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October 26, 2012
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How to Reduce Freight Costs in the Face of Rising Freight Surcharges


How to reduce freight costsGetting goods from point A to point B is the main reason that you use a freight forwarding service. The shipping manager relies on the freight forwarder to arrive on schedule, pick up the goods indicated on the order and ship them safely to their destination. The manager’s job is also to periodically review the cost of freight services and determine if there is any need for freight cost control. With the way that freight fuel surcharges are rising these days, many manufacturers have cause for concern.

Surcharges have a way of sneaking up on a company if those in charge of monitoring shipping expenses are not vigilant. Many companies feel they are hostages to the ups and downs of the energy sector. The fuel surcharge rate you are paying is directly tied to fluctuating fuel costs. If you ship goods within the U.S., those road freight costs will go up depending on the price of gas in your specific region. If you ship internationally, you’ll pay higher ocean freight costs as well.

High gas prices often hit shippers heavily when there is a sudden change in what they have to pay to keep their trucks, planes and ships moving. If they cannot cover their fuel costs they are dead in the water. Those costs are passed on to their customers. Manufacturers often understand this predicament and give shippers the benefit of the doubt when signing an agreement. However, when you are told that you are stuck with the rate of surcharge that appears on your invoice, don’t believe it. When it comes to freight cost reduction there is always room for negotiation.

When a company is seeking to reduce overall costs in operations and wants to squeeze every possible financial advantage from vendors, it makes sense to immediately implement a freight cost management strategy. What you may not know about freight surcharges is that the largest companies always receive great discounts on these fees. They have lots of leverage due to their size. You, on the other hand, are never going to get a break from paying higher than necessary surcharges unless you become proactive. 

If you are not sure of how to begin the process of reviewing your current shipping agreements, it may be time to bring in an experienced freight consultant who is familiar with this area. A consultant will conduct a freight cost analysis to see how you can save on freight surcharges that are sapping your budget.

While the shipper does have a reason to pass on these costs to their customers, they should also be doing this in a fair and equitable manner. Currently, smaller manufacturers bare the brunt of excessive surcharges. By pinpointing how much of this surcharge is necessary and how much is padding, a manufacturer can negotiate for reasonably low freight costs. These long-term savings is what makes freight consulting a worthwhile investment.