3 easy ways to reduce the cost of your freight forwarder

Cost is one of the most critical aspects of your business to manage and any risk-free initiative to reduce cost should be welcomed with open arms. Here at Explorate, we're freight forwarding and logistics experts and we've put together three easy ways to reduce your freight forwarding spend without compromising the quality of your supply chain:

1. Pay ocean freight in USD

Did you know that regardless of which port pairs your container is moving between, the default currency for ocean freight is US dollars (USD)? This shouldn't come as to greater surprise, given that the USD is the backbone of the global economy and the container is the backbone of global trade.  

That, however, doesn't necessarily mean that you have to pay in USD. Carriers and forwarders both offer currency exchange services that allow you to pay in your local currency. While compelling on the merit of convenience, it's actually not very cost effective (at all). This is because of a relatively unfavourable base rate of exchange (ROE) and a surcharge called a currency adjustment factor (CAF).

A CAF is an insurance of sorts that allows the forwarder to be sheltered against any currency fluctuations that may occur in the time between paying the shipping line and receiving payment from your business.  

Given how easy it has become to hold alternate currencies either via OFX or your bank, paying your freight in USD and avoiding these now unnecessary surcharges is an easy way to reduce your forwarding spend. All you need to do is ask your freight forwarder to invoice the freight component in USD and make the payment from your USD account.

By doing so, your business stands to save between 3-7% off of your previously exchanged freight charges.

2. Source rates direct from the carriers

It's no surprise that it's cheaper to source a product or service wholesale rather than retail. Take the airline industry for example, by booking your own flights with airlines instead of having your travel agent do it for you, you save a significant amount of time and money.

This is a comparison that we often use here at Explorate, as its our view that the logistics industry is no different. Consumers of ocean freight (importers/exporters) can reduce their ocean freight spend by going directly to the actual carrier of their goods rather than having their forwarder book it for them. Our customers have saved anywhere from 5% and 58%, with the average saving sitting at a very respectable 20%.

Who takes care of the rest? Won't my forwarder be annoyed that I'm going direct? Questions like these are all answered in our FAQ's, however as ex-freight forwarders, we built Explorate to seamlessly integrate your current freight forwarder to ensure your supply chain remains intact.

3. Ship more products less frequently

Consolidating your cargo is an incredibly effective way to reduce your freight forwarding spend. While not always feasible, it is far cheaper to send 12 pallets in one container rather than 2 pallets per week LCL. A lot of fees and charges in logistics are on a per shipment basis, that means that no matter the volume, the charge remains the same. This is most prevalent when you're shipping full containers - the freight rate is a set amount, the port charges are a set amount, and documentation fees usually aren't impacted by how many pallets are inside of a container.

The consolidation mentality requires organisation-wide buy in, as the decision to rush an order through is usually driven from the sales team (I need the goods here yesterday!). If those goods can wait an extra couple of days or a week to meet the container leaving in a weeks time, you stand to save thousands. Obviously some goods need to be shipped as soon as they're off the production line, however with some control the consolidation conversation can be hugely beneficial.