10 Tips to Reduce Shipping Costs in Logistics: Strategies for Efficiency

As a logistics company, you have to deliver loads quickly and efficiently because customers rely on you, whether it is food, clothing, or tools. Reducing shipping costs can help make this happen. When you are spending too much on shipping costs because your warehouse is not running properly or there is too much packaging on shipments, it can be frustrating. We can offer tips for how to reduce your shipping costs to save you money and help bring you more satisfied customers. 

When you ship a high volume of furniture across the state each week, it can be beneficial to negotiate a volume discount with your carrier. If you work well with a certain shipping company, build a relationship with them to help lower your costs in the future. These things help your business operate at lower costs, which increases your profits and helps you to continue to grow. Lower costs also contribute to more competitive prices for your customers, either with direct shipping costs or with lower product costs, which increases customer satisfaction. 

Every logistics company can benefit from reduced shipping costs, whether you are shipping across town or around the globe, because it helps you better serve your clients. No matter what your business needs are, there are steps you can take to lower shipping costs for you and your customers. In this blog post, we will explore ten valuable tips that logistics professionals can implement to effectively reduce shipping costs while improving overall satisfaction. 

Tip 1: Optimize Packaging

One of the most important aspects of cost-effective shipping is making sure every order is packed in the correct container. Lightweight shipping materials that take up less space during their delivery can significantly reduce your shipping costs because they are often determined by weight. Three things to consider when you are working to optimize your packaging are the size, weight, and materials of what is being shipped. 

Size

When you are packaging an order, matching the size of the shipping container to the size of the product is essential because it allows you to ship a higher quantity of orders at once and uses less material, so you save money. Small products that are shipped in large boxes and not secured might get damaged during transit, which adds more cost to returns and replacement shipping. Fitting products to the right mailer or designing customer boxes for your products can save money by optimizing the size of each package. 

Weight

The specific ounces or pounds of a shipment are not the only thing you have to take into consideration when optimizing the weight of your packages. Shipping carriers like FedEx and UPS have introduced a process called dimensional pricing, which calculates the volume of a package as well as its weight. When you optimize your packaging and use more space-efficient boxes, the weight and volume will also be smaller, which leads to lower shipping prices for you. 

Materials

What you pack your orders in, as well as what goes into the box to make your shipments secure, can easily add unnecessary weight and drive up your shipping costs. Using lighter materials that hold the products securely, like air pillows or void fill, gives you the security to make sure nothing is broken while being delivered but is lightweight enough that it will not raise your shipping costs. 

Tip 2: Consolidate Shipments

A shipment delivered to a customer several states away can carry major shipping costs if it has to be shipped as Less Than Load (LTL), meaning there is not enough in the order to justify a full truckload delivery. The additional cost comes from paying for the driver, any scheduling needs, the cost of fuel, and any other costs associated with the truck, regardless of whether or not it is full. It can be frustrating if you have to send multiple LTL shipments in quick succession because the shipping costs can easily build up over time.

There may be several LTL loads that are going in the same general area that can be combined into a single truckload shipment to reduce your shipping costs. You will still be paying all of the costs for the truck, but it will cost less per unit because there is more product being shipped. Full truckloads also tend to be packaged more effectively on pallets and wrapped, so they will not move around as much during transit. This can reduce costs because there is less risk of something being broken and needing to be replaced or returned. 

Tip 3: Leverage Negotiation Techniques

Packaging your products well and using the space in trucks wisely can go a long way in reducing your shipping costs, but another helpful tool to secure lower costs is your relationship with your shipping carrier. When you have researched rates and have a clear budget for your shipping costs, you may be better prepared to sit down with your freight carrier and negotiate a better price for their services. 

Do Your Research

As a logistics company shipping products to customers around the country, you have access to many different freight carriers like FedEx and Old Dominion. Not every carrier will be able to meet your needs with the services they offer, so it is important to do your research. Find a handful of carriers that offer the services you need, whether that is residential delivery or long-distance truckloads, and research their rates. Once you have an idea of average rates, you can discuss a deal or partnership with the carrier that is best for your company. 

Discounts for Volume

In many cases, the more products you ship, the lower your costs will be because there are more units in the truck. When you know that you will have four large truckloads that need to be shipped in the next two months, then you may be able to negotiate a volume discount with the carrier. If you commit to using their service for your shipments, they can offer you a lower cost per unit or ton per mile rate because you are shipping high volume. 

Build a Relationship

One of the most effective negotiation techniques is creating a strong relationship with your freight carrier. There may be one representative that works with clients in your region, so you will have an opportunity to get to know them over the course of your business relationship. Maintaining a kind, cordial, professional relationship with the carrier’s representatives can create an atmosphere of trust and comradery, so they may be more willing to work with you when it is time to negotiate lower shipping costs. 

