Paying the Freight in 2005

What does the New Year hold for companies who ship goods and materials via truck, rail, ship and air? How can you minimize freight costs and maximize efficiency?

December 9, 2004 -- By Mark Wyman and Tom Dromey

Every new year brings with it new problems and opportunities. If your business involves the movement of goods inbound or outbound 2005 may prove to be especially challenging. Heres why.

    The trucking shortage that manifested itself during the second half of 2004 has not lessened. Even the delay in the implementation of new hours of service rules for drivers will not free up enough drivers or trucks to meet the demand. There will continue to be a squeeze on full-truckload equipment, which will, in turn, affect the LTL sector resulting in limited capacity.
    Americas railroads experienced a banner year in 2004, and were unprepared for the business. Track and rolling stock were not up to the task, resulting in delays and soaring rates. No quick fix is in sight for 2005.
    Security on both the domestic and international fronts will continue to present a formidable barrier to the movement of freight, playing havoc with both shipping costs and schedules.
    Although somewhat stabilized at the end of 2004, fuel costs remain high. Any change in the geopolitical situation in the Middle East could cause another fuel price spike affecting trucking, rail, ocean and air freight. The costs will be passed on to you.
    Warehouse costs have risen with the red-hot real estate market, making it more expensive to keep goods in storage. It is vital that materials and merchandise be kept moving through the supply chain as quickly and efficiently as possible.

In the face of these formidable challenges, what can you do to keep your freight costs from going through the roof? It will require even more attention to the details and better planning to keep goods moving in and out of your business. The most important aspect of your freight operations in 2005 will be scheduling. It is critical that you avoid (when possible) last minute shipments, partial shipments and rush deliveries. All will cost you more in terms of time and money this year.

Know your shipping options. Too many companies settle into a rut with the same freight company for the sake of convenience. But using several different companies to move your goods, depending on the type of shipment, timing and current rates will help you get the best service at the lowest cost. For example, many companies that have traditionally relied on less-than-truckload shipments are now consolidating shipments and getting full truckload rates.

Know your freight classifications. The rate you will be charged for shipping your materials will depend on their classification. In too many instances, improper classification results in higher rates than necessary. It is up to you not the trucking company to properly classify your goods.

Despite the tight market, there is still room for negotiation when it comes to freight rates. If you have sufficient volume, can offer some advanced notice and are willing to shop around, you can save a significant amount on your freight bills.

Always examine your freight invoices closely. Although they can be complicated, it is worth your while to pay attention to each and every invoice that crosses your desk to be certain you are being charged the correct rate, for the right shipment, with the proper classifications.

Take care of these details and you will gain better control of a critical aspect of your operation. More importantly, you may be able to contain or reduce your freight costs at a time when others are paying much higher rates.

Tom Dromey and Mark Wyman are the principals of PMC Logistics Services, a third-party logistics management provider in Plymouth, MA. PMC provides logistics management services to companies of all sizes across the country. Phone (508) 830-1100. www.pmclogistics.com.

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