Simple ways to lower your freight costs

Simple ways to lower your freight costs

7/14/2014 Umut Türker 2090 Times Read

Shipping costs are under constant scrutiny in most companies. The cost of moving merchandise from your premises to those of your customer depends on many factors. Large companies shipping 1000+ tons of cargo a week will obviously get better rates than a SME moving 50 tons a month. Freight volume is a great lever for lowering freight costs. So what steps can a typical SME take to ensure that the transportation costs are somewhat moderated?  


Consolidate: If your shipments are typically between 150kgs and 9 tons (200-20,000lbs), you are shipping less than a truckload (LTL) if you’re shipping by road and less than a container load (LCL) if you’re shipping by sea. Carriers who transport your cargo (shipping lines and road carriers) normally charge their highest rates for such shipments.


If you’re making weekly shipments, talk to your internal and external customers and see if you can ship bi-weekly. Alternately see if your freight forwarder can consolidate your shipment with other shipments to the same destination. This allows you to leverage the lower FTL (full truck load) and FCL (full container load) rates. Using a freight broker like FreightArea is great way to get started on consolidation. Consolidating your shipments can save 15-20% on your current freight costs.


Avoid Volume Weight: Let’s say you are shipping your merchandise in cartons that measure 20”x14”x12” and each carton when packed weighs 5kgs. Now if you have 100 such cartons, the gross of your shipment is 500kgs. So the freight should be calculated on 500kgs, right?   Wrong. Shippers use a term called volume weight which is calculated by multiplying the LXBXH of a carton and dividing that by 360. Hence the volume weight of the carton above is 20x14x12/360kgs, or 9.33 kgs.


Carriers calculate shipment weight on the higher between gross weight and volume weight. So even though each carton weighs 5kgs, the carrier will charge each carton at 9.33kgs. One simple way top avoid this is to re-jig your carton dimensions so that your gross wt is always higher than volume weight.


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When you deal with carriers on freight brokers like FreightArea, make sure you check the volume applicable weight considerations for that carrier and how flexible the carrier is on waiving this on shipments where the difference between the two weights is nominal.