5 WAYS TO DECREASE YOUR SHIPPING OPERATION COSTS
In a world where customers are expecting faster (and often free) delivery, businesses are finding it more important than ever to closely manage their ground shipping operations. We take a look at how to address the twin challenges of reducing delivery times while decreasing shipping costs.
We’d now like to introduce you to Matt Rundblad, who oversees our Formaspace Customer Service and Shipping Operations. Matt started his career in shipping and receiving at some pretty well-known companies, including Dell, Pepsi, and Thermofisher. He’s been with Formaspace for five years now and can speak with authority on what he’s been able to accomplish to reduce Formaspace’s shipping costs.
We asked Matt to give his advice on some of the ways you can make your ground shipping operations more efficient and cut down on your freight shipping costs.
1. BEFORE YOU START: ANALYZE YOUR GROUND SHIPPING OPERATIONS REQUIREMENTS
In this first step, you need to act with conviction. Pretend that you know nothing about the business and start asking yourself questions that challenge all your existing assumptions.
Why should you try this? The resulting, creative insights that come from questioning your standard operations might end up saving your company a lot of money. For example, if you have a product that is due for a redesign, could it be an inch narrower next time, which in turn, would allow more of the finished product to fit on a single shipping pallet?
What about weight savings? Could you switch to different materials or choose a lightweight composite design that would result in significantly lower shipping costs?
Do you have too many incidents where your products are being damaged during shipment? If so, look at reinforcing the product itself or changing the shipping container design to help protect it during transit.
These types of value, engineering investigations could provide substantial shipping cost savings throughout the entire product lifespan.
Next, you can look at your primary shipping patterns. Identify the major city pair shipping routes you use most. As we’ll see in a step further down the list, knowing your customer sales projections and freight shipping requirements for the next year or two can give you a much stronger hand when negotiating lower freight company shipping rates for your higher volume routes.
Finally, look at your customer’s requirements. If you are shipping to a company that has fixed receiving hours (such as a retail company), there may be hefty penalties if your delivery misses the delivery window requirements. In some case, the penalties can be as high as 3% of the PO, which can add up quickly. In these cases, it might make sense to pay a bit more to avoid penalties by shipping via an expedited service that guarantees on-time delivery, especially during bad weather or the holiday shipping season.
2. CREATE EFFICIENT SHIPPING OPERATIONS WITH THE RIGHT PACKING TABLES AND SHIPPING STATION CONFIGURATIONS
When you are looking at the requirements for your shipping operations, don’t overlook how your packing tables and shipping stations are configured.
As we described in our article 10 Speedy Shipping Stations Set Up Tips, you’ll save money and time if you order fulfillment process is organized to avoid any unnecessary bottlenecks.
Packing and shipping personnel will make fewer errors if they have a clean, organized space to work — with the necessary packing supplies and equipment positioned in an easy-to-reach layout configuration.
Talk to your Formaspace Design Consultant about how you can improve the accuracy and throughput of your packing tables and shipping stations. We can also provide a Rapid Plant Assessment that takes a look at all aspects of your facility’s overall production layout and flow.
Whether you are a small company or a major enterprise, we have the experience to help you design a more efficient facility. Not convinced? Just ask one of our many industrial companies, including Kuene + Nagel, Amazon, Dell, Eli Lilly, Ford, Medtronic, and Toyota who have chosen Formaspace for their industrial furniture needs.
3. UNDERSTANDING HOW FREIGHT CATEGORIES AND RATE STRUCTURES AFFECT YOUR SHIPPING COSTS
As you are probably aware, ground transportation is generally divided into two categories:
“Truckload,” as the name implies, is a full truckload of freight, usually loaded with 24 or more pallets, weighing up to 45,000 pounds (or more). A typical truckload shipment travels from your shipping dock directly to the customer without intermediate stops.
“LTL” stands for “less-than-truckload” freight, e.g. a partial shipment that’s typically between 1 and 6 palettes. With LTL, it’s likely your freight may have to be loaded and unloaded (known as ‘touched’) at one or more transfer terminals on the way to your customer delivery.
Truckload and LTL shipping rates and freight categories are different as well.
Most LTL shipping rates are regulated by the National Motor Freight Traffic Association (MNFTA). Your total shipping cost is based on a calculation that takes your shipment’s freight classification, weight, density, and delivery distance into account. Since the most recent update in August 2017, there are nearly 140 classifications grouped into an 11-tier system (replacing the previous 9-tiers). Things can get even more complicated when you ship different classed products on a single palette. If this is a common situation for your shipments, it may be advantageous to negotiate a FAK (Freight all Kinds) rate with your carrier that accounts for your mixed shipments.
Full Truckload shipments are not regulated the way LTL shipments are. Instead, full truckload shipping rates on the open market can change on a daily, if not hourly, basis. (We’ll talk about negotiating long-term rates in the next section.)
There is also a concern in the shipping community about increasing freight costs due to new regulations, such as the federally-mandated Electronic Logging Device (ELD), which will be finally phased in (after many extensions) on April 1, 2018. In an attempt to cut down on dangerous truck drivers who drive longer hours than their truck logs indicate, the ELD system monitors the truck engine to create a driver’s hours of service (HOS) record that’s more resistant to tampering than manual record keeping. There is a widespread expectation that this will cause freight rates to rise, as rates will have to reflect the number of hours that drivers are actually driving. There’s also a concern that many truck drivers, and even entire companies, will leave the industry due to this new regulation, which could drive up rates due to reduced overall capacity.
4. GETTING THE BEST DEAL FROM FREIGHT COMPANIES FOR YOUR SHIPPING OPERATIONS
Matt advises taking your time before rushing to use the name-brand carriers, such as FedEx and UPS. Take your time to see how your needs (determined in step 1 above) meet up with their offerings. Remember, they are high-volume companies, and if your shipping needs are different, it might not be a good match.
Before negotiating an agreement with the big carriers, such as FedEx and UPS, you should also take the time to understand how their rates change over time.
