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AdexinBlogHow to reduce cost with freight management?

How to reduce cost with freight management?

Feb 6, 2024
5 min

Summary

Freight management reveals many issues that require substantial techniques and strategies towards cost reduction. This statement is tightly connected to transportation, supply chain, and logistics industries, with narrow margins. Companies must remain cost-effective to better cope with competition and be more resilient to outside circumstances. 

Companies running freight management software in their business operations remain the most cost-effective. Companies can reduce costs by using software and implementing various strategies. This is what this article is about. You can learn more about cost management through custom software.

What are the main components of freight management costs?

Many applicable costs in freight require management. We have selected the most impactful and, at the same time, negotiable costs in your business. Simply put, these factors constitute the vast components of freight management costs.

Cargo insurance

Provides financial protection for shipped goods against loss or damage during transportation.

Customs security

A financial guarantee to ensure compliance with customs regulations and payment of duties.

Booking fee

A fee is associated with reserving cargo space on a transport vessel.

Container fumigation fee

The cost incurred in fumigating shipping containers to comply with quarantine regulations.

Collection fee

A fee for picking up cargo from a specific location for transportation.

Customs duty (at origin)

Taxes are imposed on goods exported from the country of origin.

Terminal handling fees

Charges for handling and transferring containers at a transportation terminal.

Security surcharge

An additional fee to cover costs related to the security of cargo transportation.

Overload surcharge

A fee is applied at congested ports or terminals to manage increased demand.

Why is freight management important?

Many explanations explain why freight management is crucial for your transport, logistics, and supply chain operations. We have selected the most crucial ones that can influence your business daily.

Cost efficiency

Effective transportation management helps optimize routes and modes. That is the way you can minimize shipping costs.

On-time delivery

Effective transportation management ensures on-time deliveries. You should meet customer expectations and increase overall customer satisfaction.

Supply chain optimization

Plays a crucial role in optimizing the supply chain by reducing delays and improving the overall flow of goods.

Customer satisfaction

Timely and reliable deliveries contribute to increased customer satisfaction and loyalty.

Risk reduction

Freight management helps identify and mitigate transportation risks. It, at the same time, ensures smooth operations.

Competitive advantage

Effective transportation management can give companies a competitive advantage by offering better services at lower costs.

Freight management system - 3 steps to lower expenses

Freight management software is basically dedicated to increasing your operability through higher efficiency. Use various features that can help you lower expenses. 

Here are three steps that help you lower expenses with freight management software:

Enable business with efficiently managed freight contract rates

  • Streamlines your logistics operations by consolidating all freight contracts on a unified platform.

  • Simplifies inquiries from your carriers and eliminates manual comparisons, reducing the risk of errors.

  • Provides you with comprehensive visibility into logistics operations for accurate rate comparisons and cost calculations.

Provide real-time quotes and accurate pricing

  • Enables your business with accurate and competitive quotes to customers.

  • Provides you with real-time access to pre-negotiated contract rates with carriers.

  • Tools such as a shipping calculator help cut costs.

Streamlines costs and improves margins

  • Contributes to cost savings in your organization by optimizing internal processes.

  • Increases your profit margins by providing insight into better rate negotiations.

  • Allows you to focus on core operations and strategic growth initiatives. [1]

Secured budget with global freight management system

The freight management system used for global transportation, logistics, and supply chain significantly impacts your business operations. Regardless of the size of your business, you can significantly benefit. Here, we have selected three ways that can help you secure your budget by using a global freight management system:

Minimizing costs in an economic downturn

By using freight management software, you can address the recent economic downturn. It can help you focus on minimizing distribution costs for transportation and logistics managers worldwide.

Optimizing distribution networks for cost reduction

Freight management systems help you recognize that distribution network configurations may no longer align with service-level objectives. At that point, you can recognize better potential lost cost reduction opportunities.

Increasing planning efficiency in the face of economic crisis

In the face of an economic crisis and increased uncertainty in the supply chain, there are many areas for improvement in planning and decision-making processes. By using a freight management system, you can better react to market trends in transportation planning and provide recommendations for navigating difficult times in the business.  

