Reducing Transportation Costs for High-Volume Shippers

Smarter strategies for FMCG, Industrial, and Life Science sectors

A lot of what is written about Transportation Cost Reduction Strategies for FMCG, Industrial, and Life Science Companies is superficial and some of it wrong. We take an editor’s eye view.

Reducing costs is always a priority, second only to the need for high-volume shippers to serve their customers on time and in full. Transportation costs, which make up more than 70% of total supply chain expenses, have become a key pressure point, especially for Fast-Moving Consumer Goods (FMCG), Industrial, and Life Science sectors.

Companies in these sectors face high service level requirements, frequent deliveries, and often operate an extensive, multi-tier distribution network. The ability to cut transportation costs without sacrificing service is no longer optional – shareholders and management demand it.

While much of the press emphasizes agility and resilience, they are not used as evaluation criteria because there are no accepted metrics.

What they tell you –
but it’s only partially true

Yes, you should bid on your lanes each year, but it’s also important to consider the long term. Can a carrier truly sustain the volume at the rate they are proposing? In 2021, every carrier could make money. By 2025, many carriers had gone out of business. Working with financially non-viable carriers is a recipe for short-term savings but long-term harm.

How much should you invest in partnering with a carrier? First, partnerships only succeed if they benefit both parties. That’s not always the case. Any carrier that respects its shareholders understands that. In the long run, it needs to make money and maximize profit. This means they won’t always honor low rates – even for a partner. A classic example is a carrier that was a “partner” to a large shipper. The shipper found that the partner was refusing tendered loads only to pick up the same load on the spot market for a higher rate.

With changing macroeconomic conditions, companies must adopt a dual approach: respond quickly to cut costs in the short term while also implementing structural improvements for long-term growth.

Inefficient Routing – Poorly planned routes increase mileage, transit time, and fuel use. If you’re not using routing software, you should be. But what’s often overlooked is the need to replace fixed routes with routes based on demand. These are much more efficient.

Transportation Management Systems (TMS) and AI-based tools can suggest load combinations, alert planners to inefficiencies, and automatically reconfigure loads for optimal space use. That’s helpful, but often the TMS can do too little because it happens too late in the process. Consider the example of a deployment shipment. If the stock transfer is built at only 85% of truck capacity, the chance that another order exists which can be consolidated to fill the truck is usually zero.

Third-party logistics (3PL) providers offer scale, expertise, and carrier network access that individual companies may lack. However, FMCG companies should have their own expertise and systems in place. By outsourcing specific transportation tasks – such as lane execution, carrier management, and freight auditing – companies can free up internal resources to focus on strategic cost-reduction planning.

Things they tell you that do work

For long-haul freight, intermodal shipping (rail + truck) can significantly lower costs, especially when the lead time is just a few days longer, as with warehouse replenishment. This approach decreases fuel use, emissions, and delays caused by congestion.

Additionally, shipping during off-peak hours can lower costs, especially in busy urban areas with time-based pricing.

As highlighted in industry reports, consolidating shipments into larger, more efficient loads markedly reduces the number of trips needed and cuts costs.

Many cost-saving opportunities exist not only within a company’s four walls but also across its supply chain partners. Collaborative forecasting with suppliers, joint shipping arrangements with peer companies, and shared distribution networks can create mutual efficiencies and reduce costs. This is great in theory, but harder in practice. The good news is companies like Walmart make their data available. This has the added advantage of avoiding the bullwhip effect.

Modern logistics relies on data. Companies that utilize predictive analytics, real-time tracking, and TMS platforms obtain insight into inefficiencies and opportunities. These tools can:

Flag underutilized routes or modes
Provide shipment consolidation suggestions
Predict future demand spikes
Determine the best multi-stop routes
Identify consistent lanes for dedicated carrier contracts

The key is not just adopting technology but integrating it into daily operations and decision-making processes.
But there are systems that most articles don’t mention.

Things they don’t tell you – but they should

Fluctuating daily shipment volumes drive higher freight rates. Carriers are forced to drive more deadhead miles, pushing up their cost that they must recover.

Failing to fully load trucks, either due to poor planning or order fragmentation, leads to more trips, more miles, and higher overall costs

Working with too many carriers without leveraging economies of scale reduces negotiation power and increases variability that shipping and receiving sites hate.

Pricing models that don’t encourage shippers or customers to consolidate orders result in frequent, low-volume shipments.

Relying exclusively on Distribution Centers (DCs) when plant-direct options exist adds cost, lead time, and complexity.

Bypass the DC –
direct plant shipments

Another game-changing strategy involves skipping the distribution center entirely by shipping directly from the plant. This approach is especially useful for high-volume SKUs or when delivering to large retail customers.

Plant-direct shipping eliminates redundant handling, storage, and transit costs while speeding up time-to-market. To do this well, companies need strong order visibility, precise demand planning, and closer coordination between manufacturing and logistics teams.

Encourage full loads through strategic pricing

When orders are small and frequent, transportation costs increase. One effective way to address this is by adjusting pricing structures to encourage customers to order more on each truck. For example, volume-based pricing can motivate buyers to wait until they have enough to fill a truck, which lowers the cost per unit delivered. But the key here is what defines a full truck. Companies like Procter & Gamble have successfully increased the threshold for what is considered a full truck.

For customer-facing DCs, requiring customers to order in layers or full pallets lowers order picking, handling, and documentation costs. Companies that follow this approach often see less frequent but larger shipments – benefiting carrier efficiency and reducing costs.

This may all seem simple. Unfortunately, the biggest challenge is persuading marketing and sales that what’s good for the supply chain is ultimately good for the customer.

Stabilize volume fluctuations

Irregular shipment volumes wreak havoc on transportation planning and costs. Looking at the graph below, ask yourself, as a carrier, how do you manage this variability?

Any company experiencing high lane volume variability faces higher rates from its carriers. Although there are no precise statistics on the exact costs involved, a good rule of thumb is an increase of 10 to 15%. Daily fluctuations are difficult for everyone to handle.

To combat this, companies should:

Improve Truck Utilization with Better Load Planning

Loading a truck to 85% capacity costs the same as loading it to 100% – but delivers less product per dollar. Technology-driven load planning tools can assist logistics teams in optimizing how freight is packed into trucks. Whether it’s by volume, weight, or route density, maximizing truck utilization is an easy way to achieve immediate cost savings.

Cultural and Process Enablers

Even the best strategies fail without alignment and accountability. Companies should:

Track and review metrics like cost per mile, truck fill rate, and the number of partial loads per week regularly.

Urge plant managers, distribution teams, and even sales reps to understand how their decisions impact transportation costs.

Include finance, operations, logistics, and sales in transportation planning to ensure alignment across departments.

Conduct regular cost reviews, benchmarking studies, and pilot tests to identify new opportunities.

In a world where supply chain complexity continues to grow, reducing transportation is both a necessary operation and a strategic advantage. For FMCG, Industrial, and Life Science companies, the opportunity isn’t in just squeezing rates but in rethinking the entire transportation strategy.

By smoothing out daily shipment volumes, fully utilizing truck capacity, incentivizing customers to order more per truck, and bypassing the distribution center when appropriate, companies can achieve sustainable transportation cost reductions while improving service.

The companies that succeed will be those that stop viewing transportation as a back-office task and begin considering it a priority at the boardroom level.