What with fuel costs on the rise and the economy starting to rebound, shippers will undoubtedly see freight cost increases in the months ahead. But there IS something you can do about it.

If you haven’t re-bid your freight business for a while, now is the time to do so. Here are a few tips on what you should do:

Step #1: Develop a strategy. What are you going for? Lower rates? Better service? How do you know if your rates are already low, or if there are opportunities to reduce costs? Many shippers have been surprised by a “backfire” when they negotiate rates that are already competitive as responding carriers (even the ones they already use) come back to them with higher, not lower rates. Be careful with this — it’s a good idea to do some freight ...]]> Freight costs eat into the bottom line of almost every company. Every dollar spent on freight can equal $20 or more in sales, so if your company can save $100,000 in freight charges that can equate to $2 million in sales.

What with fuel costs on the rise and the economy starting to rebound, shippers will undoubtedly see freight cost increases in the months ahead. But there IS something you can do about it.

If you haven’t re-bid your freight business for a while, now is the time to do so. Here are a few tips on what you should do:

Step #1: Develop a strategy. What are you going for? Lower rates? Better service? How do you know if your rates are already low, or if there are opportunities to reduce costs? Many shippers have been surprised by a “backfire” when they negotiate rates that are already competitive as responding carriers (even the ones they already use) come back to them with higher, not lower rates. Be careful with this — it’s a good idea to do some freight benchmarking before starting out to make sure you don’t have problems later (by the way, we do provide this service).

Step #2: Weigh what’s important to you. Do you care more about service or price? How much more are you willing to pay for premium service? Do you have any flexibility in shipment transit times? Can you re-load inbound trucks for outbound shipments? These are a few of the many factors that will influence your pricing and service combination.

Step #3: Gather information. Carriers will want to know where your shipments originate and where they go. They’ll also want to know what products and commodities you ship, their densities, shipment weights, and shipment dates among other things. Carriers can tell you what they will need from you.

Step #4: Select carriers. You’ll want to find carriers that not only can do the job, but that also need the kind of business you have to offer. All carriers have lane imbalances where they need more freight moving between certain points in order to get their trucks, airplanes, and ships back to where they need to be. If you have the kind of business they want you’ll stand a better chance of getting favorable rates.

Step #5: Standardize your RFP. Your Request for Proposal should include a standardized format for the carriers to follow when responding with their price and service offerings. Without this you’ll be facing a nightmare of complex calculations before you’ll be able to compare the various responses.

Step #6: Evaluate the bid responses. In this step you’ll determine the economic benefits of making a shift to new carriers or of establishing new pricing with existing carriers. You’re going for the bottom line here, and the savings you achieve will go right to your company’s profits.

Step #7: Establish your rate agreements. Once you decide on a new plan, you’ll want to set up appropriate rate agreements with carriers. If you haven’t done this before, you should seek expert advice.

Step #8: Prepare your routing guides. Now it’s time to publish your new plan in shipment routing guides that can be sent to your shipping departments, your vendors, and even your customers. Make sure that they are clear and that they provide instructions for users.

Step #9: Become a good customer for the carriers. Offer to pay freight bills very promptly in return for lower rates and higher discounts. Advise carriers of your pending shipments as early as possible. Be flexible with ship dates whenever you can. Work with the carriers to increase their productivity; consider getting the carriers in and out quickly, reduce the time to load and unload, and ask the carriers what you can do to be a better customer.

Step #10: Monitor results. You’ll never know if you got there if you don’t measure where you are. In this step you’ll want to get feedback from others regarding their satisfaction with the carriers and your shipping programs, and you’ll want to measure how much your costs have changed. It’s best to set up this step early on, even before preparing your RFP.

If you use an outside consulting service to help you with this process, make sure that the firm is licensed by the Federal Motor Carrier Safety Administration (FMCSA). Anyone you hire to negotiate rates or to arrange transportation on your behalf must have a valid property broker license (we do).

Also, if you use a consultant, determine how the consultant will be paid. Basing fees on a gain-sharing, or percentage of savings option is a good approach since you only pay if the consultant saves you money (in some cases a small implementation fee applies). In other cases the consultant, if licensed to do so, can be paid directly by the carriers you use, in the same way that travel agents earn commissions from airlines. This is a normal and acceptable practice that reduces the payment cycle time to the carriers as opposed to re-billing the shipper, and often results in better pricing for the shipper.

We have the experience, knowledge, and tools required to reduce freight charges in your company, and savings of 15% or more are common. Take a few moments to browse through our site to read about the services we offer, then fill out the contact form and send it to us. There is NO obligation and no salesman will contact you unless you so request.

Why are some fuel surcharges based on a percentage of the freight charges while others are based on cents per mile? Why would a fuel surcharge on one shipment be more than that on another? What if these shipments have the same density, the same origin and destination, and the same weight, but different value? For example, freight charges — and their resulting fuel surcharges — are typically higher on a shipment of laptop computers than on a shipment of other products with the same density but much lower value. This means that somebody might be making some money on ...]]> If you’re reading this you probably want to figure out a way to get control over fuel surcharges. And who can blame you? Just look at diesel fuel prices today — people look forward to filling up their tanks about as much as going to the dentist. But the extraction is from your wallet, not from your mouth, and it hurts just as much. But you are not alone! — you’re in the same boat with thousands of other managers.

