Freight Costs: How a TMS Optimizes Freight Spend

Freight Costs: How a TMS Can Aid in Optimizing Freight Spend

Supply chain directors have a lot to keep track of within daily operations, including managing freight spend. Technology has definitely enabled better freight spend control, and more options are available for managing the supply chain network, including an automated transportation management system. 

Keeping tabs on freight costs is key to lowering shipment costs, and a functional transportation management system (TMS) can make it all possible.

Unraveling the Mystery of Hidden Freight Costs in the Supply Chain

Supply chain managers need to focus their attention on hidden costs. To do this, they must first accept the need for a reliable transportation management system. A TMS can be critical for many shipping and truckload management networks, including:

  • Manufacturers that handle large bulk orders.
  • Brick-and-mortar and e-commerce businesses.
  • Retail businesses that need accurate shipping data.
  • Distributors who oversee shipping and handling of loads.
  • Supply chain management professionals that need visibility and connectivity.
  • Companies that provide logistics services, including 3LPs and 4PLs.
Understanding freight costs and how they can impact profit margins is an essential part of supply chain management. A transportation management system can help optimize freight spend and lower fees and expenses, reducing hidden costs and excessive fees.

Examples of Three Commonly Overlooked Freight Costs Found in the Supply Chain

Within the typical supply chain network, three commonly overlooked expenses can quickly add up. When multimodal freight spend areas get out of control, they can quickly derail the most potent supply chain and quickly eat into any profits.

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Free Shipping Expenses

This popular service makes it easy for the customer to save money. However, it adds a surprising amount to the overall freight costs that shippers and carriers incur. 

According to Purolator International, “free shipping and product returns are among the many factors that often go unreported when considering overall transportation spend or logistics costs. Such ‘hidden costs’ can result in a business losing track of the actual costs of transporting goods or, worse, being unaware of the additive impact of these costs on the bottom line.” 

While this service is pretty much a requirement today, it is an example of the growing freight costs that managers must consider.

Special Delivery Services

Shippers that offer unique services such as guaranteed delivery, overnight or two-day delivery, and unique content handling services automatically incur higher fees. Any specialized shipping service will be inherently more expensive than standard shipping and will often incur accessorial charges and additional fees. These fees, of course, must be absorbed somewhere in the chain to avoid the total cost being handed directly to the customer. This adds to the freight costs shippers have to consider when budgeting and planning for load capacity.

Shipment Size

Another typical expense that often slips through the cracks and is not given much consideration until the fees stack up is the size of shipment loads. There can be a big difference in shipping costs and fees between a load made up of 100 smaller shipment orders and a load of the same weight that consists of only 20 shipment orders. Freight costs associated with high-volume loads can be challenging to plan for but critical for successful profit predictions.

Fortunately, using a transportation management system provides the visibility needed to track those three values in tandem and with laser-precision in forecasts to manage freight spend. That’s how a TMS can optimize spending across all modes and proactively reduce the burden of logistics.

Optimize Freight Spend and Reduce Freight Cost With the Right TMS Partnership

Keeping tabs on how much money is spent on fees and shipping expense is critical to securing the maximum ROI possible. Knowing with some degree of accuracy what expenses will be incurred is an integral part of monitoring freight costs within the supply chain. And the one commonality in that goal is using a TMS to track all movements, all fees, accessorials, and seeing the data within a centralized control tower to find and eradicate inefficiencies continuously. That’s why working with an expert TMS provider can make all the difference in the world.

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