How to properly source transportation modes in order to maximize your shipping program’s profitability and minimize potential issues.
In an increasingly competitive retail landscape, an inefficient or unreliable shipping program can literally make or break a small-to-medium-sized business. In order to maintain a competitive edge, companies need to ensure their selecting the best possible modes and carriers for each shipment they make — but with all the options available today, making the right decision can often be easier said than done. Here are a few simple tips that will help you optimize your transportation sourcing to ensure you’re maximizing the value of your shipping and logistics strategy.
1. Understand Your Products As Cargo
As obvious as it might sound, understanding your products from a shipping perspective is the first step towards making smarter, ROI-driving decisions. Make sure to educate yourself about any special considerations that need to be taken into account for your cargo, as well as the capabilities or different carriers and consignees and any restrictions that might apply — both domestically and internationally.
It’s also important to remember the logistics side of the equation — while it might seem like there is a lot of new vocabulary and technical terminology, a little effort to bring yourself up to speed will go a long way during planning and negotiations. If you decide to team up with a shipping and logistics partner, make sure they keep you in the loop and help you better understand the process you’re taking part in.
2. Always Consider Your Total Landed Costs
While cost is understandably a primary factor in most businesses’ shipping decisions, opting for the least expensive choice isn’t always the best idea. Ocean freight, for example, can be a consistently cost-effective investment, but there’s always a possibility that an uncontrollable variable — a weather event, for example — could cause significant delays. As such, you need to make sure you’re factoring in the costs of additional inventory and other resources to mitigate the negative effects of an unforeseen event or issue.
3. Prioritize Value
Chances are you’ve probably heard someone say “prioritize value over price,” but what does this really mean? When it comes to “value,” baseline cost is, of course, part of the conversation, but it also takes into account other factors like vendor quality, customer service, transit time, reliability, etc. When you make a decision based on price tag alone, you’re taking a huge gamble in all of these other vital areas.
You also need to account for the overall level of risk in accordance with cargo type. For example, if you’re shipping fragile and/or expensive products overseas, air freight might cost more than commoditized ocean freight upfront, but the risk of damages is significantly reduced. As a result, you likely end up getting more value the long term.
4. Understand How Capacity and Timing Affects Pricing
When it comes to calculating freight costs, when you’re sending your shipment can be just as important as its destination. For example, LTL capacity in any given region tends to fluctuate throughout the month. When capacity is low, prices get driven up, thereby diminishing ROI for those who choose to ship during these periods.
Conversely, it’s possible to use low capacity to your advantage. For example, if you or your shipping partner has a firm understanding of a particular carrier’s shipping schedule and you know a truck is going to be returning empty or partially full, that can actually help you negotiate a better deal.
5. Utilize Innovative Technologies
As digital technologies in the shipping and logistics space continue to improve, new opportunities to boost ROI are popping up left and right. However, for some small-to-medium businesses, investing in a proprietary or third-party TMS or WMS might not be an option — possibly due to the budgetary strain involved or limited internal knowledge/resources. Sometimes the most cost-effective approach is to partner with a 3PL or an Integrated Logistics Services Provider (ISP). The best ISPs have the requisite technological infrastructure, internal expertise, resources, and global partnerships to help drive real value across the entire shipping process.
To learn more about ISPs and the value they can provide, check out our handy guide on what to look for in an ideal partner.
At Primary Freight, we’ve been driving real value and boosting ROI for our partners for more than 20 years. To learn more about our unique approach, capabilities, and results, give us a call today at (800) 635-0013.