This article originally appeared in www.mylogisticsmagazine.com.
No matter how complex your freight needs, everyone involved in freight management will at some stage benchmark their existing carriers. This can be due to a variety of reasons such as perceived high freight costs, service issues or “it’s been 10 years since we went to market”.
When comparing alternative freight companies there are a number of issues to bear in mind. The Australian freight industry is particularly diverse and the first quick glance at two freight solutions can be misleading.
Here’s some quick, effective freight tips that may save you thousands of dollars:
1- Watch the zones.
Sydney isn’t always Sydney! Postcode 2210 can mean different things to different freight companies. Make sure any comparison includes all service providers’ comprehensive zone listings. If you have a customer or a warehouse that’s in a cheap zone for one carrier but an expensive one for another this can have a major impact on the overall freight cost.
2- Watch the cube.
If your freight is not really heavy, pay special attention to the cubic rate. If the rate is the same, but one carrier is charging 250kg per cubic metre and the other is charging 333kg per cubic metre this is equivalent to a 33% rate premium.
Be mindful not just of the overall cube, but be careful of regional cubic variations (e.g. Tasmania and the Northern Territory may be at a higher cube).
3- Watch the surcharges.
Freight companies love surcharges – length surcharges, home delivery surcharges, dangerous goods surcharges, remote delivery surcharges, regional pickup surcharges, etc. Sometimes the rate might look awesome, but if all your consignments are subject to a surcharge then your real freight cost is going to be higher.
By far the most important surcharge to watch is the fuel levy. With some companies running at over 20%, small variations in the rates can have a big influence on the freight calculation.
4- Watch the small print.
At the back of the proposal will usually be 1-2 pages of terms and conditions. These can be very important and must not be ignored. They were probably written by lawyers but you still should be able to understand how long the rates valid for and if you are committing to a minimum spend with penalties for not sending enough freight.
5- Watch the service standards.
What does “Priority” mean? How is it different to your current “Overnight” service? Is Mackay a 3 day or a 4 day service? Look for service standards and definitions. Will the new carrier require an earlier pickup, and what effect will that have on order shut off time?
From an IT point of view, is the new freight carrier compatible with your freight management software? Will you have to change to suit them?
6- Watch the future.
Will you be able to monitor the effect of the change in the future? Has the new quote been especially shaped to meet a specific set of circumstances? What happens if your order size increases or decreases? Know the answer to these questions before you make the change.
Freight management isn’t easy. Sometimes these decisions can be for contracts worth much more than an amount that would typically require senior management sign off. If you have covered off on the points above you will be more confident in your decision.