5 Telltale Signs Your Inbound Freight Costs Are Out of Control
A lot of focus is paid to outbound freight and shipping costs. But behind the scenes lurks the hidden expense of inbound freight. While incoming shipments and costs associated may seem like a benign event when compared to outbound shipments, actually the impact of inbound freight cost to your profitability can be just as detrimental.
These inbound freight costs are often ignored and can get out of control very quickly,particularly if your suppliers are not paying attention to their freight expenses and are simply passing the costs on to you.
To determine if you have some hidden opportunities with your incoming shipments, review these five telltale signs:
- Rates are not shared or discussed with your suppliers – even though you have prepaid freight terms, that does not mean that the freight expenses are not included in the price of your products. As freight costs increase, so will the price of your products.
- The invoice does not have a separate entry for freight expense – a separate line item on the invoice for freight expense is a good first step in determining what your inbound shipping expenses really are.
- No contracts are made with imports or inbound carriers – every carrier that touches your company from any point in the supply chain should have an agreement that is negotiated so that you will receive the best shipping deal available for your business.
- Several suppliers are leveraged to procure the same product in order to secure better pricing – suppliers will incorporate freight expense in different ways, and it is not uncommon to see a variance in pricing depending on the costs to ship to their customers.
- Raw material inventory exceeds 3 days stock in order to address erratic delivery schedules – if you have freight carriers that are not dependable, this is a red flag opportunity to find a better solution. The additional carrying costs of inventory simply to address quality failures in shipping can be terribly expensive for your business.
Most companies have 7% of their operating budget tied up in transportation expense. When margins are thin, your inbound freight expense can completely erode your profitability. Businesses must have strong supplier relationships in order to thrive, but often freight expenses are not an open topic of discussion. It is time to change that way of thinking through a transportation assessment strategy.
A transportation assessment will objectively look at ALL of your freight expenses – inbound and outbound – and provide an unbiased review of your opportunities to reduce your transportation costs significantly.
How you are dealing with your inbound freight expenses? It would be great to here of successes and opportunities in your industry.