Benefits of the optimized transportation costs

Here, we have selected results from optimized transportation costs:

Cost efficiency

By optimizing transportation routes, modes, and schedules, your business can benefit from an overall reduction in transportation costs. These efficiencies often translate into direct savings for the business.

Improved profit margins

Transportation costs contribute directly to improved profit margins. This financial benefit is critical to a company's overall success and competitiveness.

Improved customer satisfaction

Efficient transportation leads to on-time deliveries. It is crucial to meet exceeding customer expectations regarding delivery time, which can increase customer satisfaction. 

Reduced environmental impact by fuel saving

Optimization often involves minimizing unnecessary miles. This will not only save costs but also reduce the carbon footprint. 

Inventory management

Optimized transportation helps improve inventory management. Just-in-time deliveries become more feasible. It reduces the need for overstocking and associated storage costs.

Improved supply chain visibility

Optimization tools and technologies provide better visibility into the entire supply chain. This visibility allows for proactive decision-making. It helps to mitigate potential and improve overall supply chain resilience.

Final takeaway

Freight management systems allow you to implement many strategies that help reduce overall operational costs. The benefits of custom software development for that purpose are much more visible than considerations about implementation time and eventual costs. This is because all system setups are data-driven, so you can calculate a very beneficial return on investment in a quite short period.

At Adexin, we're helping companies become more productive and resilient to external changes. We are a custom software development company that can develop a Freight Management System tailored to your business needs. Contact us today to see how we can help your business remain more cost-effective.

Resources:

[1] Transportation Management Report 2011; Retrieved from: https://www.capgemini.com/wp-content/uploads/2017/07/Transportation_Management_Report_2011.pdf

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FAQ

What is the freight management system?

A Freight Management System (FMS) is a comprehensive software solution designed to optimize and streamline logistics operations within a business. This centralized platform facilitates efficient order processing, route optimization, carrier management, real-time shipment tracking, inventory control, and compliance with regulatory requirements. By providing valuable insights through analytics and reporting, FMS enables businesses to make informed decisions, reduce operational costs, and enhance overall supply chain performance. Seamless integration with other enterprise systems ensures a cohesive logistics ecosystem, fostering stakeholder collaboration and communication. The primary goal of a Freight Management System is to enhance visibility, control, and efficiency in the movement of goods, allowing businesses to navigate the complexities of the transportation industry more effectively.

What are the strategies to reduce freight management costs?

Freight management encompasses myriad challenges that require robust operating cost reduction strategies. This need is particularly acute in transportation, supply chain, and logistics industries, characterized by narrow profit margins. Remaining cost-effective is paramount for companies to successfully navigate the competition and fortify themselves against external uncertainty. The use of customized transportation management software is becoming a robust solution, offering benefits that far outweigh the issues of implementation time and potential cost. The crux lies in the data-driven nature of these systems, enabling companies to calculate a very favorable return on investment in a relatively short period.

What are the main components of transportation management costs?

Freight management involves many costs that require meticulous attention. We have identified crucial but negotiable factors in your company's expansive components of freight management costs. These include vital elements such as cargo insurance, customs security, booking fees, container fumigation fees, collection fees, customs duties, terminal handling fees, security surcharges, and overload surcharges.

Why is transportation management critical?

The importance of freight management permeates the spheres of transportation, logistics, and supply chain operations for many reasons. The most important of these are:
Cost efficiency: Effective transportation management optimizes routes and modes, minimizing shipping costs.
On-time delivery: Ensuring on-time delivery meets customer expectations and increases overall customer satisfaction.
Supply chain optimization: Transportation management plays a crucial role in optimizing the supply chain by reducing delays.
Customer satisfaction: Timely and reliable deliveries contribute to customer satisfaction and loyalty.
Risk reduction: Identifying and mitigating transportation risks ensures smooth operations.
Competitive advantage: Effective transportation management provides a competitive advantage by offering better services at lower costs.

What are the three steps to reduce expenses with a freight management system?

Freight management software is a dedicated tool to increase operational efficiency, offering various features that contribute to cost reduction.



  • Provide real-time quotes and accurate pricing

  • Streamline costs and improve margins

  • Enable business with efficiently managed freight contract rates

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