How to Reduce the Cost of Freight Transportation

The freight industry is highly competitive, with profit margins often below 5%. Attempts to lower prices by compromising on key elements, such as improper truck loading, frequently lead to quality degradation, fines, legal disputes, and financial losses. However, reducing transportation costs is possible by optimizing operating expenses without sacrificing service quality. Here are practical tips for achieving this.

What Affects Freight Costs

Freight costs are influenced by two types of expenses:

• Direct costs
• Indirect costs

Direct Costs

Direct costs include all expenses directly related to transportation, such as:

• Fuel and lubricants (FLS)
• Driver and logistics staff wages
• Vehicle purchase or leasing
• Taxes and related fees

Indirect Costs

Indirect costs are not directly tied to the transportation process but remain integral, such as:

• Per diem allowances for drivers
• Management overhead expenses
• Unplanned vehicle repairs

Both direct and indirect costs can be further categorized into:

• Fixed Costs: Predictable, consistent expenses (e.g., lease payments).
• Variable Costs: Expenses that fluctuate due to external factors (e.g., fuel consumption variations).

Converting certain variable costs into fixed ones, such as through regular vehicle maintenance, can help lower unexpected expenses. For instance, investing in timely servicing and fleet updates may seem costly initially but saves money long-term by reducing breakdowns and delays.

Practical Tips for Reducing Freight Costs

If you’ve already analyzed your major expenses, here are additional steps to further lower costs:

• Optimize Cargo Loading: Use specialized cargo calculation tools to maximize truck capacity and prevent underutilization.
• Double-Route Utilization: Wherever possible, schedule backhaul trips to avoid empty runs.
• Route Optimization: Plan routes to avoid hazardous or high-risk areas, saving time and fuel.
• Fuel Efficiency Management:
  • Accurately calculate fuel consumption.
  • Install fuel sensors to prevent siphoning and unnecessary expenses.
• Navigation Systems: Install GPS trackers to monitor routes and detect deviations.
• Fleet Modernization: Upgrade vehicles to reduce repair and maintenance costs, especially during the first few years of use.

Leverage CargoTetris to Optimize Costs

Our cloud-based service, CargoTetris, is designed to help logistics companies minimize expenses by optimizing cargo placement and maximizing space utilization. The tool allows real-time modeling of loads for containers, trucks, pallets, and other transport types.

CargoTetris Features:

• Load Balancing: Ensures proper axle load distribution and calculates the vehicle’s center of gravity.
• Real-Time Adjustments: Recommends redistributing cargo or choosing alternate transport options when necessary.
• User-Friendly Interface: No specialized skills are required, making it accessible to staff at all levels.
• Integration with 1C:
  • Perform load modeling directly in 1C using existing database information.
  • Generate and access load reports in the 1C interface.
  • Save selective results into the 1C database for future reference.

Benefits of Using CargoTetris

• Maximize truck capacity by accounting for all necessary cargo parameters.
• Efficiently plan for backhaul trips, reducing empty runs and increasing profitability.
• Identify loading inefficiencies early to save time and avoid penalties for overloading.
• Simplify logistics processes with intuitive software that integrates seamlessly with existing systems like 1C.

Try CargoTetris for Free

Start your free 7-day trial today to experience the benefits of CargoTetris. Save money, optimize operations, and boost your logistics efficiency.

Learn more and sign up at cargotetris.com.