2. 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 simple, do
not trust your freight service
providers!”
1 www.freightcostsolutions.com
INTRODUCTION
3. 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.
#1 CYCLIC INDUSTRY MODEL
“On average, an Australian
business will achieve an annual
compound growth of between
10% and 30%. Consequently,
this should result in a discount
bracket reduction”
2 www.freightcostsolutions.com
4. “If your freight volumes are
increasing, so should your company
discount level.”
5. 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.
#2 SCHEDULE RATES
“After four years of service for
one of the 20 companies in
the Inenco Group, we recieved
a call to advise us that our
apprenticeship was over and
the entire group wished to
consolidate it’s complete freight
expenditure.”
3 www.freightcostsolutions.com
7. 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 mistake
2. 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 will not
receive the correct discount
level achievable from transport
sales representatives.”
4 www.freightcostsolutions.com
8. “It is common practice for a broker to
add margins from 15% through to a
shocking 50% on top of the rates”
9. 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?
#4 LOYALTY FACTOR
“One of our clients was a very
loyal customer of a broker for
10 years. When FCS audited the
freight accounts we were able to
save the client 44%.”
5 www.freightcostsolutions.com
10. “Paying more to a transport company
does not deliver your freight any earlier
than the next customer!”
11. 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!
#5 MATHEMATICS
“Carton rates are a risky option
if you are not careful, especially
if you send multiple cartons”
6 www.freightcostsolutions.com
12. “Each transport company has their
unique way of tricking you into
believing that you have good rates.”
13. 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.
#6 ZONE TO POSTCODE
“The truth is that the transport
industry is a minefield for
business”
7 www.freightcostsolutions.com
14. “Each transport company will have
specific rates for each zone so pay
attention to avert avoidable costs”
