In a down market, everybody is looking for ways to reduce costs. Often, the first step is to go to your vendors and see if they can provide their goods or services more cheaply. In our industry, that routine starts with the customer and trickles its way through the supply chain until it eventually lands on the carriers. But saving money in this way has limits—and costs. Nobody likes being squeezed and the harder we try, the greater the frustration and resentment we sow throughout the industry. We make it harder to cultivate good relationships with partners we can count on.
There are other ways to save money in this industry. Those ways may not be as simple as trying to reduce the cost of service but they are certainly more sustainable to the health and goodwill of the industry. For those moving ocean freight, here are some ideas to consider.
Container Utilization
Are you taking full advantage of the container? This can be done either based on the size of the goods or the weight of the goods. Are you using 75% of the container because there’s empty headroom for example? Can cargo be loaded differently to replace that headroom with product? Do you have heavy cargo that can be combined with light cargo to fill that void? Can you adjust the packaging to ship less air in a box and pack more product? Some of these questions may not have easy or fast answers, but if addressed, can provide better utilization per container. More efficient container utilization will result in fewer shipments and big savings.
Consolidation
Tying into container utilization, do you need to ship as frequently as you currently are? Are you shipping weekly despite not having a full container? Can you adjust that to ship every 10 days or 14 days to load more in the container? Can you ship to multiple consignees and de-consolidate at the destination or buy from multiple shippers and consolidate the cargo at origin to maximize a container? Again, reducing the number of shipments is a huge opportunity for reducing costs.
Smart Expediting
Sometimes emergencies happen and product needs to be moved quickly. The most common solution is airfreight. That works fine for a palette of cargo but for an entire container’s worth of cargo, there maybe be less expensive ways to tackle the problem. If the customer is facing an urgent inventory need, what is the gap in inventory vs. transit days? Consider only putting enough cargo in the air to meet the immediate shortfall and ship the rest via ocean freight. And while you’re looking at ocean freight, what’s the best way to get the cargo to its final destination? Trucking something from Los Angeles to Chicago, for example, is certainly faster than putting it on the rail. But does it need to be trucked in the container it was originally loaded in? Or, can it be transloaded to a trailer resulting in a one-way transit of the trailer vs. round-trip of the container? With just a little extra leg work, the customer’s inventory timelines can be met with half the transportation cost.
Off-peak Shipping
Peak season is peak season because everyone is shipping at the same time. Volumes go up, space becomes limited, prices go up—basic supply and demand. Might your volumes be shifted to support off-peak? This isn’t for everyone – there are costs to carrying inventory for longer periods. But for some commodities, it makes a lot of sense. Agriculture is a good example of this. Spring season is the big shopping season so the product ships December – February when ocean freight volumes typically drop.
As we’re all looking at ways to reduce costs in a down market. I suggest we make it our priority to find ways to be more efficient in our operations. Those cost savings will hold up regardless of seasonal pricing fluctuations. After all, when the market improves, we’re all going to need to count on each other to get things done for our customers. We’ll probably find that easier if we haven’t spent the offseason in a 3-way knife fight over price reductions.