When you’re into the freight forwarding business, service cost is one of the important things to look after to ensure profitability. With so much to handle during the goods transportation process, it can be really hard to keep costs under the budget line. There are a lot of challenges that you come in your way. However, there are solutions too! All you need to be proactive at the right time to eliminate the chances of losses and customer dissatisfaction.
Deciding the pricing strategy for your goods forwarding services is the very first challenge in the business. For this, optimization of operational cost becomes important. Secondly, you must focus on freight forwarding methods i.e. Full Truckload or Less Truckload. Usually, consolidation of small loads helps in cost-cutting so you can also go for the same. Apart from this, you should ensure proper fuel management, get experienced employees and drivers on board to speed up the transportation. Lastly, it’s vital to use modern technology for efficient business management.
Today, we will elaborate on these points to help you with goods forwarding cost-cutting. Most of the successful transportation business owners have already adopted these strategies due to which they fall in the bracket of the profitable logistics businesses.
(a) Fixed Freight Rate contract
Transporters generally don’t have a clarification on whether they should keep the rates fixed or flexible. Maintaining fixed rates for freight services is vital, and they should try to avoid price changes as far as possible. It’s great to sign up fixed freight rate contract for minimizing the effect on your final MRP. The fixed cost annual contracts not just cut the business costs but also yield more profits. Yearly contracts provide you with highly economical options as compared to short-period contracts.
When you already have a yearly agreement signed for your shipping services, it is easier for you as a transporter to estimate the freight cost beforehand. You can get an idea of the expenses you will incur to hire carriers to complete the bookings. Accordingly, you can decide the rates for shipping services for annual contracts. Additionally, stay updated about the market before fixing freight rates.
(b) Dispatch Full Truck Goods
Full Truckload trucking is another way by which you can lower the business cost to a great level. As a transporter, you already know that Less Truckload shipments are pricier than FTL because payment is done only for the occupied space. However, it can take the net cost high. Therefore, the best way to avoid space wastage and cost-saving is the consolidation of all LTL orders to convert the shipment into FTL trucking. Consolidation of LTL orders helps in better fleet utilization.
Dispatching full truck goods help you save money in a lot of ways. The cost associated with multiple LTL loads like separate carriers, fuel, and labor gets eliminated as a single carrier and limited labor is used to transport and manage the shipment. This strategy is highly practical which is why big giants like Colgate, CVS Pharmacy, and many other companies have already considered it. Talking about potential savings, you can cut the cost up to 25% by simply consolidating the less-than-truckload shipments.
(c) Experienced Driver(route knowledge)
Up next, you should manage drivers and truck on board. If your driver is not knowledgeable enough about the best routes, he will take more time to complete the booking. This will increase the consumption of fuel. Additionally, there would be delays that will leave no chance to disappoint your customers. Moreover, if you have a shortage of trucks and a lot of bookings, then you will not be able to accommodate them. Therefore, the importance of an experienced driver is very high for your transport business. You will not just have to incur the monetary loss but reputation loss too.
In order to keep the cost lower as far as possible, you should not hesitate to hire expert drivers who are great at driving and have superb route knowledge. He can complete the bookings on time, and return quickly to take more bookings.
(d) Use Own Truck Instead of Hiring
The next thing that transporters get overwhelmed about is using a personal fleet or hiring trucks to accommodate orders. Some people think that using private trucks is more beneficial than hiring trucks while others think differently.
If your transport business gets an average number of bookings, then using a private fleet is more sensible as the entire booking amount comes in your court. Additionally, private trucks are more viable because of the shortage of drivers, trucking capacity crisis, and escalating third-party goods transportation costs.
Therefore, rather than hiring carriers from a third-party transporter, you should try to invest in the fleet, getting drivers on board, and everything else required to manage bookings. Private trucks seem costlier at the beginning, but they will get higher returns by cutting transportation costs over the long term.
(e) Fuel Management
Fuel consumption plays an important role in the cost management of your business. Nowadays, fuel prices are already at a peak and who knows it may even get higher in the coming time. This is why fuel management becomes essential. Certain tips can help you manage fuel consumption and take business costs down.
First of all, a fleet manager should try to reduce vehicle idling time. He should ensure that every vehicle of the business should be busy and should be idle. For this, he can make use of fleet management software that will notify him about all the idle vehicles on the premises. Every second of the vehicle idling period adds to fuel costs. Secondly, you should optimize the routes to avoid unwanted mileage. When your drivers run through a shorter and less congested route, then less fuel is consumed. Last but not least, the driving style of your driver impacts fuel consumption. Unnecessary braking, high-speed driving, and instant acceleration can increase fuel usage and cost. Therefore, you as a fleet manager should monitor drivers’ style of running the vehicle.
(f) Hire Professional and Experienced Employee
Have you ever focused on the fact why business owners prefer hiring experienced employees for core business responsibilities? The answer is simple- they want everything to be done with negligible scope of errors. The experienced employees will not just save your time by handling the responsibilities up to the mark but also cost on employee training. When you have someone on board with great experience in the logistics and transportation business, you don’t have to make him/her understand minute details of the process. They will do it all by themselves without you being involved at the front end.
Each experienced professional will work single-handedly like a manager, eliminating all your worries related to handling bookings from start to end. We agree that the salary bar of such professionals is higher than freshers, but then the value that you’re getting in the form of their daily performance is worth it. So, don’t look at the high salary range but see the long-term benefits for your business. They will cut the business costs in multiple ways in the long run.
(h) Modern Management and Technology
Another great way to increase productivity while cutting the cost is using modern technology and transport management systems. An excellent transport software can help lower costs by allowing you remotely manage a fleet, bookings, staff, accounting, and other tasks related to the transportation process.
With a functional TMS, you can easily optimize the routes that will help in the efficient fleet and fuel management. Automation helps logistics companies to a great extent to cut down costs. You just have to manually enter few details and everything is taken care of by TMS. The warehouse management feature will help with automated cycle counting, and ensuring location control. The accounting feature will help you send reminders to the vendors and customers to clear pending bills, enable you to manage taxes, and pay salaries online. The fleet management feature will notify you about the servicing and maintenance needs of the vehicles to avoid any unnecessary expenditures.
(i) Both Side Booking
In the end, both side bookings will help you get double profit without double expense. Here collaboration plays a great role. You can join hands with fellow freight forwarders or freight agents and constantly stay updated whether they have any booking for the same route. This would ensure that your truck won’t return empty. From the cost-cutting point of view, it’s a beneficial move as you can earn a percentage of commission that you wouldn’t earn otherwise.
These are some steps that can assist in cost-cutting while increasing returns for your transportation business. Additionally, your business will enjoy a great market reputation and happy customers.