Shipping freight makes up a large share of a business’ logistics expenses, especially if your business imports and/or exports often. It’s therefore a must to explore ways to reduce shipping costs, without sacrificing service quality and efficiency.
There are actually rather straightforward methods that will help your business considerably reduce shipping costs. We’ve listed five tips below that you can start with.
Not in a rush? Choose sea freight.
There’s a reason why most of the world’s cargo is still moved by sea. If not pressed for time, sea freight is the best and most cost-effective way to get your cargo across borders.
Transit time and cargo acceptability must always be checked by your forwarder beforehand. Other than these concerns, there is practically nothing that should stop you from choosing to ship by sea over air.
Note, however, that transit time may be a deciding factor. If your cargo is time-sensitive (e.g., perishables), choosing sea freight to move your cargo over great distances may end up costing your business rather than reducing your freight expenses. No one wants goods gone bad and goods that arrive late.
In cases where your cargo can endure lengthy travels, though, nothing beats the value of shipping by sea. According to the World Bank, air freight expenses can go up to 16 times that of sea freight. This difference is more noticeable the heavier your cargo is. In other words, the heavier the cargo, the bigger the savings when shipping by sea.
In freight forwarding and customs clearance, there are costs that are charged not based on your cargo’s gross weight or value. Examples of such expenses are terminal handling fees, documentation fees, warehouse charges, etc.
Simply put, there are costs that are charged based on the number of times you ship, regardless of the cargo’s weight and value.
Not sure how this is relevant to reducing freight shipping costs? Say a customer books a shipment with two full-load containers (FCL) this week, and then realizes after two weeks that they will need to import other goods for their business, this time through a less-than-container load (LCL) shipment.
Here are the three questions we can raise in such a situation:
- Could the customer have foreseen the need for the goods in the LCL shipment earlier?
- Could the contents of the LCL shipment have fit in the earlier FCL shipment?
- Was the FCL shipment time-sensitive, or could the customer have shipped it together with the contents of the LCL shipment?
If one of the answers to the above-mentioned questions is a yes, then the customer might have wasted money paying for handling, documentation, warehousing, the Bill of Lading (BL), etc.
Unnecessary spending can be a result of failing to check inventory and upcoming business activities accurately. In the situation above, it’s likely that the customer really only needed to book one shipment instead of two.
Plan shipments with space maximization in mind. Check with your operations team to ensure that your shipment contains all the goods you need to import/export within a given period.
One of your business’ cost strategy goals should be to effectively reduce the number of booked shipments without affecting supply. This will help you avoid spending on shipment costs more than necessary.
Optimize packaging for shipping.
Using the right packaging is probably not the most obvious tip when you think about ways to reduce shipping costs. It does help, though, both directly and indirectly.
The right packaging will protect your cargo from damage while in transit. This is most applicable for exporters who provide their own packaging and therefore have full control on how their products are protected. Although choosing the right packaging does not directly reduce expenses, it does lessen the risk of having to shell out money for damaged goods.
Coordinate with your forwarder, too, to discuss with them whether pallets, crates, skids, etc. are needed for your cargo. These items provide additional protection by supporting your cargo’s weight. They also absorb stresses caused by vessel, flight, and/or truck movement.
Proper crating, palletizing, etc. is especially important for shippers and receivers who do not have any influence on product packaging. What’s within their control, however, is working with a forwarder who will make sure that their cargo is properly loaded into a container or a plane.
For exporting manufacturers, you might want to consider revisiting your products’ packaging, especially if you ship often. This is because customers also consider shipping expenses when choosing a supplier. What’s the correlation?
Sometimes, packaging takes up unnecessary space but does not offer good, additional value. This is evident in packaging excesses that do not provide any vital, additional protection for the product. This can lead to an increase in freight shipping costs without any good return for either the seller or the customer.
In such a case, redesigning product packaging for future use may be worth it. Finding a good balance between added protection versus space maximization in shipping is key.
Ship in advance.
Peak seasons in retail bring logistics demand up. When this happens, shipping lines are known to add peak season surcharges to their rates. These charges are shouldered by customers.
There are several peak seasons for freight shipping within a year. The two most busiest are the weeks before Chinese New Year and the months leading up to the holiday/Christmas season (September to December).
Plan and prioritize your shipments months ahead. Although some goods, like perishables, are time-sensitive, there are others that can be shipped in advance with no negative impact on either the supplier or the buyer. Identify these goods, if there are any, that are within your supply chain. See if you can have them shipped ahead of peak seasons.
Other than just shipping cargo in advance, however, we also recommend that your business conduct a demand forecast for your products. Say, around the holiday season, which of your products sell the most and the fastest? Can they be shipped early?
Learn to peg your customers’ needs so you can anticipate what they will need and when they will need it. This way, you can also more wisely schedule your shipments to avoid peak surcharges.
Choose the right freight forwarder.
Freight shipping entails a lot of work that requires a high level of logistics expertise. There are companies that import or export often but do not have a logistics team. Such companies will perform better with a partner who can provide comprehensive, value-added logistics solutions.
Depending on the resources available to you, the right freight forwarder should also assist you with customs clearance, storage, and delivery. Entrusting all these services to one partner will save you money, time, and effort. Moreover, a logistics partner who can do everything for your business will also help you ensure high quality of services across the board.
Choose freight forwarders who have a lot of cargo traffic. They are likely to benefit from lower rates from (a) particular shipping line(s), agreed upon by both parties in exchange of a quota. Needless to say, such discounted rates are often unavailable to most importing and/or exporting companies.
With a proven track record in the industry, a capable forwarder will also have a rich network of logistics partners worldwide. Such a forwarder will be able to pick out the best rates for your international shipments and, of course, also give you the freedom to ship goods to and from any country in the world.