Shipping costs can add up quickly, and for shippers, even small increases across a transportation program can have a significant impact on overall spend.
Here are five practical steps businesses can take to better understand rising shipping expenses, identify opportunities for savings, and build a more efficient transportation strategy.
What Causes Shipping Costs to Rise?
Shipping costs are influenced by a mix of market conditions, operational decisions, and service requirements. Some of the most common factors include:
- Carrier Capacity and Driver Availability: Shipping costs can increase when driver, equipment, or carrier capacity becomes limited. When capacity tightens or demand increases, businesses may have fewer options and face higher rates to move freight.
- Fuel Prices: Fuel is a significant component of shipping costs, and changes in diesel prices can directly affect fuel surcharges and the overall cost of moving freight.
- Supply Chain Disruptions: Severe weather, port disruptions, labor strikes, carrier issues, and other unexpected events can disrupt normal transportation networks. When freight has to be rerouted, expedited, or moved through alternative providers, costs can increase quickly.
- Customer and Service Requirements: Tighter delivery windows, expedited shipping, appointment requirements, final-mile needs, and other service expectations can affect which transportation options are available and how much they cost.
- Shipment and Operational Decisions: Mode selection, shipment frequency, consolidation, routing, order size, and other day-to-day decisions can also have a significant impact on transportation spend. Unlike many outside market pressures, these are areas businesses may have more ability to influence.
What Can Businesses Do to Combat High Shipping Costs?
Businesses can’t control every factor that affects shipping costs, but they can take a closer look at the parts of their transportation program they can influence. Here are five areas to start:
#1: Understand What’s Actually Driving Your Transportation Spend:
When shipping costs increase, don’t assume the carrier rate is the problem. Break down your transportation spend to understand what is actually changing. Look at factors such as base rates, fuel surcharges, accessorial charges, expedited freight, shipment volume, and mode mix.
For example, a 10% increase in transportation spend doesn’t necessarily mean your rates increased 10%. You may be shipping more volume, using expedited service more often, seeing an increase in accessorial charges, or moving a different mix of LTL and truckload freight. Each of those scenarios points to a different opportunity for improvement.
Understanding what is driving the increase helps you focus on the right problem instead of making broad cost cuts that may not address the actual source of higher shipping costs.
#2: Analyze How and Why You’re Shipping:
Once you understand where transportation spend is increasing, look at the shipping activity behind it. Review patterns in order frequency, shipment size, delivery requirements, minimum order quantities, and shipment timing to understand how they may be affecting your shipping costs.
For example, a customer placing several small orders throughout the week may create multiple LTL shipments when those orders could potentially be consolidated into fewer, larger shipments. Frequent expedited requests or tight delivery windows may also be signs that ordering patterns, inventory planning, or internal processes are driving higher transportation costs.
The goal is to understand not only what you are spending, but what is happening within the operation that may be contributing to it. Small changes to how and when freight moves can sometimes create meaningful savings without sacrificing service.
#3: Optimize Your Mode, Routing, Consolidation, and Service Levels:
Once you understand your shipping patterns, look at whether freight is moving in the most efficient way. The transportation mode, route, service level, and frequency you choose can all have a significant impact on shipping costs.
For example, several LTL shipments moving to the same region within a short period may create an opportunity for consolidation or a different transportation mode. On the other hand, a shipment moving truckload simply because “that’s how we’ve always done it” may be a candidate for partial truckload or another service option. Expedited service should also be reviewed to understand when it is truly necessary and when better planning could provide more flexibility.
There isn’t one transportation mode or carrier strategy that will be the most cost-effective for every shipment. Regularly reviewing mode selection, routing, consolidation opportunities, and service levels can help control shipping costs by matching each shipment with the right solution based on cost, timing, capacity, and customer requirements.
#4: Evaluate Carrier Cost and Performance Together:
The lowest carrier rate doesn’t always result in the lowest overall shipping cost. Carrier performance can have a significant impact on what a shipment ultimately costs your business.
A lower rate can quickly lose its value if poor performance leads to missed appointments, claims, accessorial charges, delays, reshipments, or additional work for your internal team. On the other hand, a carrier with a slightly higher rate may provide better overall value through more reliable service and fewer costly exceptions.
Evaluate carrier rates alongside on-time performance, claims, service reliability, accessorial activity, and other factors that matter to your operation. Looking at cost and performance together can help you make better carrier decisions instead of choosing based on rate alone.
#5: Build Your Transportation Strategy Around Your Larger Logistics Needs:
Some of the most expensive shipping decisions start before a shipment is ever ready to leave the dock. Inventory planning, order management, warehousing, and fulfillment can all influence how freight ultimately needs to move.
If inventory isn’t available in the right place at the right time, a business may need to expedite freight or move product between locations. If an order isn’t fulfilled in time to meet its normal shipping window, a faster and more expensive service level may be needed to meet the customer’s delivery requirements. Order timing can also affect opportunities to consolidate freight, while inventory placement can influence shipping distance, mode options, and transit time.
Looking at these areas together can help uncover what is contributing to higher shipping costs beyond transportation rates alone. Working with a full-service Logistics Service Provider (LSP) that understands transportation, warehousing, fulfillment, and inventory management can provide a broader view of the operation and help identify opportunities to improve efficiency and control costs.
Manage Shipping Costs With the Right Logistics Partner
Reducing shipping costs isn’t always about finding a cheaper carrier. It starts with understanding what is driving your transportation spend, how and why freight is moving, where inefficiencies exist, and how transportation fits into the rest of your operation.
Since 1989, King Solutions has been a leading logistics service provider. We combine transportation management, warehousing and fulfillment, and e-commerce support to provide solutions built around our clients’ needs. One of our key differences is the way we work closely with each customer to understand their operation, identify opportunities for improvement, and develop a logistics strategy that supports their business.
Rather than simply connecting a shipment with a carrier, our team becomes an extension of yours. That means having people who get to know your operation, understand what matters to your business, and stay involved in the day-to-day work of managing transportation.
We work alongside our customers to review transportation spend and carrier performance, identify shipping patterns, and look for opportunities to improve how freight moves.
Sometimes that means finding a better carrier or rate. Other times, it may mean consolidating freight, changing a mode or service level, or recognizing that an inventory or fulfillment decision is creating unnecessary transportation costs.
You don’t need another provider handing you data and leaving your team to figure out what to do with it. You need a logistics partner who will dig into the details with you, bring recommendations to the table, and help carry them through.
If rising shipping costs have you wondering whether there’s a better way, let’s take a closer look together. We’ll help you understand what’s driving your costs, identify opportunities to improve, and build a strategy that works for your operation.
