The Savings Impact of Consolidating Shipments!

By George Muha

Since freight is such a huge cost center at companies and a big part of their sales gets eaten up by freight, I get a lot of calls from sales people asking for ways to lower costs to their customers. The first challenge is trying to convince sales people that freight is a real cost - something I know a lot of accounting and operations people can sympathize with. Hey, I am a sales guy so I am allowed to pick on other sales people.

Actually, all I really need to do is to delve into some simple shipping patterns. There is a really easy way to provide a cost cutting solution to your customers, without lowering your invoice price and without threatening your relationship with your freight carrier. This innovative solution is called consolidation!

It is really amazing with what a little consolidation of shipments to the same customer will do for your cost per lb. The reason for this is that most freight carriers charge less per hundred pounds for heavier shipments than for lighter shipments.

So it will cost you less per hundred lbs for a 1,000lb shipment than it will for a 200lb shipment. In fact, your cost per lb will be less than half for a 1,000lb shipment than for a 200lb shipment.

I have a customer who is based in Cleveland who has particularly high classed items. We recently did a review that showed that they ship three 200lb shipments a week to the same customer in King of Prussia, PA. Each one of these shipments carries a cost per lb of .41 cents. However, if they got their customer to buy one large 600lb shipment at the beginning of the week, then their cost per lb dropped to .24 cents per lb. That is a savings of about $100 a week to that customer!

If you multiply that over a year that is $5,200 in savings to their customer. My customer didn’t have to lower any invoice prices. Plus, their customer was happy because they don’t have to expend the labor to unload the truck three times a week.

What if my customer won’t consolidate orders?

Sometimes getting with customers to consolidate their orders is an eye opening experience for them. A lot of times, they don’t even realize how often they are ordering.

Even with the above situation with the King of Prussia customer. When we approached them, they initially didn’t want to go for it because they didn’t think they were ordering that frequently. In fact, they didn’t believe us when we told them they were shipping three times a week!

It wasn’t until we showed them two years of data of them ordering three times, sometimes four times a week, did they consider listening to us. In this case, it was multiple purchasing people ordering at different times. But now they are ecstatic that they are saving these extra dollars and not clogging up dock space.

I have also found that even customers who won’t or cannot handle a consolidated order, appreciate you looking out for them.

How do we go about reviewing this?

The first thing you need to do is pull out a spreadsheet of all of your shipments for the last quarter and sort them by “customer” then by “date”. Then scroll down and break down all the shipments into week blocks.

Then it is simple. Just get your rating program to price out all of the consolidated orders as if it were one big order. Then subtract them from the total of the multiple freight invoices and there is your savings.

This is not rocket science but it is a great way to provide an excellent cost cutting solution for your customers that does not affect your bottom line!

If you are an LMI customer and you want to look into seeing the impact of consolidating shipment to customers, just contact me and we will perform this review for you.

If you are not an LMI customer and you want to lower your freight cost, the first thing you need to do is have LMI perform a FREE Freight Evaluation. Typically, LMI’s program provides over 20% savings to shippers. Contact me today!