Tip 4: Utilize Technology and Automation

The logistics industry is always growing and changing with new and improved technology, like predictive shipping analysis programs, which are constantly being introduced. Incorporating various forms of technology into your operations can help reduce shipping costs by automating the packaging process and helping you to avoid delays. There are technologies available to help you manage your documentation and choose the best routes, predict what your supply chain needs will be, and streamline the entire shipping process. 

Management Systems

Logistics companies have to understand and work within the supply chain to receive the raw materials they need, create their products, and ship them to clients. This requires you to understand things like shipping data, packaging costs, and regulations for different shipments. All of that information is not easy to keep track of, so you may rely on a Supply Chain Management (SCM) system that consolidates everything you need into a central place. 

These systems often include a Transportation Management System (TMS) that helps track and optimize any shipments coming in or going out from your business. An effective TMS will be able to match you with the most cost-effective carrier, make sure any weight and route documentation is compliant, and generate reports so you can track your overall shipping performance. This can reduce costs by avoiding fines or delays for non-compliant loads and providing evidence of where you can cut costs throughout the process. 

AI Programs

Understanding the historical patterns and trends of your supply chain is essential to keep your shipping costs as low as possible because it gives you a clearer idea of potential needs moving forward. Organizing and understanding all of the information, like price analysis for a specific quarter or historical data, is not a simple process. As Artificial Intelligence (AI) programs become more prominent, it is likely that you may incorporate them into your business in some way, and they can prove to be particularly effective for data analysis and predictions. 

AI programs can easily gather, consolidate, and analyze data to help you find the best shipping materials, predict busy seasons with more accuracy so you are prepared, and plan the most effective routes. Large companies in the logistics industry are seeing success with AI programs, like IBM, which created its Watson Supply Chain platform to help optimize their routes and schedules. The logistics industry will continue to grow and adapt, and AI platforms to optimize shipping can help your business adapt and grow alongside it. 

Shipping Automation

When an order comes into your business, one of the most time-consuming processes is often getting everything ready to ship because you have to ensure the information is correct, create a shipping label, and package everything to ship. Fortunately, there are technologies available to streamline that process so you can ship orders out quickly, efficiently, and effectively. Programs like ShipStation and Easyship help you reduce shipping costs because they allow you to compare prices for shipping carriers to find the least expensive option. SaaS programs, also known as Software as a Service, automate the shipping process because they are cloud-based. This means that you, your customer, and the carrier can quickly and easily access any necessary information about their shipment without the hassle of scanning barcodes and having papers to sign. 

Tip 5: Opt for Alternative Shipping Methods

All shipping methods are not created equal. Using tractor-trailers to ship goods can be effective for a nationwide logistics company that sells a high volume of products, but it would not be the best choice for a local shipping company. The logistics industry is now looking at alternatives like shipping by train and not handling inventory directly as feasible options for some businesses. Finding shipping methods that meet your needs and fall within your budget is an effective way to reduce your overall shipping costs. 

Rail Freight

The United States currently has one of the largest and most cost-effective freight systems in the world, according to the U.S. Department of Transportation, because it is made up of over six hundred privately owned railroads. Owners invest nineteen percent of their revenue into the upkeep and maintenance of the freight railroads so they are safe and constantly gaining additional freight capacity. 

The increased capacity of freight trains makes it possible for them to carry more cargo than most transfer trucks, and they also consume significantly less energy. If your logistics company needs to transport a large amount of goods or products frequently, then rail freight may be able to reduce your shipping costs because they often have a lower cost-per-ton-mile rate. This means that you will be paying less for shipping with less risk because the rail is less likely to deal with congestion or accidents. 

Intermodal Shipping

One way to cut down on some of your shipping costs is to use multiple forms of transportation because it reduces fuel costs and can save you thousands of dollars each year. This process is called intermodal shipping, which is when cargo is placed in intermodal containers to be delivered to either a railroad or a ship dock for the longest portion of the delivery route. Products are only on trucks for the short trip to the intermodal ramp and then delivery to the final destination, so you will be paying less for fuel. Also, rail freight and ocean freight have significantly lower costs per mile for large loads, which will save you money in the long run. 

Dropshipping

Customers rely on your logistics company to be the experts in delivering what they need efficiently, but low inventory and supply chain problems can cause delays that frustrate your customers and ultimately cost you money. If you want to eliminate the hassle of tracking and managing your inventory while also ensuring that your customers receive their orders quickly, dropshipping may be the answer. 

The process of dropshipping keeps shipping costs low because you are not responsible for shipping the actual product. You sign an agreement with the dropshipper who owns and manages all of the products you want to sell, and they ship the products to the person who places an order. Your only financial responsibility is to pay whatever amount you agreed to in the initial contract. 

