It also helps you alleviate delays and missed deadlines. 

CONSIDER WAREHOUSING SERVICES

If you do a lot of shipping to and from the same lane, especially if it’s over a long distance, it may be a good idea to warehouse your goods closer to your customers so you can reduce those long-haul transportation costs. 

BECOME A SHIPPER OF CHOICE

It’s never a bad thing to be a shipper of choice. Carriers are in the position of choosing which shippers they want to work with. Those shippers who provide better experiences for them can not only reap the benefits of better rates but higher service levels and fewer claims. To become a shipper that carriers will want to work with, it’s important that you run efficient and friendly dock operations, reduce driver wait times, provide comfortable breakroom and restroom accommodations, and pay your carriers quickly. 

GET DATA-DRIVEN INSIGHTS

Data has quickly become one of the world’s most valuable resources. With a best-in-class TMS and proper reporting that you can analyze, you’ll be able to better manage disruptions, reduce downtimes, and effectively plan and budget your logistics spend. By using data analytics, you’ll be able to recognize which carriers are the most likely to have the capacity and ensure proper rates for shipments. 

CONSIDER OUTSOURCING

In business, any activity that isn’t directly tied to securing more business deflects attention away from your goal of making a profit. That means the hours you can spend sourcing transportation providers and managing your logistics are not considered a profitable way to spend your time. By outsourcing your logistics and partnering with a third-party logistics company (3PL), like Trinity Logistics, you gain back all those hours to focus on what you do best – make a profit! 

According to the 2020 Annual Third-party Logistics Study, 67 percent of shippers stated that using a 3PL contributed to reducing their overall logistics cost, while 83 percent said using a 3PL has improved their service. By utilizing Trinity Logistics, you won’t have to worry about any of the steps above because we’ll take care of them for you.

We’re listed as a Top 100 3PL by Inbound Logistics, and through our People-Centric service, we can help you find one or more customized solutions to meet your business needs. The first step to finding out exactly how we can help you reduce your transportation costs and improve your service is by having that initial conversation. 

Will you choose to take that step today? 

REQUEST A LOGISTICS MANAGEMENT CONSULTATION REQUEST A FREIGHT QUOTE

Updated September 16, 2021 by Christine Morris.