Lower Freight Costs in These 5 Overlooked Areas

19 December 2019       Blog

If your business relies on delivering goods or ordering raw materials or components from suppliers, you’ll need freight management to get the job done. Freight management is a critical part of any supply chain strategy that is often overlooked in favour of finding ways to increase sales and profits. The profit-leverage effect, sometimes called the procurement leverage effect, is a reliable way for managers to see for themselves how effectively savings in freight procurement can, in effect, boost sales by a much larger percentage. For example, a 2 per cent reduction in freight costs can lead to an effective 15 per cent increase in sales. That’s because logistics plays a large role in the price of your product and even small reductions in landed product costs can affect profitability tremendously when scaled up. The good news for managers and business owners is that there are normally plenty of ways to lower freight costs and thus maximise the profit-leverage effect. Here are five overlooked areas to lower freight costs:

Select a Great Freight Management Provider

SMEs just don’t have the time or resources to dedicate to creating an efficient freight management strategy, so they’ll benefit the most from choosing a freight provider that can get the products from point A to point B safely, quickly, and using the latest technologies. Freight People implement multimodal smart logistics strategies to optimise routes and delivery times, all of which can play a large role in boosting your customer satisfaction, reliability, and overall profitability.

Use Full Truck Loads (FTL) Whenever Possible

Some common ways of shipping goods by truck include in packages, i.e. 100 kg bundles, pallets, or by full truck load (FTL). Depending on the weight and quantity of what you’re shipping, some methods are most cost-effective than others. Generally speaking, however, you should endeavour to ship by FTL as much as possible since it tends to be the least expensive option.

Use the Latest Packaging Technologies

A package only protects your product, so why is it so important? Damaged goods eat into potential sales and profits and shipping air isn’t very profitable either. Packaging materials and methods should be modern and efficient to maximise shipping capacity and safety whilst minimising the occurrences of damaged goods.

Work Closely With Suppliers and Negotiate

Working long-term with suppliers and freight management providers can bear many benefits. Trust and confidence may grow over time, but so too do the opportunities to negotiate with suppliers for small reductions or discounts. A supplier that’s built a great reputation with you will be far more disposed to making a deal, even if it’s a half per cent, which can lead to significant boosts to profitability.

Consider Purchasing Insurance

Even with the best shipping practices, packaging solutions, and reliable freight providers, there’s always a chance that your product will be damaged. Accidents on the motorway do happen, for example, so you’ll want the peace of mind knowing that your goods are insured. Calculate the value of a full truck load of your product and do the maths. Ask your freight provider about insurance options that provide you with the best coverage for a premium that’s affordable for your business. Although insurance adds to your freight costs, when used properly it can prevent significant losses which thereby reduces overall costs. Lower Costs with Freight People Freight management and logistics are important considerations that bear a significant effect on your bottom line. Don’t settle for less; contact Freight People and reap the benefits of lower overall product costs and greater profitability.