In this post, we consult the experts on why freight continues to be outrageously high and how shippers can access the best rates.
Though shippers have been dealing with high carrier rates for years, the freight markets' fluctuating nature meant you seldom had to deal with them for long. That all changed after Covid and the resulting global shut down.
It’s now been a year since the pandemic began. And the global supply chain is starting to recover due, in part, to a tremendous surge in imports from retailers looking to meet the record retail sales growth expected in 2021.
Exacerbating the demand for imports is the ongoing backup at the nation’s container ports and intermodal hubs. Freightwaves reports, “Extended anchorage times have forced some ocean carriers to cancel multiple sailings. Not due to lack of cargo demand, but rather, due to lack of available ships to handle those services.”
Covid-related delays stateside and extremely high inbound volumes combined with logistical complications both inside and outside ports are causing incredible delays.
All of these factors place the power to negotiate better rates squarely in the hands of carriers.
Fortunately, there are some things shippers can do to ensure better shipping rates and get the most out of their carriers when capacity is tight.
According to Retail and eCommerce Analyst Meaghan Brophy, one of the first things carriers consider when they factor in shipping rates is weight. Meaghan says:
“Since weight is a factor in shipping costs, (shippers should) see if (they) can optimize packaging by choosing smaller and more lightweight options, especially if the products being shipped are not fragile. For example, if you’re shipping clothes, opt for a polybag instead of a cardboard box.”
Analyst Meaghan also advises shippers sending package-size shipments to understand and use zone skipping, a strategy we strongly encourage as well. Meaghan explains that:
"Carriers divide the country into zones to measure the distance a package travels. Every zone a shipment travels over increases the fees on the load...Shippers can reduce these fees by partnering with a fulfillment company whose network includes multiple warehouse locations spread across the country."
eCommerce giants like Amazon and Walmart work with so many carriers, they often negotiate volume discounts that are nearly impossible for smaller shippers to get on their own. Shippers should, therefore, be on the lookout for any shipping deals that are available through their eCommerce platform or shipping software (i.e. partner rates).
Meaghan adds to this:
"Because (eCommerce and shipping software) companies work with so many businesses, they can often negotiate volume discounts smaller shippers would not be able to get on their own. Similarly, if the products you ship require insurance, you may be able to get lower rates through a third-party than through the carrier directly."
How can shippers better prepare for a volatile market like we are experiencing right now?
Logistics management is all about relationship building. Ever Reach Logistics' Lisa Baron-Croft shared it best with us in our Leaders in Logistics feature:
"Too often, people fail to take the time to build relationships with truckers, brokers, shippers, and receivers. They don't make an effort to make personal connections, which can hinder you in the long run.
A lot can go haywire with freight. A load cannot be delivered as expected, unexpected storage is needed, or a trucker is expected to hold a load and sit on making any movements. You are more likely to negotiate a workable situation for all involved if you have a solid relationship with those people."
Burns Logistics' Ed Burns adds to this:
“The key for shippers in any market is to build a deep bench of service providers to ensure they have relationships to call upon when they are in need. If a shipper is always going to the spot-market for the cheapest rates, they will find themselves in trouble when the market gets tight, and capacity starts to disappear, as it is now. Balancing price with capacity means the shipper and the provider work with one another long term at rates that are sustainable for both parties.”
Visible Supply Chain Management's Casey Adams advises shippers looking to secure the best rates to communicate early and often with their carriers and utilize multiple shipping options to mitigate risk. She says:
“Carrier diversity is a workaround for capped volume and capacity constraints. Splitting volume between carriers can also help avoid surcharges that apply to shippers who send a certain number of parcels per week. Consider enlisting help from a logistics provider with an extensive network of reliable partners to support this strategy.”
Digitizing your supply chain and integrating all your systems is an incredible way for you to identify inefficiencies and audit your carrier performance ahead of negotiations, saving you on rates.
One such technology in the news of late, is blockchain. Blockchain may be futuristic for smaller-time shippers currently, but it is good to keep an eye on the option as it evolves.
DLT Labs' Sergei Beliaev believes in the power of blockchain technology for global supply chain customers. Sergei says:
"As a technology company with global supply chain customers, we believe shippers can (and should) succeed by adopting blockchain...The process innovation, cost savings and visibility enabled by blockchain are attractive value propositions to all parties. Better margins create more opportunities to negotiate better rates.
The technology has unlimited application along a supply chain, with one ledger that is capable of managing frictionless transactions for the movement of information, goods and fees in any process – from demand planning, procurement, provenance, rate changes, surcharges, accessorials, OTIF, ordering, invoicing, payments, insurance, returns, etc. … with unlimited potential.
Beyond blockchain, logistics experts universally recommend robust shipping software for greater insight into and control of your supply chain. They also suggest that shippers partner exclusively with others who do the same. Increasing efficiency across your supply chain will save you on your shipping spend.
Meaghan Brophy offered this advice:
"Choose a logistics partner who uses technology to optimize shipping. Parcel tracking and scan and pack verification systems add an extra layer of accuracy and quality control to the fulfillment process. They ensure the right products get delivered to the right place as timely as possible."
Obviously, as shipping software providers, we at FreightPOP highly recommend its use to save you money on rates. As a shipper, it is essential that you use a robust TMS solution that enables you to:
1) View multiple carrier quotes on one screen
2) Track and audit carrier performance
3) Keep better tabs on where your freight and packages are
These features all contribute enormously to rate savings as they allow you to quickly shop rates in one platform and negotiate better rates.
A brief teaser video of how such a shipping platform works can be seen below.
FreightPOP's one-click logistics is revolutionizing how companies access cheaper carrier rates and capture supply chain intelligence.
We encourage you to review our latest case study highlighting how we solve critical rate quoting issues for businesses and help them capture supply chain data like never before.