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May 14, 2024
How to pursue freight cost savings for the long-haul
What do all shippers have in common? A drive to optimize value for their business through cost savings and process improvements.

Previously, we have explored a few ways shippers can unlock freight cost efficiencies. To expand on these tips, we talked with Chidi Onwuka, Manager of Pricing Management at Amazon Freight. Here are some of the insights he shared for optimizing your savings.

Build density (where possible)
Consolidating loads and building density are key to gain cost and efficiency advantages. This exercise may not be possible for all shippers, depending on the volume of products being moved and load frequency. However, “if you are able to consolidate, you are more likely to gain cost advantages over the long-term,” says Onwuka

By combining loads, you can drive cost improvements with your freight provider. Plus, it gives your provider the time to understand your specific supply and demand matrix, helping them to invest in your success.

How can shippers with lower freight shipping volumes pursue consolidation?

One way is to incentivize bulk ordering. By encouraging customers to place larger orders, you may be able to merge more loads together. And, if you understand the relationship between consolidation and long-term cost savings, you can pass transportation cost savings on to your customers—causing a chain reaction of savings and loyalty.

Regardless of your business size or shipping volume, taking time to deeply understand your customers and how you can influence their purchase behaviors will pay dividends over time.

Look beyond the lowest price
Especially for larger shippers, it’s important to take the time to research transportation providers before locking into a contract. Your freight is an investment, and part of that investment is time. So, conduct interviews, ask challenging questions, and make sure any provider you consider has capacity to support your business for the long-haul.

“In situations where you have sufficient density or predictable demand volume, it makes sense to invest in a provider that can work with you to optimize operations and drive efficiency gains,” says Onwuka. If you have less predictable demand, sparsity, and more of a just-in-time demand profile, it might make sense to go the brokerage route because you can take advantage of short-term market gaps and complement that with the spot market.

It’s okay to have more than one provider in your network, in case of disruptions or unforeseen circumstances. However, using several separate providers will limit your opportunity to build density and leverage the cost advantages it brings. Be sure to weigh these factors when building your network.

You also want to understand your provider options and their unique value because their operations will impact your freight costs. Asset-backed providers are those that own their equipment (e.g. trucks, trailers, etc.) and have typically already invested in capacity. Non-asset-backed providers, on the other hand, are less likely to have guaranteed capacity because they fluctuate with the market, says Onwuka.

Consider contracts with relationship-focused providers
Annual freight contracts can help shippers secure capacity. They deliver confidence that your freight will keep moving, even as the market shifts.

When considering providers and negotiating these contracts, look beyond pricing and perks to the providers themselves. Do they offer a “quick-fix” solution or are they more focused on building a relationship and developing an effective process with you? Transportation is never a “set it and forget it” endeavor. There are too many variables at play. You need a provider that can help you see around corners, unlock growth, and respond swiftly when disruptions happen.

Asset-backed, shipper-focused
At Amazon Freight, we prioritize building relationships with shippers by meeting their needs and looking for ways to build efficiencies. We do that through our more than 50,000 trailers and tapping shippers into the Amazon network. Ready to work with Amazon Freight? Create a shipper account today.
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