Control Shipping Charges to Save $$$

Paying close attention to transportation or freight costs is often neglected, especially inbound freight costs. It is unfortunate because there can be significant savings obtained by using your buying knowledge and negotiating skills.

It is difficult to say exactly what percentage can be saved because much depends on the type and amount of products you buy or sell. It has been estimated that it is not unusual to spend 3% to 9% on shipping charges for the purchase amount and 6% to 8% on outbound shipments.

Freight charges are usually based on weight and/or volume. Distance for the shipment may also be a factor as is the mode of transportation.

How you ship is a major determinate of what you will pay. Paying more is required when you want faster delivery. Generally, larger quantities that will completely fill a truck (TL) will obtain a lower rate than smaller quantities that only fill a portion of the truck (LTL). Shipping by air is quick, but expensive. Large quantities of items may require transportation by sea, but it is slow by ship. The lesson is to plan your needs and schedule your orders carefully. Consider how much time is of the essence.

The good news is that freight rates are highly negotiable. You can obtain large discounts if you provide the carrier with enough good information about your volume and needs. The discounts may be as much as 50% or more of the published rates if you have sufficient volume.

With the potential for that kind of discount, you should devote some time to getting the best deal you can. For instance, if you purchase a million dollars worth of goods and you obtain a 50% discount, you could save as much as $15,000 to $25,000. Even if you only spend $100,000 a year, you could still save $1,500 to $2,500 a year. This should be well worth anyone’s time to gather the required information, shop, negotiate, and make an agreement.