The ongoing challenge in freight transportation is balancing cost efficiency with speed of delivery, a sort of logistical holy grail that’s difficult to achieve. To do so, shippers have to constantly analyze the cost versus speed trade-off through a matrix of factors in order to book loads that hit their SLAs without breaking the bank.
Chances are some portion of the transportation budget is going to include a contingency for expedited freight, a necessary but more costly service called for when time is of the essence. This could include just-in-time manufacturing to prevent line-down events, time-sensitive medical or pharmaceutical deliveries, or priorities such as high-value B2B deliveries or e-commerce orders.
While expedited freight may be unavoidable, that doesn’t mean you can’t find ways to do it more efficiently and economically. In this article we’ll take a look at strategies for leveraging expedited shipping as a strategic tool, while optimizing it to avoid overspending.
Strategic Freight Planning: Knowing When to Expedite
Identifying critical versus noncritical shipments is the way to avoid unnecessary expedited costs. Sounds simple, right? But how to go about doing that?
Define What ‘Critical’ Is
Use factors such as a shipment’s impact on production, on customer commitments or penalties for late delivery, or on things like product perishability or regulatory deadlines (food and beverage, pharmaceuticals, chemicals and hazmat, cosmetics, etc.). A tiered urgency system that rank orders shipments as high, medium, or low can be employed to categorize what goes by expedited or standard freight service.
Invest in Technology Tools
A transportation management system (TMS) uses automated routing and cost analysis to flag shipments that qualify for standard versus expedited freight. By integrating with enterprise resource planning (ERP) and a warehouse management system (WMS), companies can align shipping decisions with supply chain priorities. In addition, many WMSs support replenishment planning based on demand forecasting so shipments can be planned proactively, again reducing expedited needs.
Many modern TMSs utilize AI-driven predictive analytics to anticipate shipment delays and adjust services and modes accordingly. Inventory management and visibility tools, either stand-alone or as part of a broader ERP suite, help prevent last-minute stockouts that require expedited shipping. They can also help optimize safety stock levels and inventory positioning (i.e., closer to demand centers) to cut down transit times and reduce the stockouts previously mentioned.
Leverage Expedited LTL and Consolidation Strategies
Less-than-truckload (LTL) is generally cheaper than full truckload (TL) because you only pay for the space your freight takes up. As LTL involves multiple stops to unload along a route, “expedited LTL” may seem like an oxymoron. However, it can be done by limiting the number of stops to quicken the pace.
Expedited LTL shipments are given top priority within a carrier network, often loaded last for quicker unloading. It also uses direct or express lanes that connect major hubs with minimal transfers. Team driving also helps keep express LTL shipments rolling continuously. And like expedited TL, it comes with guaranteed delivery windows.
A logistics partner, like an experienced 3PL solutions provider, can help you develop a freight consolidation plan such as LTL or pool shipments with nearby businesses to share costs on expedited without a major bump in cost.
Optimizing Carrier Selection and Mode Shifting
Look to implement multimodal flexibility, balancing air, TL, LTL, and intermodal to achieve the best speed-to-cost ratio. This requires the use of real-time data, predictive analytics, and the creation of business rules. Some of the latter could include:
- Service-level requirements: How fast does the shipment need to arrive?
- Cost thresholds: What is the acceptable budget per mile or shipment?
- Customer expectations: Are guaranteed delivery windows required?
- Product sensitivity: Is the shipment perishable, high-value, or fragile?
- Regulatory compliance: Are there restrictions on transport modes (i.e., hazardous materials)?
A combination of a TMS, carrier APIs, and freight marketplaces can be used to collect real-time information on available carriers and rates, transit times per mode, capacity constraints, and disruptions (weather, port congestion, traffic, etc.). Analytics can then determine cost-to-service trade-offs, carrier performance metrics, and network efficiency (i.e., consolidation opportunities).
Expedited services can also be found at a lower cost by using regional vs. national carriers. Also, most modern TMSs have AI-powered routing and load optimization to find the fastest, most cost-effective routes, as well as automated freight booking and real-time tracking.
Sourcing Strategies: Bonded Warehouses and FTZs
Identify and source goods from countries less impacted by U.S. import tariffs or those with which the U.S. has favorable trade agreements. Nearshoring in Latin America can be attractive in certain industries, with lower labor costs and shorter trade lanes, but infrastructure remains problematic. In general, it’s good to diversify suppliers across regions to mitigate risk.
Bonded warehouses, regulated by U.S. Customs and Border Protection (CBP) allow importers to store goods duty and tariff free until they are sold domestically or re-exported. They can provide significant benefits in terms of deferred payments, cash flow, and inventory management.
If goods are later exported to another country, no U.S. tariffs are due. Goods can be stored for up to five years duty free. In addition, some bonded warehouses allow goods to be assembled or modified while in storage. Bonded warehouses are located near major ports and logistics hubs, and are often operated by 3PLs.
A Foreign-Trade Zone (FTZ) is a secured location where imported goods are designated as being within international commerce and therefore outside of CBP territory. This means businesses set up in an FTZ can defer, reduce, or eliminate import duties and take advantage of other benefits. There are nearly 200 FTZs in the U.S., with more than 250 subzones.
Finding Supply Chain Efficiency to Offset Expedited Costs
With the right mix of technology, strategic planning, and sourcing, businesses can strike the perfect balance between cost and speed. An integrated TMS, predictive analytics, and a flexible carrier network help prevent unnecessary expedited costs while ensuring critical shipments move swiftly.
Whether optimizing inventory placement, leveraging multimodal strategies, or utilizing bonded warehouses and FTZs, shippers can reduce costs without sacrificing service levels. In all of these endeavors, a tech-first 3PL can prove a valuable, strategic partner.
COGISTICS Transportation provides personalized treatment across land, air, and ocean freight operations. Whatever your unique circumstances, our expedited freight solutions and communications plan are there to back you up. We’re also a member of the global logistics partnership network WCA, with access to more than 6,800 offices in 191 countries worldwide.
Each shipment is tracked from order to destination and our best-in-class TMS provides real-time tracking and seamless routing, ensuring our clients always have the most efficient logistics solution. To find out more about the COGISTICS Transportation difference, get in touch with us today.
