By Kay Nolan
As companies struggle through tough economic times, most could save considerable money in shipping costs for both the products they sell and the purchases they make, a transportation consultant told Wisconsin manufacturers this week.
“Most companies overspend by 20 percent due to poor transportation decisions,” said Geoff Comrie, founder and CEO of Raleigh, N.C.-based Transite Technology. “It’s probably the biggest area people bleed dollars in a manufacturing environment. “
If, as Comrie says, the hundreds of thousands of dollars in potential savings is “incredibly low-hanging fruit” why don’t more companies grab it?
Speaking to participants at a Wisconsin Manufacturing Extension Partnership conference in Milwaukee, Comrie said complex pricing systems that make it hard to compare rates among various carriers are to blame.
So is leaving transportation decisions to salespeople, customer service representatives and vendors, who have little to gain by hunting for better bargains.
Transportation is mundane, misunderstood, and often left to the end, after companies worry about production and sales, Comrie said. But with studies showing that shipping costs are among a manufacturer’s top three expenses, he says it’s worth taking time to first, find ways to trim those costs, and secondly, to mark up transportation costs and pass them along to customers.
To reduce inbound transportation costs, Comrie suggested asking vendors to separate out shipping costs on their invoices. “Assume they’re including transportation costs and marking them up 20 percent,” he said. “Take charge – get your own rates and tell the vendors what carriers to use or offer to pay the carriers directly.”
When shipping products to customers, Comrie advises negotiating with carriers for better rates, and tossing out paper “routing guides” that connect shipments of certain weights to certain types of transportation options. “They’re easy, but often inaccurate,” Comrie said. The chart might indicate a 210 -lb. item going from Atlanta to Memphis should be shipped via a “small package” carrier such as UPS, for say, $200. But an LTL (less than truckload) carrier might charge only $75 and get it there faster, he said.
Ferreting out the best rates isn’t easy, however. Transportation pricing is very complex — deliberately so, Comrie says, to discourage rate-shopping. Trying to compare prices by clicking on carrier Web sites doesn’t work, he said. But there is software and consulting available to help companies create programs to continually compare rates, and to run regular reports to gauge the savings.
Other tips include:
* Submit bills of lading electronically, to avoid weight discrepancies on invoices. About 8 percent of LTL freight bills are flat-out wrong, Comrie says.
* Add a page to your own company Web site that allows your customers to track shipments. Audit the page yourself to follow up on customer service. “If a customer gets your shipment a day late, he’s annoyed, but probably won’t pick up the phone to call you. But if you find out and call the customer to apologize, customer satisfaction goes through the roof,” said Comrie.
* If you do a lot of ocean shipping, look for savings in the land leg of the transportation costs, perhaps even arranging to pick up the shipment at the port yourself. “You can shave a lot of dollars from the port to your door,” Comrie said.
* Pass along transportation costs to your customers as long as you maintain equal or better service than was previously agreed upon. But monitor your competitors’ rates so you don’t price yourself too high and lose business.
Conference attendee John Peyton, custom sales manager for PlastOcon Inc in Oconomowoc, said lowering transportation costs is a must for his firm, which does plastic injection molding for large equipment manufacturers, such as Briggs and Stratton.
“One issue we’re up against is that our customers are moving south, to southern states and to Mexico,” Peyton said. “One of our advantages was proximity. Now, even if we have better prices than our competitors, the cost of freight is going to knock us out.”