What Are Freight Charges?
If you are a manufacturer, a wholesaler or a retailer who has a business that involves inventory keeping, freight charges are one of the most important costs for your business, particularly when you are exporting your products. In the shipping industry, freight charges refer to the transportation costs that are incurred by either the buyer or the seller. The charges include the cost of the mode of transportation used in the delivery of the final goods from the seller to the final buyer. The amount to be charged depends on the distance between the source location and the final destination location. The most common modes of transportation that contribute to freight charges include ships, trucks, aeroplanes, trains, etc.
Factors That Affect Freight Charges
Multiple factors can affect the freight charges for your business and most of them are external determinants that are not directly in your or the carrier’s control. Some of the common reasons that can increase your current freight charges are mentioned below.
Demand for freight
This is one of the most important reasons as the demand is rather unpredictable. So, with a sudden increase in demand for freight, the limited supply options tend to increase their charges as there are clear competition and vice versa.
Regulations imposed by the government
Given the current pandemic situation worldwide, the governments of most countries are imposing laws to decrease the virus from being spread in their country. Laws like night curfews, restrictions on imports and exports from source countries, etc.
Price of the Fuel
The fuel prices in India have been witnessing tremendous ups and downs. The price of the fuel used up by your chosen mode of transport is added to your final bill. So, if the price is too high, it will increase your overall freight charges and vice versa.
Certain locations are known for terrorism, the high number of government-imposed policies, high crime rate, etc. Passing your shipment through such locations can in turn increase your overall freight charges as the chances of losses are high. These losses are ultimately recovered from the source seller. Additionally, carrier services often charge insurance to accommodate the increased risk possibility in these locations.
Tips On How To Save Freight Charges
One of the biggest reasons why a company faces increased freight charges is the lack of proper planning. Planning your shipment schedule based on high demand days and low demand days can greatly decrease the cost of freight for your business. One way to do it is by categorizing shipments on the scale of urgency and then shipping the non-urgent ones out on off-peak days i.e., Mondays and Fridays. For more information on this, you can take help from online shipping services that aid planning.
Encourage sellers for bulk buying
It is as simple as stated in economics, the more you ship out, the lesser the charges as it reduces the need for multiple shipments. So, convince your customers to purchase more quantity by offering other promotional benefits that do not increase your costs.
Choose a transportation service near your warehouse or shipping points
Carrier services today tend to make more money off the company by adding commute costs from port location to source location. One effective way to reduce these added costs is by researching and finalizing a carrier service that is closer to your warehouse/shipment source location.
Always load to the maximum capacity and choose the shipment mode
You pay for the container, box, etc., that contains your goods. So, utilizing every inch of that container with proper planning can greatly reduce your overall freight charges. If you plan smartly, you can reduce the number of shipments required to deliver products from source location to destination. Moreover, choosing a suitable shipment mode according to the orders to be shipped out can be highly beneficial. The two common modes are LCL (Less than Container Load) and FCL (Full Container Load). For shipping big orders, FCL is more favourable, whereas for smaller shipments, choosing LCL is cost-effective.
All the above-mentioned steps are not too hard to implement. Also, to optimise freight charges while maintaining other costs of your business, you can opt for online platforms that are gaining popularity lately. Their key features include accurate carrier rate comparisons, shipment tracking, supply chain management systems, etc. These online platforms aid the trader in the overall operational process and help him to save freight costs significantly.