In the age of Amazon Prime, free shipping and drones delivering packages directly to your residence, we thought we would offer you a little bit of down-to-earth advice while Amazon.com works the kinks out of their drone program. After all, who doesn’t like to save on shipping?
In today’s article, we take a look at 10 simple tips that will reduce your freight bill. Tips that will make you and your boss look good, win you that big promotion and let you afford that vacation home and dream trip to a private island in Tahiti. Or, maybe we will just save you a few bucks on freight. Hey, it never hurts to dream.
1. Beware Dimensional Weight: Probably the most overlooked and misunderstood item on our list. Pay attention to your dimensions, especially on lightweight freight and don’t over package. Air freight, ocean freight and some ground freight are charged based on volumetric, or dimensional weight. See here for an earlier, detailed post on the subject appearing here last year. In short, two lightweight cartons measuring 24 x 24 x 24 inches will be charged at 143 pounds domestically, while packing it all in one 28 x 28 x 28 inch carton would be charged as 113 pounds, for an instant 21% savings!
2. Plan Ahead: Obvious, right? Waiting until the last minute can cost you a bundle. The cost of expedited air freight and even expedited ground freight can run 30-40% more than the cost of a comparable shipment via a standard level of service. Even if your freight isn’t ready to go today, contacting your freight forwarder or broker in advance will give them the opportunity to shop rates on your behalf and move your freight at the least possible cost. In short, don’t wait until it starts raining to shop for umbrellas.
3. Communicate with the Consignee: You just landed a big order from your newest customer. Don’t give back some of that new-found profit in unplanned accessorial charges. Do they have a loading dock for delivery? Is an appointment required? What time does receiving close? We see needless money spent daily on re-delivery of freight simply because the shipper didn’t want to take the time to see what time their customer’s warehouse closed or what their requirements were. Sweat the details. It pays off.
4. Establish a Charge-back Policy on Shipping: Every successful business has solid procedures in place. Yours should too. Let customers know when they will pay for shipping and when your business will. If it is your company’s policy to provide 3-5 day ground service, and any premium level services — such as overnight air or expedited ground — are paid for in part or entirely by the customer, make sure that your customer clearly understands that. Once these policies are set, inform your sales and customer services staffs, as they are speaking directly with your customers. If your customer wants expedited shipping you can pass that cost through and possible make a few dollars on it for yourself.
5. Know your Incoterms: In shipping, the phrase “Incoterms” is somewhat like Canola oil. Everybody has heard of it, but nobody is quite sure what it is. EXW? DAP, FOB? In short, Incoterms (International Commercial Terms) are a set of three-letter codes defined by the International Chamber of Commerce (ICC). They are an internationally agreed upon set rules that clearly define the roles and responsibilities of a buyer and seller in a shipping transaction. Since things like Custom duties and taxes alone can represent as much as 30 percent of the cost of shipping, it’s important to understand who is responsible for what portion of the transaction. For instance, who is responsible for getting the freight from your supplier’s warehouse to the port (EXW or FOB terms), you or your supplier? It’s an important distinction that can seriously impact your bottom line. You don’t want to find out after the fact what CPT or other similar terms mean to you (or your boss).
6. Understand Documentation Requirements: Unless you are a real industry pro, this is one area where it often pays to get professional assistance. Especially on international shipments. Documentation requirements vary widely from one country to the next, including not-so-simple NAFTA transactions to Mexico and Canada. Not knowing things like the fact that the destination country requires document legalization, or that an ATA Carnet can eliminate your duty on temporary imports, can cost you a bundle in lost time, storage charges and customs fees. When in doubt, ask questions. Lots of them. Don’t let international commerce requirements make your company look bad and rob your bottom line.
7. Consider a Split Shipment: Another oft-overlooked shipping tactic. OK, sometimes the product is needed for a specific event and it can’t wait. However, given the cost of air freight, if you have the flexibility, consider shipping just enough inventory to fill (or partially fill) the orders of your key accounts. Send the rest via ocean freight and save yourself 50-70% on the cost of shipping. It’s easy to split an import shipment into ocean and air components and the incremental cost of two customs clearance charges will be a minor inconvenience. The same applies to export shipments.
8. Beware Cheap Freight: If you get a quote that is 40% less than the other quotes you received, it’s time to ask some pointed questions. In the shipping business, no freight forwarders or brokers know about any secret airlines, ocean carriers or trucking companies that nobody else has discovered yet. There are only so many ways to get from point A to point B. In addition to knowing your Incoterms and dimensional weight (see above), make sure you are comparing apples and apples. Is carrier A quoting 7-10 day service while carrier B is quoting 2-3 days? If one carrier is calculating your weight as the 800 kilos of gross weight that you reported and the other is charging you 1,200 kilos for dimensional weight, the time to catch it is now. You don’t want to wait until you have already billed your customer for shipping , only to get a supplemental freight bill for an extra 400 kilos that you can’t recover. Like your Mom and Dad told you, if it looks too good to be true, it probably is.
9. Get Accurate Weights/Dimensions: Closely related to tip #1 above, that 5 minute walk out to the warehouse with a tape measure can save you a bundle. This is especially so if you are charging some or all of the cost of the freight to your customer. Experience has shown that shipper’s consistently underestimate both the actual weight and overall dimensions of their freight. It’s human nature. However, in today’s automated warehouse environment with carriers scrapping for every dime, nearly all freight gets re-weighed and re-measured when it arrives at the terminal. That 72 inch tall pallet that you guesstimated as 48 inches from the warm and cozy confines of your office, could cost you a bundle. If your forwarder’s quote is based on 48 inches and that is the amount you quoted your customer, you are in for a nasty surprise and so is your customer. Customer’s hate surprises. We see it every day. Take a walk out to the warehouse and get to know the folks in shipping. It’s worth it.
10. Know your carriers: If you were booking a flight for your family vacation, you wouldn’t take Air Tahiti to Anchorage or Turkish Airlines to Cancun. Would you? Sure, Air Tahiti can probably route you to Anchorage, on a “partner carrier”, but at what cost? Freight carriers are no different. There are regional, trade lane specialists and not everybody goes everywhere. Just because new England Motor Freight gave you a great rate to Boston last week, does not mean they are the best choice for freight to Seattle. You can shop around yourself for alternatives, or let your freight broker do the work for you and find the least-cost solution.
Questions: Have more questions? We live for this stuff and would love to hear from you: firstname.lastname@example.org or 800-832-1207.