Tip 6: Streamline Warehouse Operations

Warehouses provide a central place to maintain inventory, pick orders, and package things to ship, so they are ideal for logistics companies. A disorganized warehouse may lead to increased returns or delays, which increases your shipping costs. If your team packages an order and has it ready to ship, but it is put in the wrong place and not picked up on time, it will be delayed or even missed entirely. Automating the process of routing shipments helps you avoid this because it eliminates human errors. 

Delays like this can be costly and frustrating, but they are easily fixed with the correct automation. An order management system like Extensiv or Shopify helps you select the most cost-effective carrier, generates a shipping label, and finds the best delivery route for the package. This automation helps avoid packaging errors and delays so you can keep your shipping costs low. 

Tip 7: Implement Effective Inventory Management

When you receive an order from a customer and begin starting to package and ship it, knowing what inventory you have available is essential to getting the order out quickly. If you run a large business or carry a wide variety of inventory, it can be difficult to keep track of everything, which may cause some orders to slip through the cracks and be shipped incorrectly. When that happens, your business is losing money on unnecessary shipping costs because you may have to resend a package or send the correct products. 

One way to minimize these issues is to incorporate a Just In Time (JIT) system to manage your inventory, which is when you order products as you need them. This reduces costs because you are less likely to have stock that sits in your inventory and is never sold or mistakenly added to an order. Keeping track of your inventory on a regular basis also helps you to avoid stockouts because you are able to predict what products you will need before they are sold out. A well-managed inventory helps to ensure that you are not sending out extra or miscellaneous orders, which keeps your shipping costs low. 

Tip 8: Optimize Carrier Selection

Your shipping needs may change depending on what you are shipping, where it is going, and how much needs to be sent. This means that you will likely need to work with a rail freight company if you need to ship a large volume of products across the country, but a local delivery service to send a package across town. Choosing the best carrier for your needs is important because it can help you reduce shipping costs and improve customer satisfaction. When comparing carriers, you should consider factors like rates, where and how they ship products, and their overall customer satisfaction. 

Prices

Shipping costs are not universal, so comparing shipping or freight rates for several carriers can help you make an informed decision. You may have a carrier that you trust because they have been reliable for you in the past, but their prices are higher than a close competitor. At that point, you will have to decide whether the additional cost is worthwhile or if you want to trust a new carrier for that particular shipment. 

Services

You may need a different carrier for shipping small, individual packages to the next state than for rail freight loads to the opposite coast. Not every carrier will offer the same services, so it is essential to evaluate what services are offered by each carrier. If your logistics company is responsible for shipping a variety of products, then you should expect to use several different carriers on a regular basis to meet your changing needs. 

Customer Satisfaction

Hearing what other people have to say about a freight or shipping carrier can influence your choice because you are hearing their lived experience, positive or negative. Reading reviews and feedback from current or previous customers can tell you whether or not a carrier is reliable with their scheduling, has readily available customer service if there is a problem, and is consistent with their pricing. 

Tip 9: Analyze and Optimize Shipping Routes

When a shipment is loaded onto a tractor-trailer and carried across the country, the route it follows can have a major impact on your shipping costs. You will pay a price per unit on the truck as well as other costs like fuel and driver salary. A longer route uses more fuel, so the cost will be higher for your business. Similarly, truck drivers are typically paid by the mile, so a longer route means that their pay will be an additional cost as well. 

Optimizing your shipping routes, either by finding the shortest distance or utilizing alternative shipping methods like rail freight, helps you cut costs because of lower fuel needs. A route optimization software like RoadWarrior or Onfleet can automate this process so you are guaranteed the more efficient and cost-effective route for every shipment. 

Tip 10: Continuously Monitor and Adapt

The landscape of the logistics industry is constantly changing because the needs of customers are always changing. In order to maintain effective operations and keep your shipping costs as low as possible, it is important to regularly assess your shipping carrier, packaging materials, and management systems to ensure that they are as efficient as possible. 

If you notice that the inventory management system you relied on is no longer serving your needs, then you should start looking for new systems to implement. When your packaging is out of date or needs to be updated, find new, lightweight materials that will be able to protect the products without adding more weight and increasing shipping costs. No matter what your needs are, it is essential to monitor your shipping practices and adapt when you need to so your shipping costs remain reasonable. 

Conclusion

Your customers rely on you for safe, efficient, and effective delivery, whether you are shipping auto parts to a major factory or delivering inventory to a retail store. Keeping these shipping costs low can help your logistics business grow and maintain successful operations. Whether you find the perfect route optimization software to reduce fuel costs, convert to dropshipping to keep your overhead costs low, or create custom packaging to minimize shipping weight, there is always something you can do to reduce your shipping costs. Incorporate these tips into your regular operations so you can continue meeting customers’ needs and build a thriving logistics business. 

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