Lower transport costs
Your transport costs are higher than necessary. Here’s why, and what you can do about it.
Reducing transport costs sounds simple: find a cheaper carrier, negotiate a better rate or plan fewer trips. In practice, it is rarely that straightforward. Transport is part of a supply chain. A decision that saves a few euros per shipment on paper can lead to longer delivery times, additional inventory, more express shipments or dissatisfied customers further down the chain. In that case, you have not reduced costs, you have simply shifted them.
I work with logistics processes, supply chain challenges and the organization of operational processes on a daily basis. From that perspective, I mainly look at where costs arise, how processes influence one another and which improvements are achievable without compromising delivery reliability. My starting point for transport optimization is therefore: do not focus solely on the rate per kilometre or shipment, but also on how transport is organized.
In this blog, you will find eight practical ways to reduce transport costs without compromising service.
Snelle Navigatie:
- 1. Start by understanding your actual transport costs
- 2. Increase your load factor
- 3. Reduce empty kilometres
- 4. Consolidate orders where the customer allows it
- 5. Distinguish between standard and urgent shipments
- 6. Do not automatically choose the cheapest carrier
- 7. Use multiple carriers strategically
- 8. Improve collaboration between WMS and TMS Conclusion
- Conclusie
Co-founder and Director of Adaption, expert in logistics software and process digitalization
1. Start by understanding your actual transport costs
If you want to reduce transport costs, you first need to know where those costs arise. That sounds obvious, but in many organizations the total transport spend is more transparent than the cost structure behind it. Therefore, do not only look at the monthly invoice, but also at:
- costs per shipment, order, kilogram or pallet, delivery address, carrier,
- country or region;
- surcharges;
- waiting costs;
- express shipments;
- failed deliveries;
- costs of partial shipments.
The exceptions are often particularly interesting. If 90% of orders are transported efficiently, but the remaining 10% regularly result in express trips, additional stops or expensive partial shipments, a large part of the improvement potential may be found there.
Look beyond the average
An average transport price tells you little when different order flows are mixed together. For example, do not compare B2B pallet shipments with small parcel deliveries. Analyse transport flows based on comparable characteristics. This makes it clear which customers, orders, routes and transport methods are relatively expensive.
2. Increase your load factor
A truck that is only half full costs almost as much as a well-loaded truck. That is why load factor is one of the most important factors in transport optimization. The better you use the available capacity, the lower the transport costs per pallet, product or order can become.
This does not mean that every truck needs to be filled down to the last cubic centimetre. Instead, look for patterns. For example, do two partially loaded vehicles leave for the same region every Tuesday and Wednesday? In that case, consolidation may be worthwhile.
Consider both weight and volume. A vehicle may still have capacity in terms of weight, while all available loading metres are already being used. The best planning therefore takes several constraints into account at the same time.
3. Reduce empty kilometres
It is not only the outbound journey that costs money. When a vehicle returns empty or almost empty after a delivery, you are indirectly also paying for kilometres without revenue-generating cargo.
Completely eliminating empty kilometres is unrealistic. Measuring and structurally reducing them is achievable. Analyse, for example:
- where vehicles regularly return empty;
- which routes frequently involve one-way traffic;
- whether return flows can be combined;
- whether supplier flows can be incorporated into return journeys;
- whether different transport flows can be combined.
It is no coincidence that reducing empty kilometres is regarded within the European transport sector as an important way to reduce both operational costs and energy consumption.
4. Consolidate orders where the customer allows it
Shipping three pallets today and another two tomorrow can be more expensive than sending one shipment of five pallets. Yet partial shipments regularly arise because of how order and warehouse processes are organized.
An order is released as soon as it becomes available. The warehouse processes the order and transport plans the shipment. A few hours later, a second order for the same customer arrives. Operationally, these are two correctly executed processes. From a logistics perspective, however, they could have been one shipment. That is why order consolidation can be valuable.
But do not let cost savings determine the delivery time
Consolidation only makes sense when it fits within the agreed service level.
A customer expecting delivery within 24 hours does not want to wait three days because another order might still arrive.
