Basic Costs of Transportation - How to Save


February 04, 2013


No matter how simple or relatively complex your logistics operations may be, there are certain logistics costs that you will have to be concerned with. Luckily, professionals in most industries will have the opportunity to turn these costs over to various carriers and other logistics services and will not have to concern themselves directly with things like the cost of fuel, long haul trucks, training and maintaining drivers, and so on.

However, there are still a variety of fundamental logistics costs that are inescapable. They cannot be eliminated, only optimized. Switching to a model that relies upon carrier service will make the cost of the carrier relationship itself the most basic cost. Likewise, the cost of various parcel and freight services, in terms of the cost of postage per transaction and the cost of moving items along a defined route, will still play a major role.

That said, developing carrier relationships is the wisest course of action in the long run because it creates a “single point of fault” for many problems. While you might work with dozens of carriers, you will soon learn that there are fundamental techniques that you can adopt to improve the performance of all your carriers and thus save money. Every fraction of a cent that you save successfully will be amplified across hundreds, thousands, or even millions of activities.

Want to reduce your freight and parcel shipping costs? Here are some basic ways to proactively manage the cost of freight and parcel shipping and many other foundational costs.

1) Transportation Cost Analysis

The first way to cut down on freight shipping cost or any other costs related to logistics is to recognize where those costs are originating from in the first place. This is similar to developing a budget for personal spending. You will not be quite sure how to approach cost savings if you do not know what the most outsized categories of cost are. You might have a notion that the biggest spending problem is the cost of freight shipping only to learn it is something else. Only a thorough transportation cost analysis can help you be sure. It is the basis of all future moves.

2) Carrier Optimization

This goes back to the idea of the carrier as the “single point of fault.” Even when you have hundreds of carriers to work with, the means of improving your bargaining position with them consists of a handful of sophisticated and powerful techniques. One of the most important ways to reduce costs and improve your outlook with carriers is to demonstrate to them that you are always on the hunt for a better deal. As your volume of transactions rises, you should regularly re-evaluate your contract with the help of a qualified logistics service.

3) Invoice Auditing

The larger your network of vendors and carriers, the more invoice errors you will be subject to on a weekly basis. These errors are typically the result of simple human error, without malice, but that also means that they follow no pattern and can be very difficult to spot. Invoice errors can give you an erroneous view of your logistics spending outlook. Luckily, you are empowered to collect upon these errors whenever you discover them. A logistics service can help here as well.

Logistics is growing to be understood as a fundamental component of business as globalization continues to proceed apace. While most enterprises are not in a position to transform logistics into a profit center, it can directly impact customer perception of your business and thus the willingness of millions of people to do business with you. That being the case, you should treat it with the same rigor of any internal function, even if most logistics duties fall to carriers.

One final word of advice: You can still be proactive and effective in your logistics management no matter what level of internal control you maintain. Logistics software that renders your shipping and freight activities visible to every decision-maker in your organization will help you uncover further areas for improvement. The most advanced software will sort through various information streams independently and provide you with real-time updates on key factors.

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