How to reduce transport costs or freight costs and whether it makes sense

Product and production are the core of every industrial company. Customers, brand and product are the focus of the activities of manufacturing companies and determine the actions and success of the company. Logistics and procurement of transport services are organized as a complementary company function and therefore transport costs are the first to be cut when there is a new round of savings in the company. But transport purchasing is an important part of every company. Without planning, coordination and control of the relevant flow of goods, neither production can take place nor customers can be supplied. Carelessly reducing freight or transport costs in the wrong place therefore carries 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, to the right place, or to the right customer. In addition to the flow of goods, the right information should also flow through the IT systems. However, all of this should also be guaranteed at the right price. Wanting to save on transport costs is therefore an important aspect for the entire logistics system, but a number of points must be taken into account.

Logistics and transport make a very important contribution to the success of a company. Logistics costs are a direct drain on money for companies. Every euro spent on transport costs flows directly out of the company and affects liquidity. It is therefore essential for companies to have freight costs under control in order to ensure company stability.

It goes without saying that extreme reductions in transport costs do not make sense. If transport costs are reduced too much, essential quality aspects such as adherence to delivery dates and product safety usually suffer. Companies should therefore never reduce their transport costs at the expense of quality. Possible consequences are dissatisfied customers and falling sales with long-term negative effects on the company’s success. In order to bring transport costs and quality into line, it is advisable for companies to monitor freight cost developments, for example using an efficient transport cost calculator.

There are already a number of offers for calculating, comparing, evaluating and reducing freight costs. Variable and fixed transport cost components are determined, among other things. Freight consultants are one way for companies to have their transport costs evaluated on a very individual basis. Excel templates are usually developed together, which logistics service providers fill out. The management consultants standardize and compare the data and give companies recommendations on which logistics partners they should work with.

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 of time. This process is often associated with a change of logistics service provider.

Tailor-made IT from software companies helps to tailor a tendering process to the individual needs of a company. This makes sense if a company does not want to use external software. The disadvantage here is certainly the high acquisition costs.

For companies that do not want to use external software for freight tendering, their own in-house solutions are suitable. The basis for this is a high level of internal knowledge of transport and forwarding processes. It is necessary to analyze processes and set up precise criteria for a transport cost comparison. Otherwise, problems arise when querying costs from logistics partners due to a lack of understanding of the specifications given. 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 they be used to determine transport costs, the process is also much easier than calculating transport costs with Excel. There are often flexible pricing models with no fixed term, so that companies have no investment risk and can stop using the service at any time. Free test phases before a purchase decision is made are usually possible.

Applications and services that companies can use to manage their transport offers and reduce freight costs differ in three key points. The first point is process efficiency, which indicates how complex the process is to reduce transport costs. Process control is 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 are the third criterion and refer to the costs of the external application or service or the internal company process.

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

If companies use tenders to significantly reduce the conditions offered by their logistics partners, several quality problems may arise in the processing. Collaboration with the logistics partners may be strained, which can lead to a permanent problem in the business relationship. Constantly changing transport service providers is also not recommended, as operational problems and switching costs significantly reduce, if not completely cancel out, the benefit of the tender.