Cost is a perennial concern in everything to do with logistics. Shipping and handling costs make up a major part of the money spent on logistics by most companies in a given year, and so, many efforts are undertaken to reduce shipping and handling costs by improving contract terms and optimizing carrier relationships. However, controlling these costs is easier said than done for a number of reasons. There are many factors that work together to raise shipping and handling cost – and many of these are beyond the direct control of client companies.
Here are a few reasons why shipping and handling cost is so high:
There Are Many “Moving Parts” in a Long Supply Chain
In theory, the “handling” part of shipping and handling refers to the human element in the supply chain and logistics equation. Hundreds or even thousands of individuals can be involved in moving items from one side of the planet to another. Every contributor to that process, from truck drivers and warehouse staff to shipping managers and cargo pilots, must be represented in the cost structure of shipping and handling. Companies that are lean and cost-effective, therefore, can offer reduced rates – but as complexity scales up, so does cost.
The Rules are Constantly Changing ... for You and for Them
Logistics companies and carriers have an extremely heavy regulatory burden to deal with on a daily basis. This is true virtually no matter where the company is centered or where the items are headed. International shipping is and always has been a part of the notoriously complex and often challenging customs bureaucracy. As customs requirements change, companies pass on the additional costs to customers in order to maintain an average level of solvency. Well-operated companies have analysts working constantly to minimize the impact.
Shipping and Handling Can Be a Profit Center
In many cases, shipping and handling is not a key profit center for major carriers, but in the case of small carriers, it is the main source of operational income and, ultimately, revenue. Unless a firm is partnered with a major strategic player in the industry, this is an almost inevitable stage in the growth process. If you have a long supply chain that includes some smaller “boutique” and regional players, you might be paying a premium for the services that they specialize in. That’s one reason why it is important to maintain high awareness of your shipping agreements.
You Can Reduce Costs With Outside Expertise
Although it is not always possible to directly reduce the costs incurred in relation to shipping and handling, you can streamline the cost structure that you are exposed to by optimizing your logistics chain from end to end. This includes taking such steps as evaluating invoices for human error, re-negotiating contracts, and using enterprise software and outside expertise to ensure that you are using the best routing and carrier selection approaches in real time. With all of these approaches working together, you can save a significant percentage of your shipping spend.