Expert Column How to Reduce Airfreight Cost for Shippers

Airfreight has long been regarded as a swift yet costly mode of transportation for shippers. However, with escalating fuel prices and operational expenses, air freight rates have been consistently increasing over the years. As a result, air cargo shipments have emerged as a significant cost factor for many companies. 

Despite these challenges, there are various strategies for shippers to reduce air freight. Through meticulous shipment planning, consolidation practices and the use of technology, shippers can enhance cost effectiveness and streamline supply chain operations. 

Understanding Air Freight Cost Components

To effectively manage air freight costs, it is important to obtain a clear understanding of their key components: 

• Fuel surcharge - This fluctuates based on jet fuel prices and can account for up to 40% of the total freight rate.

• Base rate - The basic rate charged by the airline which covers operational costs. Base rates vary by route, volume, and season.

• Security fees - Charges levied by airports for security screening and customs clearance.

• Pick-up and delivery - Costs for trucking shipments to/from the airport.

• Other surcharges - Peak season surcharge, currency adjustment factor etc.

By understanding these key components, shippers can make informed decisions to optimize their air freight spending. Thorough analysis of each cost element will identify potential areas for cost saving measures and devise strategies to mitigate expenses while ensuring service quality. Eventually, having a nuanced understanding of air freight cost components will allow businesses to navigate the complexities of air freight pricing more effectively. 

Optimize Shipment Planning

In order to reduce airfreight spending, it is essential for shippers to be meticulous in shipment planning. Efficient shipment planning is paramount for shippers aiming to mitigate air freight expenses. By meticulously strategizing shipment schedules, shippers can capitalize on consolidation opportunities, maximize cargo space utilization, and minimize the frequency of expedited or last-minute shipments. This approach enables businesses to leverage economies of scale, negotiate favorable rates with carriers, and optimize route planning to minimize transit times and associated costs. Additionally, comprehensive shipment planning involves analyzing shipment characteristics, such as weight, volume, and urgency, to determine the most cost-effective transportation mode and service level for each consignment. 

There are a few methods of optimisation: 

Consolidate Small Shipments

Consolidating multiple small shipments into one large shipment can significantly reduce air freight cost for shippers. By combining smaller multiple shipments into larger and more efficient loads, shippers can leverage economies of scale and get volume discounts from airlines. Consolidation allows for better utilization of cargo space and reduces the number of individual shipments, thereby minimizing the handling and administrative costs associated with each consignment. In addition, the consolidation of shipment enables shippers to optimize routing and scheduling to reduce transit times. 

Ship During Low Demand Periods 

Air Freight rates fluctuate based on market demand. During off peak season, carriers tend to offer discounted rates to fill excess capacity and optimize flight schedules. Shipping during low demand periods also minimizes the risk of capacity constraints and delays associated with peak shipping seasons, like holidays or industry-specific events. This allows shippers to benefit from smoother operations, enhanced service reliability and greater flexibility to secure preferred routes and flight options. Aligning shipment schedules with low demand periods can also help shippers maximize cargo space efficiency and reduce shipping charges. 

Whenever the holiday season approaches, the air freight industry braces for the annual phenomenon: the surge in demand and subsequent price hikes. With holiday shopping, inventory restocking and gift deliveries, shippers will face pressure from soaring rates as they vie for limited shipping capacities. As much as possible, businesses are advised to schedule shipments during low demand periods instead. 

Compare Rates of Different Carriers

Comparing rates from multiple carriers before booking of shipments, is a fundamental strategy for minimizing air freight cost. With thorough market research and obtaining quotes from various carriers, shippers can identify competitive pricing options and negotiate favorable terms. It involves analyzing rate structures: Base rate, Fuel surcharges and even Additional fees to enable shippers to make informed decisions based on cost effectiveness and service quality. 

Incidentally, comparison of carrier performance metrics such as transit time, reliability and customer service responsiveness also allows shippers to assess and select carriers that align with their specific requirements and priorities. Using technology solutions and freight rate management platforms further streamlines the rate comparison processes and provides real-time visibility into pricing fluctuations and market trends. 

Optimize Packing

Efficient cargo packing plays a crucial role in optimizing space utilization and minimizing air freight costs. By utilizing pallets and containers strategically, shippers can maximize cargo density and minimize wasted space during transportation. This approach not only ensures that shipments are compactly packed but also facilitates handling and loading processes, reducing risk of damage and improving overall operational efficiency. Shippers can further optimize their weight considerations by removing unnecessary packaging materials or utilizing alternative packaging solutions which offer the same level of protection while minimizing bulk. 