Therefore, use clear rules, for example:
- consolidate within the same day;
- consolidate when orders have the
- same delivery date;
- only combine shipments if the agreed delivery time does not change;
- make exceptions for urgent orders.
This allows you to reduce transport costs without putting the customer at a disadvantage.
5. Distinguish between standard and urgent shipments
If every order is urgent, eventually no order is truly urgent. Express transport is often considerably more expensive than regularly planned transport. Yet urgent transport is sometimes used to solve problems elsewhere in the process. Examples include:
- a late order release;
- inventory that turns out not to be available;
- a delay in the warehouse;
- incorrect planning;
- a missed cut-off;
- insufficient coordination with the customer.
Therefore, do not only analyse how many express shipments there are, but especially why they were necessary. If the same cause returns every month, the solution probably does not lie within transport itself. An interesting KPI is therefore the percentage of express shipments combined with the reason for each urgent shipment. This turns express transport from a necessary evil into a concrete area for improvement.
6. Do not automatically choose the cheapest carrier
A lower transport rate does not automatically mean lower logistics costs. Suppose carrier A charges €5 less per shipment than carrier B, but delivers late more often or causes more damage. Customer service costs, returns, claims and replacement shipments can quickly eliminate the initial saving. Therefore, compare carriers based on their total performance. Consider:
- transport rate;
- delivery reliability;
- damage rate;
- first-time-right delivery;
- capacity availability;
- quality of track and trace;
- response speed when deviations occur;
- surcharges;
- invoice accuracy.
The best carrier is not necessarily the one with the lowest base rate, but the one that offers the best combination of cost and service for a specific transport flow.
7. Use multiple carriers strategically
Using one carrier for all shipments is straightforward, but not always optimal. One carrier may be strong in Benelux distribution, while another offers better rates and lead times to Germany or France. A different provider may again be better suited to pallet transport than to parcels.
With a multi-carrier strategy, you can determine which carrier is the best fit for each shipment. This can be based on destination, weight, volume, shipment type, agreed delivery time, available capacity, rate and carrier performance.
A TMS can automate these choices. The objective is not to add dozens of carriers, as that would only make the operation more complex. Instead, the goal is to work with a limited network in which each carrier is used for the transport flows where it performs best.
8. Improve collaboration between WMS and TMS
Transport optimization often starts before a shipment is even submitted to the carrier. The warehouse determines when orders are ready, how goods are packed, how many pallets are created and when a vehicle can be loaded. That is why a Warehouse Management System (WMS) and Transport Management System (TMS) should not operate as separate worlds.
Good data exchange makes it possible to know at an early stage:
- which orders are ready;
- how many pallets are expected;
- what the weight and volume will be;
- which delivery date applies;
- which carrier is available;
- which orders can be combined.
The earlier transport receives reliable information, the better the planning can be.
If a planner only hears at 15:30 that twelve additional pallets need to leave for Germany at 16:00, the available options are limited.
Transport costs are therefore partly determined by the quality and timing of information from earlier processes.
Conclusion: reducing transport costs starts before the truck departs
If you want to structurally reduce transport costs, you need to look beyond carrier rates. Many costs arise earlier in the process: orders released at inconvenient times, poor consolidation, insufficient visibility into volumes, low load factors or information reaching transport planning too late. That is why I primarily see transport optimization as a supply chain issue.
WMS, TMS, order management, planning and carriers need to work together. From there, you can focus specifically on the deviations that actually cost money. The objective is not to achieve the lowest possible transport price. The objective is to achieve the lowest transport costs while reliably delivering the agreed level of service.
That distinction is essential. Cost savings that come at the expense of the customer are usually not savings at all, but a problem that will reappear somewhere else in the supply chain.
Sources and background
- IRU, Understanding cost-effective freight transport
https://www.iru.org/ - IRU, European road freight dynamics 2024 to 2026 and beyond
https://www.iru.org/ - European Environment Agency, Freight transport activity
https://www.eea.europa.eu/ - IRU, Road freight transport prices
https://www.iru.org/intelligence/road-transport-intelligence/road-freight-transport-prices