If you have ever shipped anything, you probably have considered the question of “how do they come up with these prices”. Whether you are at the post office shipping a box full of presents to the grandkids at the holidays or on the shipping dock of your company watching a tractor trailer truck drive away with your freight, the shipping process is both confusing and complicated. Adding to the problem is the rising cost of shipping. While estimates vary, transportation costs as a percentage of sales range from as 5% – 15% depending on the industry and as much as 30 – 50% of the overall cost of the goods. With numbers like these, it clearly becomes important to make sense of the complexity and put a strategy in place to maximize the value you get for your transportation dollars.
Industry experience and shipping expertise are vital in managing costs across the many variables that drive transportation and supply chain costs. Shipping costs and prices are driven by factors such as raising cost of labor, insurance, facilities upkeep, volatile fuel markets, regional geographic differences, customer size, competitor rates, availability of multiple transport modes, freight breakability, time of the day, seasonality, sense of urgency and perceptions of customer’s willingness to pay or need. With so many cost and pricing factors, it is no wonder people get confused. Fortunately, businesses are not alone in their quest to make sense of the shipping process. Today, numerous third party logistics providers (3PLs like BlueGrace Logistics) exist to help companies and in some cases individuals simplify the shipping experience, save money and improve the performance of their supply chain or transportation and shipping functions.
3PLs have established themselves as market leaders in transportation and logistics. Both small businesses with only a few shipments per month and major corporations benefit from working with companies like BlueGrace. Experience in the transportation industry along with access to carrier partnerships and best in class technology provides a tremendous advantage to shippers. Senior Vice-President at BlueGrace, Adam Blankenship, recently was quoted saying, “with transportation costs accounting for such as large percentage of the overall cost of the goods, companies must effectively manage their supply chains. Failure to do so will put them at a significant competitive disadvantage in their markets.” Blankenship went on to say that “at BlueGrace, we understand what drives cost to carriers and we help our customers with optimizing their shipping patterns, freight shipping configurations, and carrier selections.”
Shipping prices are in large part impacted by two major areas. First are the direct costs that transportation companies experience when handling freight. The costs of labor, insurance, vehicle maintenance are largely costs that shippers have little direct control over. Wild swings in fuel prices and soaring insurance costs have drastically impacted the cost of shipping in recent years. However, costs related to freight theft, damage, and cube utilization do offer areas where smart shippers can save money. For example, packaging high value freight in very plain boxes which do not draw attention to the contents inside does have an impact on freight theft. Shipping freight on well packaged skids that allow transportation companies to fully utilize the cube of their trucks will make a company’s freight less costly and more desirable. Good 3pls like BlueGrace can help educate shippers on how to make their freight as desirable (least costly to handle) as possible to carriers and thereby secure the best possible pricing.
The other area impacting shipping cost has little to do with cost and more to do with a company’s willingness or need to pay. In many cases, transportation companies set rates based on seasonality, the amount of freight moving in a given lane, how soon the customer needs the freight, what the competition is doing and in many cases simply how much they believe they can charge. This is where the value of a top-notch 3pl really shows up. Companies such as, BlueGrace Logistics, have solid, long-term relationships with virtually all major transportation companies in the United States. Further they have the technology to analyze a company’s shipping data and build an optimal plan for shipping using a variety of carriers across numerous markets. In some cases, this may even mean utilizing more than a single mode of transportation (i.e. LTL, TL, Rail, Ocean, etc). Not to mention that the increased leverage and buying power of experienced 3pls helps customers to control shipping costs over time.
Blankenship states that “the true value of BlueGrace or any great 3pl is not only to save you money, but to also save you time and improve the performance of your supply chain in the process.”
Many of the costs that drive transportation and shipping costs ever higher will likely be present for the foreseeable future. That coupled with the old industry adage of “if you bought it, a truck brought it” means that this topic will be on the minds of shippers for a long time. So while you probably cannot avoid shipping costs, there are many good 3pls out there including BlueGrace Logistics to help you take the complexity of those shipping costs and save you money in the process.
Give BlueGrace a call at 800.MY.SHIPPING or send an email to [email protected] to speak with one of our logistics experts today!