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Shipping costs can add up to astronomical heights, but don’t just accept it as it is! Reduce the sting of carrier costs by negotiating for better rates. You can do so by using these tips.
You might think rates and fees are inflexible and that your business must just deal with the high costs. Well, they’re not! There’s room for you to lower carrier costs, whether you work at a small or large business.
We’ve compiled several strategies and tips to help you save on shipping costs and improve your bottom line.
Negotiate with Carriers
All shipping companies follow the same pricing model based on volume: the more you ship, the lower your rate is. However, there are surcharges and fees that can greatly fluctuate your total costs. In the end, you want to know if you’re doing all you can to get the best deals. When negotiating with your carrier, understand that you need to demonstrate to them your value to justify lower rates.
1. Develop & Maintain Relationships
Connections and relationships are critical pieces in the negotiation process. Your relationship with the carrier prior to negotiating sets the tone of the conversation. Try reaching out to your account manager more than just once a year, maybe once per quarter to ask questions or simply catch up. It makes your relationship much more meaningful and enjoyable. These deeper relationships will bring more successful perks and concessions for you and your company.
2. Be & Stay Informed
With a strong relationship with your carrier account manager, you can stay up to date with any changes your carrier will make that might affect your logistics in the future. A way to strengthen those relationships is to make things easy for your account manager to help you. By knowing your logistics and operations inside and out, you can quickly answer any questions the account manager may ask. Anything you can do to make you easy to work with will tip you in the carrier’s favor.
Tip: Regularly conduct freight bill audits to keep track of expenses and avoid unknown surcharges.
3. Consider Prepaid Shipping
To help cut carrier costs, consider using prepaid shipping for FedEx and UPS who offer discount rates. Prepaid shipping means your business buys a specific quantity of shipping labels and uses them for packages as needed rather than pay for each package when it’s sent out. This strategy works best if your company repeatedly sends out the same-weight packages.
4. Consider Hybrid Services
UPS and FedEx also offer hybrid services (e.g., SurePost and SmartPost) that can cut a significant amount of the costs to ship packages. Hybrid services pick up your packages at your business location and ship them to the post office closest to the destination. The post office then handles the final delivery stretch. Be warned that this strategy can slow delivery time because of the extra step.
5. Use Packaging Provided by the Carrier
Do you use your company’s packaging? If so, you should know that you may face additional “dimensional fees” if your packaging exceeds the size regulations set by the carriers. Avoid the extra charges by using the packaging provided by the carrier. This will save carrier costs but also save you supply chain logistics costs in the long run when you’re no longer investing in custom packaging.
6. Offer Night Pick-Up
If your company can offer night pick-ups for packages, you allow carriers to make your load into the backhaul. Carriers might turn down shipments that are requested for a pick-up in the middle of the day because it conflicts with another run. With a later pick-up, carriers can make the delivery and fill their backhaul with your freight, ensuring optimization of carrier assets.
7. Ask About Surcharges & Fees
It never hurts to ask about fees and possible discounts! As mentioned earlier, you want to be sure that you’ve done all you can to get the best rates for your business, which is done by asking directly during negotiations. You never know what you can get just by asking! And if your relationship with the account manager is strong, the chances are higher of being successful.
Pack & Ship the Smart Way
On your logistics and operations end, there are steps you can take to trim down shipping costs. Optimize your supply chain process to pack and ship your products the smart way. Develop a reputation with carriers for consistent load time performance and efficient operations to save costs in the long run. Your company would get favorable treatment with a positive and professional reputation. Remember, your goal is to have the carriers want to work with you!
8. Optimize Pallet Space
The more space you take on a carrier’s pallet, the more it costs you. Pack efficiently to save pallet space and money. With software like CubeMaster, you can easily determine the best way to pack your products into stackable patterns that take fewer pallet spots. While you want to minimize pallet space to save costs, consider shipping more pallets at once rather than shipping a few pallets multiple times; shipping a few pallets multiple times would cost you more money in the long run.
You sacrifice space and increase costs by using an exorbitant amount of packaging material for shipments, especially if the products are shipped across the country or the ocean. Look into whether your company is going overboard with the packaging, such as airbags and strapping, to protect your products. Don’t hesitate to seek advice from carriers on how to reduce packaging without increasing the chances of damaging your products. With that said, dimensional weight pricing can decrease, therefore reducing costs.
9. Maximize Carrier Assets with Advance Shipping Notice
You can save money for your company by making the shipping process easier for the carriers. For example, introduce planning into the supply chain to give the carrier advance notice about future loads. The carrier would then be able to maximize assets, like trucks, drivers, and warehouse space.
It can get really expensive for carriers to pay for a truck to sit idly at a facility while waiting for loading. With better planning, all aspects of the supply chain – pickup, staging, live-loading – can be improved. The more the carriers can do behind the scenes with your advance notice, the more efficient shipping will be with the potential for the carrier to come to you with a better rate.
10. Load Efficiently onto the Carrier
Carriers generally assume a 2-hour window for loading when they develop pricing. If the carrier knows they’re picking up at a place where shipments get loaded swiftly, however, that affects the pricing. This reputation of fast and efficient loading takes time to develop, so understand that this is a long-run strategy for a future negotiation period.
Look Beyond the Carrier to Reduce Costs
How else can you save shipping costs? There are strategies to implement that doesn’t require negotiating with your carriers. Doing all that you can to cut down freight costs for your company means looking at third-party companies.
11. Get Suppliers to Use Your Shipping Account
Worried about not having enough shipping volume? Convince your domestic suppliers to ship products on your company’s carrier account to increase shipping volume for cheaper rates. Not only can your business qualify for better rates, but you can also help prevent suppliers from fluffing up their shipping costs.
12. Consolidation Program for Smaller Shipments
It makes sense to hold onto freight until you have enough for a full trailer to optimize space and save costs. However, retailers want smaller shipments but more frequently. That’s certainly the opposite of what you want to do to save money. The easy solution is to find a retail consolidation program near you! The program combines your shipments with other nearby companies shipping to the same mass retailers for direct delivery.
13. Buy Insurance from Third-Party Companies
Do you ship expensive products? More than likely, you’re buying insurance from carriers to protect your products. Consider buying insurance from third-party companies that charge cheaper rates than carriers. Companies like Parcel Insurance Plan and U-PIC Shipping Insurance provide low-cost package insurance to business shippers. They guarantee up to 90 percent discounted rates compared to major carriers.
So, there you have it – 13 ways to cut down on shipping carrier rates. Pick and choose the methods that are relevant to your business operations and goals, which are unique. We encourage you to carefully check which of these options is feasible for your company to implement.
Key Takeaways:
- Build strong relationships with your carriers’ account managers to ensure success in a future contract negotiation
- Introduce planning into your supply chain process to pack and ship efficiently
- Consider using different programs, features, and third-party companies to trim down costs
With ShipERP, the multi-carrier shipping and compliance solution integrated within SAP, business can rapidly ship products during the pick/pack/ship process and selectively adjust shipping services on the fly. Get the best value with rate shopping and automated carrier comparison all in one place.
