How transport costs or freight costs can be reduced and whether this makes sense

Product and production are the core of every industrial company. Customers, brand and product are the focus of the activities of manufacturing industries and determine the actions and success of the company. Logistics and procurement of transport services are organized as a supplementary corporate function, which is why, above all, the red pencil is first set for transport costs when there is a new economy round in the company. But the transport purchase is an important part of every company. Because without the planning, coordination and control of the relevant flows of goods, neither can be produced nor can customers be supplied. Carelessly lowering freight or transport costs in the wrong place poses great risks for the entire value chain of a company.

One of the most important goals of corporate logistics is to deliver the right products, in the right quantity, in the right condition (or in the right quality), at the right time in the right place or to the right customer. In addition to the flow of goods, the right information should flow through the IT systems. However, all of this should also be guaranteed at the right price. Accordingly, wanting to save on transport costs is an important aspect for the entire logistics process, but some points must be taken into account.

Logistics and transports make a very important contribution to the company's success. Logistics costs are a direct cash outflow for companies. Every euro of transport costs flows directly out of the company and affects the liquidity. Therefore, it is essential for businesses to manage freight costs to ensure business stability.

It goes without saying that extreme reductions in transport costs are not sensible. If transport costs are reduced too much, essential quality aspects usually suffer, such as adherence to delivery dates and goods security. Companies should under no circumstances reduce their transport costs at the expense of quality. Possible consequences are dissatisfied customers and falling sales with lasting negative effects on the company's success. In order to reconcile transport costs and quality, it is advisable for companies to monitor the development of freight costs, for example with an efficient transport cost calculator.

There are already a large number of offers for calculating, comparing, evaluating and reducing freight costs. Among other things, variable and fixed transport costs components are determined. Freight consultants are an opportunity for companies to have transport costs evaluated very individually. As a rule, Excel templates are developed jointly, which logistics service providers fill out. The business consultants standardize and compare the data and give companies recommendations on which logistics partners to work with.

Tender platforms or tender platforms are external services and carry out a multi-stage IT-supported process. This consists of RFI (request for information), RFP (request for proposal) and RFQ (request for quotation). The aim is to reduce transport costs and to conclude price agreements for a longer period. This process is often associated with a change in the logistics service provider.

Tailor-made IT from software companies helps to tailor a tender process individually to a company. This makes sense if you don't want to use external software as a company. The disadvantage here is certainly the high acquisition costs.

In-house solutions are suitable for companies that do not want to use external software for a freight tender. The basis for this is a high level of internal knowledge for transport and forwarding processes. It is necessary to analyze processes and set up precise criteria for a comparison of transport costs. Otherwise, due to a lack of understanding of the specifications, problems arise when querying costs from the logistics partners. The disadvantage here is the high workload with correspondingly high personnel and process costs.

Software-as-a-Service, web software or cloud solutions are web-based applications that can be used without complex system implementation. Not only can you use them to determine transport costs, the process is also much easier than calculating the transport costs with Excel. There are often flexible price models without a fixed term, so that companies have no investment risk and can stop using them at any time. Free test phases before a purchase decision are usually possible.

Applications and services that companies can use to manage their transportation offerings and reduce freight costs differ in three main ways. The first point is process efficiency, which states how complex the process of reducing transport costs is. Process control represents the second aspect and describes the extent to which companies are able to carry out the process independently without the involvement of third parties. Process costs form the third criterion and describe the costs of the external application or service or the internal process.

Based on these criteria, web-based software, so-called cloud solutions, performs best. Process control and process efficiency are very high, while the cost of use is very low.

If tenders are used by companies to significantly reduce the terms offered by their logistics partners, there may be several quality problems in the handling. Cooperation with the logistics partners may be stressed, which can lead to a permanent problem in the business relationship. Constant changes in transport service providers are also not recommended, since operational problems and change costs significantly reduce, if not cancel out, the benefits of the tender.