The six secrets to slashing freight costs

Freight costs are often a big burden for small businesses. Here are six tips for SMEs to get the best value out their freight deliveries.

Transport is unfortunately often seen as one of those set-and-forget type costs. A provider is chosen, a deal is struck and it isn’t reviewed again – at least, not until something goes wrong.

If your business has a compound growth rate of 15 per cent or greater over a three-year period, and your volume of freight has increased significantly, there is a good chance that you are eligible for a volume discount on your freight.

For this reason alone, you should review your transport provider every three years.

There are also a number of other variables to consider, including service levels and hidden charges.

The transport industry has not traditionally been transparent about its costs, which is where an independent freight auditor can add value to your bottom line. SMEs in particular can be drastically overcharged on international and interstate freight.

These six tips for avoiding unexpected and expensive freight charges will go a long way to helping your business keep a lid on shipping costs:

1. Keep records in order for evidence

It is important to keep consignment paperwork organised,as it may need to be used as evidence in the future. Keep a record of the weight and cubic dimensions of each consignment, including photo evidence if possible.

Most carriers will provide estimates for the freight, and the heavier the consignments, the higher the cost. If your consignments are under the estimated weight you are eligible for a refund, but without evidence it is hard to get the money back.

2. Watch out for express air freight

When choosing your type of air freight service, consider what you actually need in terms of consignment speed.

Most air carriers will send deliveries overnight or on the same day, charging a priority service fee unless you specify otherwise.

Freight providers offer a number of transit times and if your consignments are not urgent, you can send on a regular service for less. Express deliveries are far more expensive than the regular service costs and often unnecessary.

3. Choose a carrier wisely

Did you know that just because a basic rate is competitive, it might not always be the cheapest option overall?

Consider that there are numerous extra costs that carriers can charge on top of their base freight rate, including the Western Australia surcharge, remote area surcharge, or an oversize surcharge for large consignments.

A freight auditor can help you gain a full understanding of these additional charges and when they can arise.

4. Road v air

Most businesses would assume that sending consignments by road is much cheaper than sending them by air.

However, there are numerous opportunities for businesses to save money by sending light packages by air instead.

If your consignments are light (under three kilograms), air bag service is often cheaper – and of course faster – than road service.

5. Ask for full delivery details

Transparency is the key to reducing your freight costs.

If you don’t know the details around how your freight is being calculated, then you can’t review all the actuals against the estimates and see the additional charges.

Always ask carriers to send the freight file (.csv or .pdf file format) with a full outline of the delivery details.

Some carriers only send an invoice showing how much you need to pay, because they don’t want customers to find out how they calculate and charge for freight.

Being aware of all the hidden costs is the key to negotiating your payments.

6. International freight couriers

For light air-freight deliveries (under 70 kilograms), using a local door-to-door international courier is often cheaper than using a freight forwarding company.

By using a courier, you can avoid the collection of minimum charges that many freight forwarding companies apply.

 

Darren Ash is the managing director of Freight Cost Solutions, an independent freight auditor.

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