Untapped Cash from Inbound Loads

By Don Dovgin

Have you stopped to think about "who's managing the inbound freight"? Like many manufacturing organizations, DC's or assembly plants, raw materials and supplies come in heavy loads. Whether it comes by truck, rail, air, or by ocean, this is another cost to you.

Companies struggle so much with keeping their own customer happy, that most of the concentration is spent watching outbound loads and their own on-time delivery. While this is a challenge in itself, your inbound freight is a "diamond in the rough".

Most suppliers want to save you the burden of sticker shock when they sell you something, so they give you "all inclusive" pricing. That's okay, nobody wants more confusion. On occasion, they might even boast that because they ship in massive volume, they get the best carrier pricing. Our experience has found many times this is NOT the case. In fact, suppliers are just like you! You are their customer, so they spend a lot of time managing their outbound freight. So when their production falls behind schedule, they may be shipping to you using an expedited carrier or simply put, they just don't get favorable rates from the carriers they use. Consequently, you have to pay more for your product.

Transportation costs can be 7% of a company's operating budget. If you work in a thin margin industry, chances are your inbound suppliers are passing transportation costs to you; you just don't know it!

5 telltale signs that you're paying too much for inbound freight delivery.

1. Suppliers do not share their carrier rates with you
2. Freight cost is not broken out separately on the invoice
3. You don't have contracts in place for carriers of inbound freight
4. You use multiple suppliers for the same product, just to get favorable procurement pricing
5. You hold more than 3 days of inventory of raw materials because of erratic delivery schedules

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