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How to reduce your freight shipping costs: The year that freight barged into the boardroom

Posted by IFCO Systems
September 27, 2018

Getting your shipment from “A to B” isn’t getting any easier, and it's not getting any cheaper, either. No surprise, escalating transport costs and finding truck capacity are the leading flash points for over-the-road shippers, according to Trucking Perspectives, Inbound Logistics' most recent annual survey of the trucking market. Aside from fuel surcharges, 78 percent of shippers have been hit by rate hikes this year, versus 60 percent who reported rate increases in 2017.

And the heat is being felt upstairs. Between January and April, CEOs of 148 S&P 500 companies identified transportation and supply chain issues as being drags on corporate profitability.

Unfortunately, many of the cost drivers seem out of the control of transportation managers. Freight providers cite the concerning driver shortage and the recently introduced Hours of Service requirements as factors dampening supply, while a robust economy is increasing demand for load capacity. Rising fuel prices are also adding pressure. These are macro issues being faced across the board. In spite of such industry-wide constraints, however, here are some ideas to consider in your quest for transportation saving opportunities.

Break Down the Silos

Not only do transportation managers feel constrained by market conditions, but they also often deal with silo mentalities inside their own companies. Departmental efforts to optimize within one organizational silo can put pressure on another--such as trucking. Procurement, distribution and sales strategies can all play a role in helping ease the strain on your trucking function, if everyone works together. One recommended move, says Mike Regan, Co-Founder of Tranzact Technologies, is to provide trucking a “seat at the table” so the transportation department can be heard and supported, rather than blamed. A deteriorating transport market has created an urgency for collaboration within companies and between trading partners. “This has been the year that freight barged into the boardroom!” he observed in a recent blog.

Be Freight Friendly

Keeping trucks moving is critical, and this is an area where there is significant opportunity for cost saving. According to a recent European study, trucks are idle for loading and unloading 55% of the time. In the U.S., similar inefficiencies persist. According to the Detention Time Study Survey, a majority of drivers spend between 11 and 20 hours of detention time each week waiting to load or unload their truck. Shippers and receivers can help by taking steps to ensure that trucks are turned around as quickly as possible. Start by ensuring that appointment times are honored. Attention to staffing, dock and yard organization and overall planning can make a difference. This is where breaking down the silos can really help.

Think Strategically About Packaging

Packaging is one place that companies might not immediately consider when looking to achieve freight cost reduction. Attention to packaging can help transportation by reducing the amount of loads required, as well through helping to improve loading and receiving operations. Better packaging can be stacked higher and result in more product getting onto the load. IFCO RPCs, for example, can be stacked safely to help build optimal loads, while protecting product to prevent damage. They offer a 94% reduction in product damage versus alternative packaging choices. RPCs can be used to build stable loads without pallet overhang, thus contributing to more efficient loading and unloading--and less time at the dock for carriers. IFCO’s standardized packaging system can reduce handling, storage and warehouse costs by up to 25%.

Focus on Recruitment and Retention

The driver shortage is a serious contributor to the increasing cost of freight, and the aging driver pool suggests that improving the situation will be difficult. The average age of a professional driver is 52, with over 60 percent of drivers over 45. Only six percent are younger than 35 years.

Ryder notes in a report that it is essential to understand the new workforce, find them, and entice them into joining your company.

“Millennials grew up in a digital world on mobile platforms and social networking,” Ryder stresses. “That’s where companies need to be to recruit them.” It points out that while advanced vehicle technology may have deterred veteran drivers, it will be beneficial in recruiting a new generation of drivers. Ryder also recommends looking to hire from under-represented workforce segments such as veterans and women, and to consider a recruit and relocate strategy from areas of higher unemployment.

Finally, there is the importance of retention to consider. Retention efforts, Ryder advises, should begin on the first day of work, and be ongoing. Clear expectations, daily communication, career advancement opportunities and providing better road equipment can all help. Truck options such as automatic transmissions should be chosen with younger drivers and women in mind. And finally, find a way for drivers to get home more often, and to easily communicate with home when they are away.

The truck freight market will probably remain daunting for at least the near term, but companies have the opportunity to take some positive steps towards saving money and easing the pain.

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