In this article, we point out 4 important ways to reduce transportation costs:
1. Packing:
Proper packing of the cargo, is a necessary factor in keeping your cargo safe in the transportation process, however, it can also have a remarkable impact on the transportation cost. Proper usage of the transport vehicle space along with stack-ability of the packed units, can sometimes reduce the transportation costs by %100!
We can put all types of packing in 3 categories:
1. Packing for final use.
2. Packing for sales.
3. Packing for transportation
Let's assume your cargo packing for final use, is packed in cartons for mass sales and these cartons are put in pallets for transportation. In case the pallets are considered stackable, the pressure of the upper pallets causes damages to the cartons on the lower pallets which means in order to keep the cargo safe, the stack-ability of the pallets should be ruled out and it leads to space loss in the transportation vehicle resulting in higher transportation cost, because, for example, instead of one truck, you are going to need to use two trucks. Now, if you change the packing and use wooden boxes or metal frame crate, you can stack the boxes or crates and use the maximum load space of the transportation vehicle (truck, container, wagon or ship hold).
So, ask yourself this question: How can I maximize the loading capacity by changing the packing of the cargo ?
2. Smart selection of route and mode of transportation:
At first glance, it is often thought that there is always a certain shipping route and mode for a certain project while it is not always true!
Let's just assume you have a shipment from US to Iran. The usual routes that may come into mind is air freight from US to Iran or sea freight from US to Dubai and then from Dubai to Bandar Abbas after transshipment.
Did you consider shipping to Mersin port in Turkey and road freight from Mersin to Iran ?
Or, it is always thought that the route from China to Germany is sea freight from one of China ports like Shanghai to Hamburg in Germany.
Did you consider rail freight from China to Germany through CIS countries and east Europe ?
Depending on the type of the shipment, size, weight, time bar, and other factors, different modes and routes of transport could be considered.
Ask yourself this question: How can I find a different route and shipping mode for transportation of my shipments?
3. Preventive considerations:
In order for you to take preventive actions, you need to know where you can take such actions and what are the charge factors that can possibly be prevented:
1. Cargo insurance: In case of an accident, if you don't have proper cargo insurance, and if the accident is because of a reason the transport service provider is not responsible for, you are totally on your own and the total value of your cargo is at total risk. Do always buy proper cargo insurance coverage.
2. Smart selection of the transport service provider: Transport service provider, is the one you are giving your valuable shipment to, to take care of and deliver to you. It is the keeper of your safe!
There are lots of blind spots all throughout the transportation cycle from origin to destination and if the transport service provider is not the right choice and not aware of the know-how, it will cost you money. Make sure you choose the right entity to take care of your shipment.
3. Making a good contract with the transport service provider: You may have heard that a bad contract is better than no contract. It is not true. Why a bad contract? Make a good contract with the transport service provider. Of course, the BL itself can serve as a contract, but there are definitely some points that need to be taken care of by the transport service provider and you need to make it clear that everyone knows about the necessities and expectations.
4. Cargo survey service: If you are a buyer, when you are not there to see if the cargo that is delivered to the transport service provider by the seller is exactly in the same quality and conditions you have agreed upon. If you are a seller, you may need some kind of proof to show that you have delivered what you have promised to deliver. Cargo condition survey can give you a milestone with which you can compare the cargo you receive from the transport service provider.
4. Choosing the right Incoterms:
As a buyer, If you choose any of C and D Incoterms in your purchase order, you have left the choice of transport service provider to the seller and the sellers may not choose the best choice for you. If you are a seller, choosing D Incoterms gives you additional unnecessary responsibility. If you are not obliged to choose any other terms than FCA, choose FCA!
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5. Choosing the right transport service provider:
Choosing the right transport service provider, is a tricky one! Well, you can reply on your previous experience, ask others or even search the internet. This item can make a lot of difference. For example, in an air freight shipment, the transport service provider who receives a good many of orders giving him the choice of consolidating the orders into one package, pays the freight for that one package to the air carrier which is much less than the freight paid for each of the consolidated orders individually. That results in a more competitive freight rate for each order.
Or, a transport service provider who is a regular client of a shipping line in a particular route, receives much better rates for that route and clients can receive much better rates from the service provider for that route than the shipping line itself.
What else can you think of to cut down on your transportation costs?
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