Five questions your business should be asking about freight

By Darren Ash

There are over 2.1 million active registered business in Australia according to ABS Statistics. It is estimated that at least 50% of these businesses would be utilising the services of a freight company, based on Treasury’s most recent data card on Australian small business, particularly in the agriculture, construction, manufacturing and retail industries.

For those businesses, expenditure is sure to be a hot topic with most implementing a strategy to cut costs with small savings over time. However, the top three costs for those industries are usually employees, products/assets and freight.

Keeping employees remunerated is generally the biggest cost and is usually the first area the leaders of these businesses would turn to if major cost cuts were required. This can be a false economy as less resourcing means less efficiency and when striving for an end goal of growth, losing workers should be one of the last resorts, particularly for an SME.

As a business owner you may then turn your head to products and assets: can there be any cost negotiations in terms of the prices you pay for product or manufacturing efficiencies? To this end, you may be looking at compromises in terms of quality. Again, this may not be the best strategy for longer term success and growth.

Freight isn’t usually on the radar as most businesses accept the cost they are paying is how much it is. However, before you start reviewing your staff structure or looking for cheaper products and services, you may want to ask yourself the following questions.

1. What transport channels am I using most and is this effective?

Most businesses we work with are not utilising the best transport channels for their freight and there are a number of cost savings to be made.

It is predominately cheaper to send shipments by rail and so if a shipment doesn’t have to get to its destination the next day, this can make a significant impact on your bottom line.

Think about replenishment shipments that are not time sensitive. Time and time again we come across examples of businesses sending volumes express by road when there is no urgency.

2. Am I on the most efficient costing model for my product distribution?

The standard freight cost model is a basic rate plus a charge per kilo, however, there are other options that may be more effective for your business.

If a number of your shipments are under five kilos, a satchel or a cost-per-carton delivery could be much more beneficial rather than incorporating the shipments into a large load.

3. Does all my stock need to be sent express?

There is a general urgency in business today that is filtering down from the digital economy; everyone wants everything immediately.The federal government is running with this and trying to improve road infrastructure to support quicker freight deliveries.

However, we find that a lot of this is unnecessary and causes more congestion and issues on our roads. Ask yourself, does everything need to be express? Most likely the answer is no.

4. Who is invoicing me and what are the extra costs?

A freight broker will manage your relationship with the freight company and send you invoices directly. Often there are hidden charges and extras on these invoices that you may not be aware of.

A freight auditor will ensure there is a direct relationship between you and the freight company and invoices will come from the freight company for complete transparency. This alleviates any concerns around the hidden costs you might be paying for freight.

5. Am I eligible for volume discounts?

Another general acceptance in most industries is if you are paying for a service, over time the cost will gradually increase. The more I send the more it will cost, right? Wrong.

Consider your eligibility for volume discounts as these are always offered by freight companies and you may find you are paying up to 20-30% more than you should be for large loads.

Darren Ash is the Managing Director at Freight Cost Solutions, an independent freight auditor.