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ASCM Insights

4 Tips for Managing Fluctuating Freight Rates


In the face of volatility around material availability and fluctuating freight rates, it’s time for every supply chain to get proactive. You likely can’t shift gears to start mining or harvesting raw materials yourself; but you can focus on cost-saving efforts where you have control. In the supply chain, that starts with tackling freight rates for inbound and outbound shipments. Here’s how:

1. Expand your roster of carriers, suppliers and service providers to reduce freight-related expenses. There are a few ways to do this: First, adjust supplier partners to bring about changes to distances, reduce the number of shipments and achieve other cost-saving impacts. Add more carriers and boards to the roster for outbound efforts to help you price shop on loads. Also use automation tools to simplify the selection process while ensuring each load is cost-effective and makes it to its destination on time. Some artificial intelligence learning tools also factor in success rates for long-term viability. Eliminate bottlenecks and single points of failure to diversify and improve operations. Importantly, factor in freight pricing to these decisions to look for opportunities to manage risk while optimizing for expense.

2. Increase minimum order quantities. Raising order minimums or enhancing the value of larger orders for customers can reduce shipment quantity and provide relief against higher or uncertain freight rates. Begin by consolidating shipments or boosting freight from LTL to FTL. Shipping a full truckload is cost-conscious and may be more achievable when you raise minimum order quantities or deepen discounts for these bulk buys.

3. Reduce waste. Large, heavy equipment requires even replacement parts and components to be moved via freight shipments. When that’s the case, every immediate replacement is costly due to expediting fees, and a piecemeal approach means paying LTL costs routinely. Address this by analyzing and tracking equipment and suppliers regularly so it’s easier to avoid outages and production line difficulties due to breakdowns. Schedule regular maintenance and checks. Consider alternatives to a rapid replacement, such as remanufacturing. Not only are there opportunities to minimize disruption, but you can also extend the life of parts to reduce waste and to order replacements when freight rates are low or you have enough volume to reach an FTL shipment. Lastly, increase load size or move parts and raw materials closer to each production facility.

4. Leverage data. The supply chain industry has rapidly adopted the benefits of data collection, analysis, and sharing. Ensure your tech stack provides API and EDI support. The more data you collect and analyze ahead of freight movements, the better you can control costs and provide value for customers. Review the data you use to make decisions. Data isn’t just metrics on current shipments. Have ports expanded their operations to handle higher volumes and minimize delays compared to a year ago? Are new rail heads available near customers or distribution centers to minimize costs? Did a customer base shift as companies responded to remote work, making a shift between East and West Coast ports viable?

Freight rates will always be moving. However, there are opportunities to control other aspects of freight and container costs. Expand your carriers, increase minimum order quantities, reduce waste and tap into data analysis to ensure the best possible decisions are made.

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