5 Ways to Reduce Shipping Costs

Going into 2024, 86% of logistics professionals expected fuel and other operating costs to increase this year, and 4 in 10 planned to raise fees as a result. Heading into 2025, we’re confident that that number has either stayed high or given way to a chorus of "I don't know what to expect."

High shipping costs are just one piece of the puzzle of high operating costs in general—but while there’s a limit to what you can do about rising prices for raw materials, there are a number of proven tactics you can leverage to reduce shipping costs. 

There’s no version of this advice that equates to waving a magic wand—working seriously towards any sort of operational goal or initiative will come with change management hurdles—but each of the items on this list is a proven method for reducing costs in last mile delivery. 

What Are the Top 5 Ways to Reduce Shipping Costs?

1. Optimize Your Routes

Fuel and driver pay are the biggest expenses that your typical fleet has to deal with, and route optimization is the most straightforward way to decrease them. Simply put, the more efficient your delivery routes, the fewer miles you have to travel per shipment and the less time your drivers have to spend on the road.

And what, exactly, do we mean by “optimize” in this context? If you’re planning your routes by hand, that absolutely doesn’t count. If you’re planning your routes with a legacy technology solution that requires a huge amount of manual massaging, that doesn’t really cuti it either. 

What we mean by optimization is leveraging a modern, AI-powered route optimization that can account for all of the factors that impact route efficiency—drive time, driver skill, service time, vehicle and delivery site requirements, traffic patterns, customer requirements—while giving you the freedom to configure routes to your specific needs. 

The right solution should cut your routing time by at least half, while giving your route planners enough flexibility to ensure efficient routes that meet your parameters. 

2. Leverage AI in Your Customer Experience

This one might be a little bit more controversial. AI has been leveraged in route optimization for many years at this point to reduce drive time and miles per delivery: it’s a known quantity and a well-established use case. AI in customer experience, by contrast, is a newer application—one that some businesses might look askance at. 

But a careful deployment of an AI chat agent within your customer communications can actually have a huge cost impact, all while increasing customer satisfaction. 

When you have an AI-powered chat agent that your customers can text directly with questions and issues, they get: 

• Instant responses to simple queries like “when is my delivery scheduled”
• Round-the-clock connectivity
• Easy escalation to a human customer service rep with complete context when needed. 

While your team gets:

• A complete reduction in low-level inquiries—including questions about delivery timelines and order statuses. This can save serious time and money for your team in and of itself.
• Clear visibility into all customer service interactions across teams.
• Contextual intelligence for handling customer requests in real time. 

At the end of the day, all of this adds up to a team that’s less bogged down with simple questions and therefore better able to handle more important situations as they arise. It’s a recipe for both cost reduction and improved delivery service. 

3. Empower Drivers from End-to-End

Drivers shouldn’t be left out of the AI evolution either. Modern solutions can create AI-powered voice-based guidance for drivers at every stop along their routes—equipping them with information about the delivery site, the area around the suite, and the customer’s requirements.

These should be smart, focused summaries that help drivers know exactly what to expect: where to park, how to access the location, how long the delivery might take, and what challenges might be waiting at the site. It won’t replace human experience—it will enhance it with real-time, location-aware insights that make every delivery smoother and more predictable. Instead of being blindsided by a lack of parking or an unexpected staircase and having to improvise, drivers are empowered to get the job done and delight your customers. 

If this can give your drivers the boost they need to complete even one more delivery per day, you can reduce shipment cost significantly over time. 

<< Learn how DispatchTrack’s industry-first Driver AI is making drivers more productive >>

4. Take a Connected Logistics Approach

What do we mean by that? It starts with digitizing and standardizing. If you’re doing any of these processes manually, you could save money by automating or digitizing them:

• Contacting customers
• Scheduling customer deliveries
• Capturing proof of delivery 
• Generating invoices and driver settlements
• Dispatching drivers
• Distributing route manifests
• Getting delivery status updates from drivers 

Not only should you automate any of these processes that can be automated and digitize any that can be digitized, you should make sure that they’re all connected within a single solution or set of solutions. When you have total visibility into every aspect of your logistics process from one location, you can ensure greater efficiency from end to end. 

5. Optimize Your IT Spend 

The technological demands of the average last mile delivery outfit are often complex. The last mile isn’t the only part of the supply chain that you have to worry about, and success depends on a smooth handoff between one part of the fulfillment process and the next. 

To keep costs down, you need to find the delicate balancing act between ensuring that you have all the capabilities you need without paying for redundant solutions. 

Obviously, this will be highly specific to your business use case, so there’s no one-size-fits-all approach. But here’s a checklist of potential IT redundancies that you can use to get a sense of whether or not you could down on the number of solutions you use:

• Are you performing strategic route planning and daily route planning in multiple different solutions?
• Are you doing territory planning and route planning in multiple different solutions?
• Are you using a separate solution to send texts to customers?
• Do you have a separate dispatching app on top of your route optimization?
• Do your drivers use a mobile app that’s not part of one of your existing software solutions?
• Are different functions (e.g. sales versus delivery) running redundant software to cover the same functionality?

If you can spot any redundancies like that, you can consolidate solutions to reduce your total IT spend and further streamline your processes. 

For leaner IT teams, finding the right technology fit is a big part of this. There’s always a temptation to leverage a heavy-duty TMS for the final legs of the supply chain—but most of the time what you really need is a last mile logistics solution that’s designed for fast implementation and rapid time-to-value. 

Finding the Right Technology to Reduce Shipping Costs

Like we’ve alluded to above, the key to powering many of these methods to minimize shipping costs is to leverage logistics technology that makes connected logistics processes and efficient delivery management default. No technology is a panacea, but the right software provides a crucial foundation for reducing shipping costs and improving your operations.  

Curious to learn more about how these tactics play out in practice within the context of the right software solution? Check out our Customers page to see the kinds of results DispatchTrack has helped businesses like yours achieve. Or, better yet, reach out to an advisor to learn more.