Top 10 Tips for Reducing Freight Costs
UNDERSTANDING and managing freight and logistics costs are critical to enhancing competitiveness in global markets – yet are too often ignored, or put in the “too hard basket” by many Australian exporters and importers. Here are my top ten tips from over 25 years working at the “coal face”.
1. Know your product
Many companies waste money on additional charges that could have been avoided by doing their “homework” up front.
o Do you know your Harmonised Tariff Code?
o Are your products classified Dangerous Goods? If so, what is the code?
o Do your goods require an import permit and/or government inspections at origin or destination?
o Don’t use worn or old cardboard boxes, use proper inner packing, do not over pack and re-inforce your boxes.
o Use standard size pallets and stacking sizes. Ensure boxes are secured on the pallet and don’t exceed the pallet edges.
o Calculate your weights and dimensions correctly and know the gross cargo weight of each item.
3. Clear and Accurate Labelling
Ensure the shipper, consignee, origin, destination and shipping marks/goods description are clearly marked on the “packaging labels” and secured to the goods for travel.
4. What is the most cost efficient shipping method?
o Typically transporting by ocean is cheaper than air but this is not necessarily always the case.
o To make the best decision, it is important to know how carriers charge for international shipping.
· Airlines bill by what is called a chargeable weight which is calculated from a combination of the weight and size of a shipment.
· Ocean carriers charge per container rates for shipping in standard containers (FCL). If you are shipping less than a container load (LCL), your price is often determined by cubic metre or volumetric weight.
o Working out the most cost effective shipping method (i.e. FCL/LCL/Air) should also take into consideration the following:
· Transit/shipping time
· Characteristics of cargo i.e. Perishable, DG, fragile
5. Are you insured and do you have the correct policy?
o It can happen to you so shop around for Marine Cargo insurance for the loss and /or damage of goods while in transit.
o Check your coverage is adequate, especially if shipping to volatile regions.
6. How will you pay for your freight costs?
o Consider your payment options and terms for goods and freight/clearance.
o Consider currency of payment, security of payment method and exchange rate margins/fees charged by banking institutions.
7. Hidden Fees
o Custom duties and taxes alone can represent as much as 30 percent of the total shipping fees, so it’s important to understand the terms and hidden fees involved.
o Take advantage of FTAs!
8. Using cross docking versus container delivery
o It is often cheaper to use a load/unload facility at port for packing/unpacking FCL containers rather than your own facility or factory.
9. Demurrage/storage and detention
o The key is to ensure your goods are cleared and ready for release prior to the vessel/goods arrival.
o Make sure port slots are booked for the “first available day” by your transport provider.
10. Choosing a service provider
o The biggest mistake that you can make in choosing a freight service provider is to hire the first company that comes along.
o No one freight forwarder that can be a specialist on every trade route or freight category so shop around to find a specialist with competitive pricing. Remember the best “headline” price is not always the most cost effective option.
o Questions you should be asking of new service providers include:
- Do they have experience with your product/commodity type?
- Do they have experience in shipping to/from your country/region of interest?
- Can they provide references from companies that have used their services?
o We have developed CargoHound to allow you to quickly identify a reliable service provider that fits your specific requirements and budget!
Kim Mauch, Co-Founder of CargoHound