The freight forwarding industry is known for its slight profits, with typical operating margins ranging from 1-11%. While the majority of revenue directly funds carrier capacity purchase, many organizations have their fair share of internal expenses eating into the bottom line.
In this post, we’ll talk about where your expenses may be adding up, and how you can optimize your operations to boost profits.
Reducing overhead as a freight forwarder
Outside of increasing revenue, cutting costs is the most effective way to improve your bottom line as a freight forwarder. However, that doesn’t mean eliminating every expense on your balance sheet. Rather, you’ll need to plan and execute a strategy to remove unnecessary costs without sacrificing quality of service or customer experience.
Instead of whittling down your budget to nothing, focus on improving your team’s efficiency. That way, you can make the most out of your resources while still providing your customers with exceptional service.
Maximize labor output
With the growing scarcity of labor in the logistics industry, it’s more important than ever to leverage your workforce to its full potential. However, in dedicating time to monotonous tasks like sending status updates and preparing shipping documents, many forwarders are hiring salaried employees to perform the job of computers. This mismanagement of resources can lead to over-inflated rosters, not to mention high recruitment costs as employees leave for more engaging roles.
To maximize productivity and boost employee retention, many companies are starting to prioritize professional development within the organization. That starts with providing employees with the tools they need to perform their roles more effectively.
Many organizations have ample opportunity to incorporate automation into their day-to-day work. In freight forwarding, a wide variety of tasks can be automated, including:
- Assigning tasks to team members
- Sending documents
- Notifying customers
- Transferring data from one system to another
With the right tech solution, you can train your team to cut down the time they spend on copy-paste tasks. Even if you need to do an extra check to verify, you’ll still put in less time than if you did it all by hand.
In off-loading repetitive work to computers, you can manage a leaner team with employees focused on building relationships and developing strategy rather than performing maintenance. Work with your IT team to see what capabilities in your current applications you could already be leveraging.
Streamline your paperwork
From quotes to invoices, and everything in between, many freight forwarders end up spending a lot of time and resources on paperwork. In fact, data from RPA labs shows that processing a shipment takes 113 minutes on average– the majority of which is spent preparing, verifying, and sending documents.
On top of the bloated cost of labor from lengthy document management processes, the material cost of creating and shipping/faxing paper can also add up. That’s why digitizing your system is a critical first step. Then, from there, you can find a solution to speed up your work and reduce the possibility of human error.
Other solutions to streamline your document process:
- Invoicing triggers
- All-in-one document management
- Document data extraction
- Automated document verification
Eliminate wasted resources
Figuring out where to allocate your resources is difficult in any business. If you’re not paying attention to how your money is moving, it’s easy to continue in the wrong business direction.
Set up your organization for success by analyzing your costs and revenue at the shipment level. While you can conduct periodic audits by running ad hoc analyses, you can also take it a step further by building dashboards to monitor all of your business input and output. This can allow you easy access to snapshot reports, as well as a constant view of your status over time.
From there, over the course of months, you can figure out which expenses are actively contributing to your revenue, and what you can pull back on.
In the freight forwarding industry, most organizations are already running relatively lean operations. After all, operating without your own assets or vehicles certainly helps limit your liabilities. However, there are still several places you can optimize as a freight forwarder.
Want to learn more about how to improve efficiency at your organization? Check out these blog posts: