6FREIGHT RATE

SECRETS EXPOSEDBY DARREN ASH

FREIGHT COST SOLUTIONS

If your business is spending thousands of dollars on freight services, you may not want to know that the Australian transport model is potentially working against you, yes, unfortunately it’s true.

Transport companies are annually increasing rates even though your volumes are growing and you generally distribute more freight year on year.

Do you know what should your real discount level should be?

Transport services are integral to many businesses and often take up a large percentage of potential profit.

This eBook is designed to help you to save money by putting the power back into your hands when negotiating your freight rates and seeking out any hidden costs that may become evident by the end of this document.

By keeping your eyes open to the details that most freight service providers hide away, you can make smarter decisions that directly result in real bottom line savings.

Here are the six secrets within the Australian transport model that can and will impact your bottom line.

“My message is s imple, do not t rust your f re ight service providers!”

1 www. f re igh tcos tso lu t ions .com

INTRODUCTION

The cyclic model is best viewed over a three-year period. Whoever developed this model deserves either a medal or persecution.

Fast Facts

1. Within the Australian transport industry, the major transport companies continue to increase their rates on an annual basis. The rate increases are normally between 3-5%. They claim it is to cover increased costs in manpower, trucks or to allow for inflationary costs they have incurred.

2. On average, an Australian business will achieve an annual compound growth of between 10-30%. Consequently, this translates into increased freight distribution.

3. Taking into account points one and two, Australian business could conservatively save 30% from compound growth and increased freight volumes. However, simultaneously and unknowingly business can incur up to 15% rate increase from the transport company, year on year! Ouch.

If your freight volumes are increasing, so should your company discount level.

The net result is that your business is potentially paying an additional 15% above market values whilst not receiving the benefit of the applicable discount level that is due.

This is very true.

Are you paying too much for freight? Maybe it’s time to benchmark your rates against industry standards.

#1CYCLIC INDUSTRY MODEL

“On average, an Austral ian business wi l l achieve an annual compound growth of between 10% and 30%. Consequent ly, th is should resul t in a discount bracket reduct ion”

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“If your freight volumes are increasing, so should your company discount level.”

Schedule rates are the most expensive rates charged because there is no rate discount provided at all.

Primarily these rates are applied to new companies with no freight history or to the general public. Be aware!

There are also many instances, both past and present where a sales representative or broker will not provide your business with rates for all zones or destinations across Australia where reciprocal rates or back rates have not been provided.

Do you know your entire schedule of rates? From every depot? from every postcode Australia wide? Probably not.

Many a time, companies have paid a significant amount more for freight distribution when all rates are NOT known and negotiated.

Having established set rates could cost much less, you just need to know to ask.

Are your schedule of rates what they should be? The correct answer is you should have zero schedule rates on your rate card.

#2SCHEDULE RATES

“After four years of service for one of the 20 companies in the Inenco Group, we recieved a cal l to advise us that our apprent iceship was over and the ent i re group wished to consol idate i t ’s complete f re ight expendi ture.”

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“Primarily [scheduled] rates are applied to new companies with no freight history or to the general public”

The transport sales representative and the broker are common friends. They both have a shared goal, add margin onto your rates.

Sales Representative

At their disposal is the contact and quotation history their transport company has had with you and the discount rate level and rates they have offered you previously.

The role of the sales representative is to add as much margin as possible onto your rates as they receive commission based on the margin level they are able to maintain. Therefore, in many instances, you will not receive the correct discount level achievable from sales representatives. It’s simply not in their interest.

The Broker

The broker is very similar except they acquire the best competitive rates from the transport companies that will deal with them and then add a high margin onto these rates and deliver to you sum of both.It is common practice for a broker to add margins from 20% through to a shocking 50% on top of the rates they receive from the transport companies.

