You are an expert in your field. No matter the product you create or the problems you solve for your customers––you are successful for a reason.
When it comes to logistics, expertise is king. Carefully honed, tested knowledge is the key to providing real value and truly making an impact in the supply chain. Transportation directors hold a different skill set than their engineering teams, just as the accounting team's craft unlike that of the marketing staff.
This is exactly why companies choose to partner with a freight broker who is an expert in transportation planning, efficiency, and lowering your largest logistics expense: getting your product into your customers' hands.
Working with a freight broker, you strive to obtain a partner who's well-versed in assigning the correct modes (LTL, volume LTL, intermodal, OTR, partial T/L, etc.) As a shipper, you need to get your product safely and swiftly to your customer, but you may not have the capacity or expertise to research and implement the cost-cutting strategies your freight broker will.
In this post, we'll dive into the reasons freight brokers are an essential piece of your supply chain and the 7 main strategies they lead to lower your overall transportation costs.
When Should I Begin Working With a Freight Broker?
Freight brokerage services are often the first stop in optimizing your network. If you have considered optimizing your network to pinpoint inefficiencies and lower expenses, it's definitely time to connect with a broker.
As you meet potential partners, focus on finding a team that has established, proven expertise in transportation cost reduction, investment in strong carrier relationships, a large network of shippers to connect you with, and a mastering of their transportation management system (TMS) to give you better visibility into your analytics. These aspects are essential to achieving your end goal in working together: to lower transportation costs while maintaining or exceeding current service levels.
Each company varies, but at Kenco Logistics, freight brokerage can be a standalone option for our customers as well as fully integrated services such as warehousing, material handling, and full network optimization. Let's move into some of the specific value streams that a freight broker's expertise can drive for your company.
7 Ways Your Freight Broker Lowers Transportation Costs
1. Consolidation using a freight brokerage analysis
In this strategy, brokers ask a series of questions regarding your current shipment process that could allow for more leniency and time in the pickup or delivery window. These questions are essential for determining if you could consolidate loads and split costs with other shippers who are also looking to save.
- What's the absolute last delivery day we need to adhere to?
- Is there a critical date to have it picked up? Is this timeline flexible/optimal for our costs?
- Can we pair your freight with other shippers' freight to reduce costs further?
2. Mode shifting
Here, brokers look at the size and characteristics of a shipment and the urgency of which it needs to get there. With many possible modes––LTL, full truckload, intermodal, partial truckload, and air shipments––brokers advise on the best mode to get your shipment there for the lowest cost to meet your delivery timeframe.
For example, a broker may find a mode shift that can save 30% on transport costs if you can extend the delivery window just one week and use rail shipment.
Depending on your customer's expectations and your product, this could be a lucrative cost-saving strategy.
Or perhaps you frequently ship 20 pallets on each truck and the broker suggests you could safely have 60 in its place to maximize your truckload. Again, this is a big opportunity for streamlined shipment and a large reduction in costs.
3. Centralized transportation procurement
Most companies don't typically have a centralized system for transportation routes and costs. Especially for inbound freight, you should be using a TMS to reduce confusion, duplicate data, and simplification of strategy.
Kenco freight customers employ our TMS, MercuryGate. They can easily share their "portal" with their vendors––so now, with the help of a freight broker, they can give shippers visibility to better optimize. This allows your traffic managers to focus on their key metrics in a more consistent, visible way. Another important form of ROI specifically involving a TMS is that by working with a freight broker, you now do not have to invest in creating your own internal transportation department. Your freight broker, who is an expert in TMS, acts as another branch of your business––ensuring you are getting the most out of your software and using that data to inform you of other efficiency and cost-saving strategies.
4. Wrangling inbound transportation costs
When it comes to the raw materials you source to create your product, your inbound transportation costs can be a beast you may not know where to begin to tame. This is where your freight broker comes in: We have a widespread, flexible network that isn't bound by geography. You now have extensive opportunities to maximize your truckloads of inbound freight by working with your broker and the broker's network.
5. Becoming a "shipper of choice"
While your brokerage partner won't be able to certify you as a shipper of choice, per say, they will be able to use your position as a shipper of choice to their advantage within their network. For example, your broker may have carriers who look to give sought-after preference to their safe and certified fleets that could save you money on each run: easier access for trucks, more flexible loading times/procedures (such as first come, first serve), or a safe and clean break room for drivers.
This preference may be reflected in your rates because the facilities certainly prefer doing business with trusted drivers.
Your freight broker can "advertise" this quality within their network to establish stronger relationships with these faster, more efficient facilities. It's just one more piece to leverage when you can turn trucks faster, offer less wasted time, and produce happier drivers on the road.
6. Cost avoidance
Building on the above idea of safety, your broker drives a hard bargain with the topic of cost avoidance. They are your #1 ally in the battle against potentially dangerous and costly situations: such as negligent hiring scenarios, improper insurance on the trucks carrying your load, and risk mitigation through properly vetting carriers who haul your freight.
Your freight broker acts as a safety net or a second look at your possible cost pitfalls.
For instance, if you use a carrier who has an unsatisfactory safety rating (even unknowingly), and they get in an accident with your load where someone is injured, you could be legally responsible for this as the shipper. You may not have known they had a bad rating or had a process in place for vetting that specific rating, but you would still be liable for the situation that ensues––even if the trucking company's insurance takes primary liability. This can be especially dangerous if you ship Hazmat goods.
A freight broker mitigates this situation by helping you avoid these untrustworthy carriers. At Kenco, our system automatically checks nine different criteria for each carrier: safety ratings, authority, insurance coverage, fraud prevention, etc.
7. Time and workforce savings
As I mentioned in #3, one of the biggest cost-savings in using a freight broker is that you do not have to hire in-house personnel to create a department for carrier management specific to the types of activities mentioned in this post. Consolidating freight, carrier compliance monitoring, and negotiating the best possible transportation rates all fall on your transportation teams––and this is one area you can save on recruitment and hiring costs, staffing, workspace, and the many additional costs that come with building out and employing a new branch of your internal processes.
How Much ROI Will You See From a Freight Broker?
This big question's answer entirely depends on each individual situation. The ROI you may see from using a freight brokerage team depends on these important factors:
- Shipment volumes
- Current state of network optimization
- Current processes and opportunities for "low-hanging fruit" cost-reduction strategies
It's not unusual to see around 10-15% ROI when working with a freight broker.
However, the partner you choose should absolutely be able to provide you with an analysis of your historical freight spend, and a calculation of actual savings based on your freight spend and relationship. This is a real number attached to your investment in a freight broker relationship––which is essential for calculating the value of your partner and the value they bring to your company.
To Sum It All Up
With these 7 strategies in mind, it's easy to see the many avenues your new transportation expert could drive cost-savings. Without adding staff or infrastructure, you could equip your supply chain with a level of knowledge that only comes when working with a freight broker––as well as an expanded network of high-quality facilities and shipping partners.
Your freight broker will get to know your business goals, your wants and needs as a transportation manager, and truly become your partner for efficiency as you grow and change.
If you're ready to understand these strategies on an even deeper level––as well as get an overview of even more transportation cost reduction methods you could implement yourself––download our Freight Costs eBook.
In it, you'll gain a better grasp of how concepts such as mode shifting and consolidating freight have such a big impact on your overall logistics expenses.