Most people associate transportation costs with carrier rates, and rightfully so. However, this indicates a limited understanding of the ways in which these costs should be managed in order for a transportation business to be successful. Often times, shippers equate the proper management of transportation costs to the continuous pursuit of drops in carrier rates, overlooking other essential aspects involved in it. Here are a few hints on how to tilt the carrier rates in your favour and manage your transportation costs successfully.
1. Carriers should get a fair return rate on their services
You need good carriers in order for your transportation network to function properly. Indeed, you may not be willing to pay the extra costs that come with superior capacity. However, you must be able to stand up to your direct competitors. In order to achieve that, you need to compare your rates with theirs.
2. Cheaper carriers usually come with additional costs that compensate for any savings.
You should keep in mind the fact that saving on the carrier rates does not necessarily mean saving on the total costs as well. Chances are you will find yourself spending those savings on various additional charges or customer complaints and claims resulted from a lower quality of service. Therefore, you should draw a carrier management plan that covers all categories of carrier costs.
3. Choose a driving test that guarantees top notch training.
Whether you are deemed a good shipper by carriers or not depends on a number of factors, such as your mode of operation at origin and destination points, the quality of the information provided or that of payment. So, go over your supply chain and see which areas could be improved.
4. The carriers you partner up with will not control all your transportation costs.
A closer examination of the existing issues within your transportation network will reveal a very limited influence of carrier activity for they must possess your shipment before they can impact your transportation costs. Instead, you should be looking into the activity carried out at your ship locations, in the sales and customer service area, as well as into your customers’ expectations.
5. Manage your transportation network properly and everyone will benefit from it.
Your customers and yourself will be the first to benefit from the proper functioning of your transportation network. For starters, a constant activity on the market will increase your chances of being offered better rates by carriers. So try to see the big picture when looking to make improvements in the transportation cost area.
Always root out the evil!
Transportation costs may be traditionally associated with carrier rates, but try to remember that increases in carrier rates may be due to other factors. Therefore, you need to draw a proper carrier program management (CPM) plan in order to address the existing issues successfully. This will enable you to build strong partnerships with top carriers, find quick solutions to any potential carrier performance issues and identify those factors that influence their ability to maintain an ideal price/quality ratio. In other words, transportation costs should be associated with proper management.