Freight forwarding expenses is something business of all sizes have to worry about if they have to transport or receive cargo. It is the price that carriers charge for sending something from one place to another.
For this reason, most businesses are looking for ways to optimize the cost of freight forwarding. Companies always include a freight cost reduction plan. Optimizing freight forwarding expenses helps in reducing the cost of goods sold, shipping cost, cost of received goods and makes bookkeeping easier. Decreasing the cost of freight forwarding helps improve receivables while making the expenses account lighter with smaller payables.
What makes freight forwarding expensive?
Whenever you move products or goods, incur some freight expenses. However, in order to effectively optimize the cost of freight forwarding, you should understand what contributes to the price.
The cost of freight forwarding is affected by local, macroeconomic, and environmental factors. Such as:
- Fuel cost
Some freight forwarding companies may also include a fuel cost component to evaluate the operating expense better. For this reason, various business owners tend to be confused with ocean and air freight because the fuel cost component can make ocean freight forwarding more expensive.
- Current events
Restricted air spaces, Piracy, and government sanctions can affect the freight forwarding cost and delivery expenses. Companies may have to prefer to take longer routes, spend more time at docks, and pay higher wage. All of this adds up to transportations costs.
- Government Rules
Various countries have specific regulations, rules, and policies that affect how freight forwarding companies work. These policies have an impact on retailers, shippers, and even local freight services. If these rules and regulations impact business, a shipping company will increase the freight bull to cover their losses.
Some regulations that may affect freight cost includes:
- Carbon emission laws
- Nigh driving bans
- Working hours’ limitations.
That is why car shipping rates can break the roof in some cases.
What are the ways to optimize freight forwarding costs?
- BOL Decrease
Decreasing the overall quantity of BOLs generated every day can assist you in reducing shipping expenses. If your staff oversees inbound and out bound shipping, turn it into a practice to incorporate more orders into a shipment, providing more cost-effective, oversized volume loads. With increased company visibility and linked technology systems, you will generate substantial cost-saving possibilities.
- Accessorial Audits
Make time to review the shipping invoices from the previous months to make sure you are being billed inaccurately and recognize possibilities to remove accessorial expenses. Administrative accessorial such as BOL and weight modifications can be prevented with appropriate training.
- Improve Collaboration Among departments
Because the current events can cause issues for shipping, many departments must work together. For instance, a company’s ware house coordination and planning department should work closely with the procurement and shipping departments. Increased visibility and Collaboration among these department will ensure that they can make data-backed decisions on the optimal shipping routes.
Better Collaboration can always help make it easy to work on financial statements. For example, if people understand things like free on board, freight on board, FOB destination, FOB shipping pint, Inventory costs, line items, freight out, etc., it would make more manageable accounting freight expenses.
- Understand current states
Because the pandemic caused many problems in 2020, it will continue to affect global trade for a while. The demand for freight has increased to the full extent because people are ordering everything online.
While most buyers understand the situation, it is still the job of a freight forwarding company to explain the reason for higher shipping charges.