Capacity rules the shipping game, really. The cost of finding room for your cargo on the optimal channel could be high, depending on factors such as the time of year and popularity of the route. Suddenly, the freight prices you’re being quoted far exceed your expectations.
However, cargo capacity and cost isn’t a zero-sum game. While high traffic along a shipping lane can encourage capacity and drive rates down, overcrowding can send freight prices skyrocketing. You can’t control this market volatility when managing your logistics. By making some adjustments and understanding the marketplace, you can better project and control your costs.
Freight Price Capacity Tip #1: Consider the season
Businesses whose production and shipping ramps up at any particular season are especially vulnerable to capacity changes. Seasonal fluctuations in capacity affect the freight prices of certain products dramatically, including produce, back-to-school items and construction materials.
Some seasonal shifts are those importer-exporters might not even anticipate. Many air freight forwarders track the correlation between a jump in rates from China each September to the annual release of the iPhone.
If you’re not in a seasonally sensitive industry, keep freight prices lower by avoiding peak seasons. If you deal with seasonal concerns, do as much shipping as possible of other materials during downtimes. Import the apple boxes in winter, before you need to export apples in summer.
Tip #2: Simple supply and demand
If you’re a logistics manager, you need a T-shirt that says “SUPPLY & DEMAND.” It’s critical for you to track changes in the overall capacity in your designated shipping lanes. Regulation changes, natural disasters and political turmoil can significantly narrow capacity in any given channel. Likewise, booms in activity caused by regulation relief, economic growth and seasonal customers can swamp the system.
Consider the outlook for U.S. trucking capacity, with 20 percent of truckers saying they’re facing capacity challenges. The industry is facing a driver shortage, with retirees not being replaced by new workers, and new electronic time monitoring that limits the amount of extra hours drivers can be behind the wheel. This issue alone is crushing capacity. Suddenly, we may find domestic shippers moving to rail. Be ready to roll elsewhere if truck freight prices push you out.
Freight Price Capacity Tip #3: Packaging matters
To consider why capacity matters, it’s important to understand how freight prices are calculated. Cargo is subject to dimensional weight pricing, a system that accounts for both the weight of the package and the space it occupies within the vessel. The result is the item’s “freight density.” Based on this calculation and other information about the sensitivity of the cargo, it is assigned one of 18 freight classes, as laid out by the National Motor Freight Traffic Association.
These freight class designations were developed to create uniformity among freight price calculations throughout the global logistics industry. Fascinating, right? The important takeaway here is that the more efficient you are when packaging your product, the lower your freight prices will be. Pay attention to your packing procedures, as sloppy work can cost you dearly.
#4: Improve internal logistics
Remember that plans for your business’ economical logistics start even earlier than your warehouse. You can leverage digital planning tools to find the most innovative ways to package your material and check capacity among carriers. Most importantly, use an online freight price calculator to assist you in making decisions. Think creatively and develop ambitious quotes that challenge you to maximize your capacity.
Planning and forethought of your entire team can contribute to capacity cures that translate into cost savings. In addition to your logistics staff, engage product developers, marketers, salespeople and even clients in considering solutions. You may find your capacity answers lie right under your nose.