Daily Archives: January 21, 2013

So You Need To Save On Ocean Freight

You could start with these pointers from Inbound Logistics on Reducing Ocean Freight Costs:

  • Consolidate LTL/LCL to FTL/FCL
       (and use 40-foot and high-cube containers)

    It costs almost as much money to run a truck almost empty as it does to run a truck almost full (when you consider that an empty trailer weights around 12,000 lbs or 5500 kgs), so a trucking company has to charge you more on a weight/volume basis if you don’t ship FTL as they might not be able to consolidate someone else’s cargo and lose money otherwise. Similarly, it’s cheaper to ship full containers, and for a carrier to standardized on 40-foot containers.
  • Transload operations to inland destinations
    Once shipments arrive, route them through a transload facility to be repacked and loaded to inland destinations. Avoiding unnecessary warehousing reduces costs and expedites shipments.
  • Make round-trip opportunities available.
    Providing inbound and outbound flows from a location allows carriers to make optimal use of equipment. While it will not be possible from final destinations, especially if shipping direct to stores with transload operations, you can give the carrier outbound shipments from US production facilities / (return) service depots on its return route to minimize it’s costs, and yours.
  • Know the market
    You should know the current market prices for fuel costs, capacity on your lanes, and provider overheads. You should also know total demand. This way you can negotiate a good (fair) deal.
  • Pay carriers on time according to agreed terms.
    Delaying payments only costs your company in the long run. If you don’t, the carriers will likely have to borrow at an interest rate that (far) exceeds any interest you may make keeping the cash in the bank. This means that they will have to build these costs into their fees, which will go up and cost your organization ore over the long run.

Or, you could just eliminate the need for (a significant quantity of) ocean freight (entirely). Let’s face it — 100% savings is WAY more than the 5% to 10% the above will shave off your costs.

How do you do this? Nearsource (or, better yet, Home-source)! In North America, consider Mexico or Brazil. With overseas labour costs and logistics costs climbing significantly year-over-year, for some products, it’s just as economical to produce them south of the equator — especially when you consider overseas labour rates and logistics costs are NOT going down. Now, SI knows this isn’t necessarily possible for all categories (as high-tech requires very advanced production facilities which can’t be thrown up or staffed overnight, for example), but with the exception of high-tech, biotech, and other industries that require a large pool of very specifically educated people and very high-tech production facilities, there’s no good reason NOT to be looking at locales like Mexico and Brazil right now. (And even if the raw materials need to come from overseas, the cost of shipping (refined) raw materials, which are very dense, is much less than shipping final goods, which typically aren’t dense and which require a fair amount of packaging — and which often have lower import duties!)