February17, 2009

How to get lower freight rates by managing your freight costs.

Many companies treat their inbound freight as a non-controllable expense but this isn't true. Many companies use their freight department as a profit center, so cutting cost can be achieved by close control of inbound freight. Depending on the product ordered and its purchase price, inbound transportation may represent 3% to more than 10% of merchandise cost. Even more if it is a minimum charge shipment delivered by LTL common carriers.

Truck companies have taken around 6% increases every year for the last five years, increasing your trucking rates. Freight transport costs have affected just about everyone. As domestic freight cost rise, you might be surprised at how much you can save by getting frequent freight shipping quotes. Carriers are also boosting revenues by trying to classify freight at a higher class and charging for every extra service. Liftgate and residential fees can greatly effect your overall freight charges and increase your customer's purchasing cost.

Get low shipping rates for your freight transportation needs

How to get low, lower, lowest shipping discounts.

Did you know that almost all freight shipping companies increase their rates every year for 6-7 %? Not only do they use these increases to beat inflation, freight companies have a few less obvious ways to increase your shipping costs and you may not be noticing it. Now on the carriers defense, most domestic freight carriers only make 2 cents on the dollar, which makes it hard to keep any company in the black.

Anyway, back to the first point. Taking a look at a typical freight transportation contract and how LTL, Less than Truckload freight carriers can charge you more:

• Published Rates - The majority of freight companies keep their base freight rates close to the competition. This is easy because governmental agencies require LTL carriers to publish their base rates. You can search online and find  any ltl carrier's base rate. You can attain a copy from the carrier's site. Although, you will find some LTL freight shipping companies do publish higher base rates.  You will discover that these rates may vary by as much as ten percent.
• Obtaining Freight Discounts - There are 2 methods carrier use for offering shipping discounts. 1, Freight discounts based on the published rates. These provide lower shipping rates. The discounts stay the same, but the base rates can be changed, usually annually.   2. Freight discounts based on a multi-year contract. These provide the lowest shipping rates. On this type, your discounts and based rates are locked in for a set number of years. Acquiring these are hard and are usually only done for high volume shippers.
• Direct and Non-direct discounts - Almost every freight transportation company uses an interline carrier to service locations outside their own coverage areas.  You will want to acquire discounts on these interline services too.  If you find that a large number of shipments are being delivered by interline, you may need to locate a different carrier that has better coverage of your customer or supplier locations.
• Minimum Charge - All freight carriers have what is called a minimum and a minimum minimum. The minimum minimum is the absolute lowest rate a carrier will charge for doing a shipment. Whenever you renegotiate the contract, you should always try to get the lowest minimum charge you can.
• Accessorial Fees - Accessorial fees include: residential delivery and residential pickup, liftgate, reweigh, notification, single shipment, articles of extreme condition and  limited access, just to name a few. Over the last few years, these have been the main profit source for most carriers. and many more. Most of these services fees can be negotiated. If you don't, they can have a significant affect of your overall shipping costs.
• Auditing your Bills - Freight carriers are notorious for sending out incorrect bills. It is so bad that large companies subcontract freight bill auditing out to companies that do nothing but audit freight bills. You will need to audit yours too..