That’s why brokers are very scared that their customers will either:

1. Receive the transport companies invoice directly by mistake2. Discover what margin they are making on their account.

An important fact to note is that in today’s market, transport companies look at every business opportunity and account on its merit. This means a broker can no longer claim that they receive a hugely discounted price based on their business volumes.

Is your transport sales representative or broker really working in your best interest?

#3 SALES REPRESENTATIVES AND BROKERS

“In many instances you wi l l not receive the correct d iscount level achievable f rom transport sales representat ives.”

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“It is common practice for a broker to add margins from 15% through to a shocking 50% on top of the rates”

What is the loyalty factor?

Transport companies will squeeze additional fees from your business every year and argue black and blue that you’re business receives excellent rates.

However, they will potentially omit the fact that your freight volumes have placed you on another discount level.

To protect your business, it’s imperative that you achieve fixed rates when negotiating prices and employ the services of an auditor to benchmark your current rates against the industry discount levels.

Paying more to a transport company does not deliver your freight any earlier than the next customer!

Is your loyalty to a transport company cutting into your bottom line?

#4LOYALTY FACTOR

“One of our c l ients was a very loyal customer of a broker for 10 years. When FCS audi ted the f re ight accounts we were able to save the cl ient 44%.”

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“Paying more to a transport company does not deliver your freight any earlier than the next customer!”

The rate card you receive from transport companies is full of hidden ‘gotchas’.

There is multitude of different ways transport companies charge businesses. The most common are:

• Basic charge and kilo rates• Pallet Rates• Carton rates

Each transport company has their unique way of tricking you into believing that you have good rates.

The basic charge and kilo rates require you to know the transport company’s zone to postcode file well to avoid hidden costs. It also requires you to be able to identify at what point minimum charges are applied.

For example: A basic charge of $7 and a kilo rate of 23 cents to Sydney may look great at first glance, but if a minimum charge of $15 is applied you need to know how many kilograms you need to send before the basic charge and kilo rate applies. In the example above it is 35 kilograms.

Carton rates are a risky option if you are not careful, especially if you send multiple cartons. The transport companies work on the basis that the majority of customers send multiple cartons.

Therefore, it is wise to send less than three to four cartons within a con-note otherwise carton rates can be more expensive than basic charge and kilo rates.

The basic charge and kilogram rate and the carton rate operate on a charge weight. The charge weight is either the physical weight of a product or the length, width and height multiplied by the conversion factor, which is usually 250 or 333. Be very aware of this point!

#5MATHEMATICS

“Carton rates are a r isky opt ion i f you are not careful , especial ly i f you send mult ip le cartons”

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“Each transport company has their unique way of tricking you into believing that you have good rates.”

Most people look at the cost of sending freight from their location to a capital city.

Be wary that transport company’s zones and the postcode ranges they encompass are unique and will be quite different from their competitors.

Confusing right?

This is deliberate.

This adds confusion to the process of comparing your choices. Consequently, the town of Maldon in Victoria at postcode 3463 could be zone VC1 for one carrier, Bendigo for another and inner Vic for another.

Each transport company will have specific rates for each zone so it’s important that you pay attention to avert avoidable costs.

Conclusion

The truth is that the transport industry is a minefield for business especially if you have no one who has worked previously from the transport companies’ ‘side of the fence’.

Rate audits are imperative and a necessary tool to allow you to establish what rates you should be paying for your freight volumes. Sales representatives, brokers, transport companies all work on increasing your costs to ensure they create and maintain more margin and dollars from you.

Freight Cost Solutions are Auditors. Our business model is aligned with you the customer and we only work with major transport companies to guarantee service delivery. We deeply understand the costs and margins that are utilised by the transport companies so that we can ensure that you receive the best rates possible.

Is Sydney for one transport company Sydney or a NSW country zone for the next? Be careful.

#6ZONE TO POSTCODE

“The truth is that the t ransport industry is a minef ie ld for business”

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“Each transport company will have specific rates for each zone so pay attention to avert avoidable costs”

6www.freightcostsolutions.com

1800 428 348