The transportation costs of carrying large inventories affect the profitability and growth of businesses. The issue of reducing transportation costs can be baffling considering the variety of freight products, their classification, and dynamic costs.
While cost planning takes care of cost spikes, it is better to reduce the costs of transporting inventories on a day-to-day basis. Look at these five cost reduction strategies to lighten your financial burden and provide reliable freight.
#1 Improve Packaging
Packing is a significant component of transportation costs and needs to be a priority. The simplest way to pare costs is to use efficient packing. The space occupied is a major factor in fixing freight rates. The lesser the dead space, the lower the freight rates. You can then weigh the costs of new packaging including the cost of breakage and spoilage. If there is a significant reduction in freight rates that can help you absorb the costs of lost stocks.
#2 Reduce Shipping Frequency
Bulk customers can negotiate cheaper rates because carriers can load a container efficiently, in less time. Bulk shipping is a one-time loading and unloading exercise and a better option to sending out multiple shipments.
In the case of regular shipping, it becomes the customer’s responsibility to carry the inventory, which increases their inventory carrying costs. This can be compensated by either a small reduction in the price of the product or other favourable business terms. However, businesses can improve the transport efficiency of products that can be shipped in bulk (components and ingredients) for assembly and packaging near the point of sale.
#3 Fixed Volume Shipping Arrangement
The concept of standing capacity is used to reduce transportation costs. Large businesses can use standing capacity because they can regularly book specified space with a carrier which can help them get discounted rates and preferential treatment.
This is not a suitable solution for small businesses but proves to be useful for those shipping products regularly between fixed locations. The purchase of standing capacity is a money saver when there is a spike in demand for transportation and the rates increase phenomenally.
#4 Use Off-Peak Periods For Shipping
Transporting goods during off-peak periods, can help you save a significant amount of money, because that’s when the freight rates are lower. Backhaul shipping is yet another way to reduce costs. Lower rates are available because empty trucks are returning to the base. However, perishable goods need to be shipped when they are ready and the issue of shipping them during off-peak periods is not relevant. Customers who have implemented just-in-time delivery options cannot take advantage of off-peak transportation.
#5 Identify Freight Weaknesses
Eliminating weaknesses in business operations helps improve efficiency and reduce costs. But relevant data needs to be collected and analysed to spot weaknesses and take corrective measures. Modern inventory management systems are effective in picking up data that locates the areas with poor shipping performance. For example, shipping records can help identify carriers that cause higher than average damages to the product or result in delayed deliveries.
Many consumer goods packaging companies find it challenging to keep their logistics costs under control, especially since E-commerce is booming. This happens because of the changes in consumer preferences and buying habits (online shopping) which results in smaller orders at a higher frequency. These companies will need to identify every opportunity to reduce transportation costs.
Small and medium companies face tougher challenges, as they lack the management knowledge necessary to put in place new systems and use them efficiently. They need to fight on many fronts like system capabilities, freight volumes, and resources to drive efficiencies.
For effective and sustainable cost reduction solutions & efficiencies that will increase your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.
Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777