Route Optimization

Route Optimisation aims to achieve an optimal balance between transit time and cost efficiency. Shippers must meticulously research flight routes to identify options that offer the best transit time at the lowest cost. While direct flights offer faster transit times, they tend to be more expensive. In order to determine the most suitable route for their shipments, businesses must weigh the trade offs between speed and cost to evaluate the best flight option. 

By leveraging on advanced route optimisation software and analytic tools, shippers are able to conduct comprehensive analysis of various factors such as flight options, durations, layover times, fuel surcharges or even carrier rates. Having a data driven approach enables shippers to make informed decisions to accommodate airline budget and align to delivery timelines. 

Use Alternate Modes of Transport

Airfreight might be the fastest mode of transport, but it has higher costs compared to other alternatives. However, when speed is not paramount, shippers can explore more cost effective options, such as ocean freight or rail transport. These alternative modes offer competitive pricing while accommodating larger volumes of cargo, making them ideal choices for non time sensitive shipments. The strategic leverage of various transportation routes, based on specific requirements of each shipment, allows businesses to optimize their business operations to achieve a balance between speed and cost-effectiveness. 

Ocean Freight

Ocean freight is an economical alternative to air transport for shipments with flexible delivery timelines. While the transit duration is notably longer, the cost savings associated with ocean freight are substantial, especially for non-urgent cargo. By aligning inventory planning with ocean freight schedules, businesses can capitalize on these cost advantages to optimize their supply chain expenses. 

Rail Freight

Rail freight is another low cost alternative for cargo with flexible delivery timelines, with transit times higher than air but lower than ocean. Leveraging rail transport between inland container depots near origin/destination facilitates efficient connectivity to ocean freight, streamlining port to port movements. 

Intermodal Transport

The integration of multiple transportation modes: Air, Ocean and Rail, within a single shipment enhances flexibility and cost efficiency. By transferring cargo between modes at strategic hub terminals, businesses can optimize transit times and minimize expenses. This approach ensures swift delivery for time sensitive segments of the journey, such as air transport, while capitalizing on cost savings for longer haul transportation. 

Leverage Technology 

Modern logistics technologies help reduce costs by optimizing air cargo operations. Through the use of innovative solutions like real-time tracking, automotive cargo handling processes and predictive analytics, businesses can streamline their operations and minimize processes. 

Route Optimization Software

Route Optimisation Softwares recommend the most efficient air routes through the analysis of vast amounts of shipment data. Moreover, they also enable businesses to forecast air rates and identify the cheapest period for shipping in order to capitalize on cost-effective opportunities.  

To determine the optimal route for each shipment, route optimization softwares utilizes advanced algorithms to consider various factors such as distance, transit time, fuel consumption and even carrier preferences. By optimizing routes, businesses can minimize fuel consumption, reduce transit time and maximize cargo load efficiency to reduce costs. Additionally, route optimisation softwares also provide real-time visibility to shipment statuses and location, allowing businesses to proactively address any potential delays and disruptions. 

Partner with Freight Forwarders

In order to find the optimal balance between cost-effectiveness and transit time, businesses are advised to partner with experienced forwarders. By leveraging on our expertise and extensive network, partnering with Cello Square opens a world of possibilities for businesses planning to streamline their supply chain operations and navigate the complexities of global trade with confidence. Cello Square works closely with businesses to identify areas of cost savings while ensuring that shipments reach their destination without compromising on budget constraints. From the negotiating of favorable rates to optimizing transit routes, we are committed to delivering value at every step of the supply chain journey. 

Conclusion

Airfreight costs account for a major component of logistics budgets for companies shipping high-value or urgent products. While air cargo provides speed, shippers can reduce airfreight spending through better shipment planning, use of alternate transport modes, adoption of technology and by partnering with specialists like freight forwarders. A combination of these strategies can help optimize air cargo logistics costs.

About Cello Square

Cello Square is a digital freight forwarding service, developed by Samsung SDS. The platform provides end-to-end visibility and optimal routing of logistics transport with a simple booking process. Features range from real-time quotations, chat functions to dashboards reflecting operation insights. Cello Square is used by leading companies from various industries to optimize supply chain stages and enhance system capability. 

Samsung SDS is a provider of Digital Logistic Services, establishing strong logistical capabilities across the world. Our global network spans across 36 countries with 53 international branches. We provide comprehensive IT-enabled services optimized to respective areas of Global Logistics, reliably handling the world’s 10th largest volume of air and ocean cargo. Speak with us today to optimize your supply chain operations.

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