EYE ON LOGISTICS BLOG

5 Ways Shippers Can Reduce Transportation Costs and Find Capacity

Ryan Keepman

26 February 2018

Try these 5 strategies to find capacity and push back against sky-high freight rates to reduce transportation costs.

Are you having trouble finding capacity for your shipments? When you do find capacity, are astronomical shipping rates preventative? Welcome to 2018, my friends.

Increased freight volumes, a nationwide driver shortage, the ELD mandate, extreme weather, and increased fuel surcharges have combined to create a transportation climate that favors carriers and is tough on shippers' budgets.

But, the reality is that the current capacity crunch isn’t a one-off event. Shipping demand will always ebb and flow. So, instead of white-knuckling this wild ride, develop strategies you can use now — and in the future — to find capacity, reduce transportation costs, and optimize transportation overall.

5 strategies to find capacity and reduce transportation costs

1. Be flexible

It’s never easy to push an organization out of a groove. But cost-savings are a huge motivator to try something new.

If your organization can tolerate some pickup and delivery variability, you will improve your options. By taking timing slots and ship dates that are less ideal for other, more inflexible shippers, you could access increased capacity and improve rates.

Expand your carrier network to find capacity and ensure you’re paying the least amount of money to transport your freight. Bonus: when you step outside of your preferred carrier network, your preferred carriers are likely to agree to reduced pricing when it’s time to renew and renegotiate your contracts. Be careful though. While choosing a carrier that’s outside of your preferred network may reduce your rates, you also risk growing pains like delayed transit times and increased susceptibility to damages.

Open your mind to different modes. Usually ship FTL but can’t find capacity? Consider breaking up your freight into smaller units to be shipped LTL. Is LTL your go-to but you can’t find trailer space? See if you can consolidate to ship FTL. Not only will modal conversion help you find capacity, but, depending on your circumstances, it can also reduce your transportation costs.

2. Be efficient

Do all you can to optimize the shipping experience, not just for your customers, but for your carriers. The better your carrier relationships are, the better your rates and ability to find capacity will be. Here are some examples.

  • Ensure your paperwork is accurate. If your shipment's actual weight doesn’t match what’s listed on its bill of lading (BOL), the carrier will have to reweigh it, increasing transit time and landing you with a fee. Inaccurate paperwork wastes both your and your carrier's time.
  • Maximize delivery lead times. Not only will this increase your ability to find capacity and reduce your rates, advance notice to your carrier will allow them to take measures to be more efficient.
  • Be smart about how you package your freight. More densely packed shipments are likely to ship more quickly and less expensively while being less prone to damage.
  • Don't make carriers wait. A carrier's time is a carrier's money. So when a trailer sits idly at a pickup point waiting to be loaded or unloaded, the carrier loses money, and the shipper incurs a costly fee.
  • Pay your carriers fairly and quickly. With more freight volume than trailer capacity, carriers can afford to select their customers carefully. Serious shippers are paying serious rates to get their freight to its destination. So don't be surprised if you must trade lower rates for increased capacity.

A transportation management system organizes all of your transportation data into one place, allowing you to make the most informed decisions for your business, no matter the market conditions.

3. Ship strategically

Get creative with your shipping strategy to keep your freight moving even in the most challenging market conditions. We’ve detailed some of the most effective creative shipping strategies below so you can consider how they will work for your business.

  1. Aggregation takes place when one shipper combines multiple orders headed to the same destination on the same day into the same trailer, therefore reducing transportation costs, minimizing risk of damage, and making capacity less of an issue.
  2. Pooling occurs when freight is consolidated or deconsolidated at a pool point, also known as a cross-dock, so that it spends the majority of its transit time being shipped via the most cost-efficient mode. Pooling can be leveraged at any shipping lane’s origin (called pool consolidation) or destination (called pool distribution) — or both! Pooling can keep your transportation costs low, expand your capacity options, and mitigate the risk of freight damages. Here are some of the most effective ways to benefit from pooling.
    1. Inbound consolidation – Consider this option if you manage multiple inbound shipments that have the same final destination. How does it work? LTL carriers pick up your inbound shipments at your vendor locations and bring them to a pool point. At the pool point, they are consolidated into FTL shipments before being delivered to the final destination.
    2. Outbound deconsolidation – Consider this option if you have high volumes of outbound LTL freight destined for specific geographic areas. How does it work? FTL carriers pick up your outbound freight at your shipping location and deliver it to an LTL terminal that is near the geographic center of the volume distribution. At the LTL terminal, your freight is deconsolidated into multiple LTL shipments and delivered to their final destinations.
    3. Inbound consolidation to multi-stop FTL – This is another option to consider if you manage multiple inbound shipments that have different final destinations. How does it work? Inbound shipments from multiple vendors are delivered to a pool point. At the pool point, they are consolidated into a single, multi-stop FTL. Then, the multi-stop FTL delivers each shipment to its final destination. In multi-stop FTL shipping, each shipment’s final destination is known as a stop-off point. Hint: make multi-stop FTL more attractive to carriers by planning continuous moves.
    4. Continuous move solutions cut costs for shippers and FTL carriers by reducing empty miles, or deadhead. Adding multiple shipments to one carrier route closes the gap between pick-up and drop-off locations, maximizing carrier efficiency and decreasing deadhead. Making your freight attractive to carriers and reducing their expense is one of the best ways to turn a market that favors carriers into one that works for you.

4. Leverage logistics technology

If you’re a technology holdout, or if you just aren’t getting the most out of the tech you have, now is the time to make changes.

A transportation management system (TMS) organizes all of your transportation data into one place, allowing you to make the most informed decisions for your business, no matter the market conditions.

Establish API connectivity with your carriers to benefit from real-time quoting and tendering and an automated transportation management experience that increases speed while reducing costs and inaccuracies.

Invest in transportation optimization software to become able to test different shipping scenarios before having to commit to their execution. This way, you minimize risk and reduce costs while improving customer satisfaction.

Now is the time to digitize your supply chain logistics or risk falling behind.

5. Partner with a 3PL.

Maximizing your logistics opportunity in today’s carrier-centric market isn’t simple. While the largest shippers are able to build high-performance transportation management teams in-house, this is not an effective solution for smaller shippers. Investing in the procurement and management of the top logistics talent and technology that it takes to be competitive will detract from their core competencies.

Outsourcing transportation management to an experienced third-party logistics partner (3PL) allows even the smallest shipper to find capacity and reduce transportation costs while achieving increased speed and improved service — without limiting the resources they are able to commit to their core competency.

With hundreds of thousands of 3PL options, how do you pick the right one? Look for a partner with significant experience, strong carrier relationships, a transparent approach to communication, and best-in-class technology. You want to leverage your partner’s resources for maximized cost-savings and customer satisfaction. No fly-by-night entity is going to do that for you.

Already working with a 3PL but dissatisfied with the results? Consider switching to a different 3PL partner to access new opportunities.

In this capacity-constrained climate, it’s important to examine all of your options to keep your transportation strategy on track.

Ryan Keepman

Ryan is the President of Evans Transportation.

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