Why are some fuel surcharges based on a percentage of the freight charges while others are based on cents per mile? Why would a fuel surcharge on one shipment be more than that on another? What if these shipments have the same density, the same origin and destination, and the same weight, but different value? For example, freight charges — and their resulting fuel surcharges — are typically higher on a shipment of laptop computers than on a shipment of other products with the same density but much lower value. This means that somebody might be making some money on this, at your expense.

SO, what can you do about it? You really want to control this untamed animal, and the good news is there ARE some things you can do.

First of all, break things down into two basic categories: Less-than-truckload (LTL) shipments and truckload (TL) shipments. You’ll take different approaches with each.
Let’s start with LTL. Ask your carrier sales reps why the freight charges on your shipment of laptop computers (or whatever) are different than other products where product density is about the same. Do shipments of laptops need more fuel to transport? Of course not. So why not consider negotiating a different freight rate structure that lowers your base freight charges AND the resulting fuel surcharge? That’s where a good transportation consultant comes in. That worth-their-weight-in-gold person can perform a study to compare your products and shipments to others, and can develop a rate negotiation strategy for your company — A very good idea.

Now how about TL? First ask, “How many TL carriers do I use”? Take a look at the fuel surcharge tables for these carriers. They’re not the same, are they? But aren’t these different carriers all driving similar kinds of trucks? Don’t they get similar fuel mileage?

Tip #1: STANDARDIZE THE FUEL SURCHARGE TABLES! Sit down with your carrier reps and ask each why their table is different than their competitors’ tables (this should result in some interesting answers). While I can guess what their responses will be, feel free to let me know what they tell you.

Tip #2: Many companies put a lid on fuel surcharges, capping them off at a certain level (these are the companies with either lots of buying power — maybe $50 million in freight expense or higher — or, they have GOOD consultants who can benchmark fuel costs and know how to negotiate these caps). It’s definitely worth a try.

But aren’t you already paying for some fuel in the base rate? Of course! Freight rates already include some cost component for fuel, even before fuel surcharges are added. You don’t want to pay for fuel twice, particularly at today’s prices.

Diesel fuel prices will probably continue to rise, what with diminishing supply, increased world-wide demand (China and India are taking off), and political turmoil. Now’s the time to put together a good fuel surcharge strategy — and make surcharges less worrisome than going to the dentist.

And don’t be afraid to ask for help.

We have the experience, knowledge, and tools required to reduce fuel surcharges and freight charges in your company, and savings of 15% or more are common. Take a few moments to browse through our site to read about the services we offer, then fill out the contact form and send it to us. There is NO obligation and no salesman will contact you unless you so request.

It’s been said that “time is money”, but when it comes to air express shipments, time “costs money”. Plenty of it. While each shipment may cost only a few dollars, it really adds up when you look at company-wide expenditures for air express services. In fact, many companies spend millions of dollars on air express services each year. One of the big drains? Priority Overnight and Next Day Air services.

Here’s the problem. Many users of these services select premium service options as their default. They automatically select the fastest (and highest cost) services available, even if their packages aren’t all that urgent. What can you do? There are some easy-to-implement things you can do to bring air express costs back down to earth. According to John Harold, president of the San Francisco-based logistics management firm Business Logistics, employee awareness and education is the key: “Many employees nowadays simply ‘default’ to using priority overnight whenever they feel that a sense of urgency is involved”, Harold says. “What they often don’t know is ...]]> Want to reduce air express costs? You can!

It’s been said that “time is money”, but when it comes to air express shipments, time “costs money”. Plenty of it. While each shipment may cost only a few dollars, it really adds up when you look at company-wide expenditures for air express services. In fact, many companies spend millions of dollars on air express services each year. One of the big drains? Priority Overnight and Next Day Air services.

Here’s the problem. Many users of these services select premium service options as their default. They automatically select the fastest (and highest cost) services available, even if their packages aren’t all that urgent. What can you do?
There are some easy-to-implement things you can do to bring air express costs back down to earth. According to John Harold, president of the San Francisco-based logistics management firm Business Logistics, employee awareness and education is the key: “Many employees nowadays simply ‘default’ to using priority overnight whenever they feel that a sense of urgency is involved”, Harold says. “What they often don’t know is that express packages may not be needed or even opened by the recipient the following morning — afternoon delivery, for example, or even second day service can often meet the recipients’ needs just fine.”

Words to live by: “Ask and Act”

When it comes to air express service, “Don’t Ask, Don’t Tell” is a fast way to higher cost. That’s why we recommend that companies teach employees to ask package recipients when they plan to act on the materials being sent to them. Let the recipient determine the service level for the package based on his or her ability to actually open the package, read or review the materials, and initiate action of some type as a result. “Once employees get used to asking when the recipient will act, then choosing the shipping method that is the most cost effective, you’ll start seeing air express costs go down. Senior managers must stand behind the concept so that everyone is comfortable ‘asking the question’ whenever a package is to be sent by air express”.

“While air express services are here to stay, there are lower cost, reliable alternatives such as ground courier, intra-company ‘pouching’, priority USPS mail, and Email”, says Harold. “We customize express service programs to meet client needs in the most economical way.”