Transporting Cost Down

Transportation remains one of the most significant cost drivers in omnichannel fulfillment. Customers expect fast, flexible delivery while organizations face the constant pressure of rising rates, fluctuating demand, and increased complexity across channels. The challenge isn’t just to reduce cost, but to do so in a way that preserves service and protects margins. Executed well and with intentionality, transportation becomes more than a cost line—it becomes a lever for both customer experience and financial resilience.

This is, clearly, a stock image. It is stressing me out - golden path with obstructions, pallets and waste leaning against a wall! It also, is not, as I thought when I was selecting it based on thumbnail, a staging lane, tying it to the transportation theme. As always, a great way to see if anyone is reading these…

Freight Terms

At its most basic level, transportation cost begins with who pays the freight, whether it’s Prepaid (where the seller pays) or collect (where the buyer pays). They may sound like straightforward choices and a desire to avoid showing cost would lean towards Collect - however ultimately there’s no such thing as a free (delivered) lunch - that freight is getting paid for whether it is up front or in making. Freight terms are critical levers in retailer contract negotiations, with some retailers operating their own fleets or have preferred carriers, pushing hard for collect terms. Others expect prepaid so that freight management is consolidated upstream, which adds a direct cost to the Logistics budget.

For supply chain leaders, it’s reductive to say it’s about who holds the invoice, instead we need to take a holistic view of cost to the organization and not simply limiting it to a functional impact. Before signing any transportation or retail agreements I expect a detailed analysis, modeling out scenarios across modes, carriers, and volumes so that an intentional decision can be made - the trap is that a contract that seems favorable from a sales perspective can undermine profitability if freight terms shift responsibility without considering true landed cost. Supply chain’s role in these negotiations is not only to enable the top line but to safeguard the bottom line, ensuring transportation strategy and financial health are aligned - without you can fall into the trap of having great looking metrics but the check-book not balancing (that’s a reference for my fellow millennials and older).

Using Networks, Data, and AI to Control Cost

Beyond contract terms, the real work of cost control happens in how companies (and therefore supply chain leaders) manage their networks day to day. Dead lanes, underutilized trucks, inaccurate billing, and volatile rates all eat into margins. Traditionally, this meant leaning on brokers to find backhauls, running manual freight audits, and walking a tightrope between spot and contracted rates - all of which reduces the need to have in-house resourcing, but as with all outsource services means the potential for loss of visibility/control. These levers still matter, but technology is fundamentally changing how they are applied and giving greater visibility/data behind decision making.

Modern brokers are increasingly powered by AI-driven platforms that dynamically match freight with capacity, minimizing empty miles and smoothing out the inefficiencies that plague omnichannel networks. Freight audit, once a manual process of combing through invoices, is now enabled by software that can validate every charge in real time, flagging errors instantly. I haven’t just seen this save money—it creates confidence in data and capability in financial planning - something Logistics/Supply Chain aren’t always known for!

When contracting with brokers/carriers the structure of rates is critical - spot versus contracted rates - another longstanding balancing act that is being reshaped by technology. Contracts absolutely provide predictability, however AI-enabled tools can now monitor live market data, assess risk tolerance, and recommend when to flex into spot capacity, transforming rate management from a reactive decision into a proactive strategy. For organizations with complex fulfillment networks, managed services providers are increasingly stepping in to bundle these capabilities—offering capacity management, auditing, and analytics in one place, and giving companies scalability without building massive in-house teams.

At the Reuters Supply Chain conference in Chicago earlier this year, I sat in a packed hall for an impressive demonstration from Uber Freight in which they showcased how agentic AI is already being used to assign loads in real time, rerouting based on weather or capacity constraints and automatically balancing service levels against cost. It wasn’t another powerpoint deck or proof of concept but live, with real freight moving through the system. Seeing the technology in practice drove home just how far AI has come in logistics and once again, what was once a buzzword has now become a practical, deployable tool that can deliver tangible savings while improving agility.

The Unique Challenge of D2C and B2C Transportation

While much of the conversation focuses on network and contract optimization, the reality of omnichannel is that D2C/B2C (direct-to-consumer/business-to-consumer) shipments represent a distinct cost challenge and yet typically represent the highest margin side of a selling organization. Parcels carry a disproportionately high per-unit cost and many a logistics leader has (for once) breathed a sigh of relief when an outbound number has been hit but mix has been higher on the Retail side!

A critical area that is often underlooked is packaging - many organizations think that it’s ‘one-and done’ and when a solution has been identified that’s it. Logistics and cost should be a Mobius loop (yes, pretentious, but love using the reference) and not just between finance and Supply Chain - feedback needs to get to Product and the commercial teams. Great examples of where cost can be avoided is with VAS (Value Added Services) at warehousing, with bundling or co-packing - not only could you be saving on number of parcels shipping but significantly on dimensions. Aligning dimensions and weight to carrier thresholds is one of the most key activities necessary (in theory before product even arrives) that will significantly reduce cost, while also improving handling efficiency.

In the United States, at least, it is rare to operate from a single-site for fulfillment, while in EMEA many companies see the benefits of consolidating to a couple of well-placed multi-market mega-warehouses and while that provides reduced transportation cost in theory, this is undone when stock is not in the right place at the right time. Ultimately, this comes down to forecasting and S&OP accuracy and ironically I think one of the most critical Logistics KPI’s is forecast accuracy - setting the full Supply Chain (and therefore organization) up to succeed. Reduce transfers (which are pure cost), reduce shipping out of logical zone and, of course, better inventory optimization.

Better…at least this makes sense…

The days of vertical supply chains are almost completely gone and in a world of 3/4PL’s, companies must choose partners that fit their scale. The carrier network used by a large multinational may not be right for a mid-size D2C brand (and of course, vice-versa). Leveraging regional parcel carriers, consolidation programs, or niche last-mile providers can often deliver the right balance of cost and service however this is only possible if the organization is explicitly clear in what it wants, which in turn is in only possible with clear objectives and business goals. A great example of this, is aligning service levels with those organizational goals - often companies default to premium services like next-day air, when ground or deferred options would meet customer expectations at a fraction of the cost. Clarity across sales, customer service, and supply chain about which orders truly require expedited service is essential, as well as clear planning (e.g. peak periods) to lock in the best rates.

Building a Transportation Strategy for Omnichannel Success

Reducing transportation costs in omnichannel fulfillment is not about chasing the lowest rate, but about creating a strategy that balances financial responsibility with service excellence, one that brings coherence across every function of the organization. Prepaid versus collect must be evaluated through the lens of profitability, not just convenience while brokers, audits, and rate management must be integrated, not treated as separate levers. AI and managed services should be embraced as accelerators, helping teams scale without adding unnecessary overhead, yet at the same time clearly managed with objectives. For D2C and B2C, packaging, placement, service alignment, and the right partner network are central to maintaining cost discipline without sacrificing customer experience.

I’m clearly biased, but building a truly effective strategy requires more than process and tools—it requires leadership. I describe the role of the supply chain leader as the “lubrication of the gears of the machine.” Transportation touches every part of the business: sales wants speed, finance wants cost control, marketing wants flexibility, and customer service wants consistency. Left to themselves, these gears grind against one another but a successful leader’s will create the alignment and the mission consensus, that allows the machine to run smoothly. By establishing clarity on service levels, transparency on cost impacts, and a shared vision for customer experience, you are ensuring that transportation is not a source of friction but a unifying capability that enables the entire organization to move forward together.

When done right, transportation ceases to be seen as a drain on margin and is recognized instead as a strategic enabler—balancing service with savings, protecting financials while unlocking growth, and ensuring that every gear in the machine is turning in harmony.