The Hidden Benefits of Controlling Your Inbound Freight

Almost every business that makes something, or distributes something has a shipping department that is responsible to ship that “thing”. Many of those shipping departments are physically located out by the shipping docks and they do a great job arranging the outbound shipping of the company’s product. Procedures and processes have grown up to manage the company’s outbound freight and match up well to the company goals for cost and service.

Yet surprisingly, many businesses lack formal processes to manage their inbound freight…the raw materials, inventory, and sub-assemblies that they use to make up their valuable products. This lack of a formal process means these companies miss out on:
  • Best Carrier Selection.  Many find the “easy” button when it comes to inbound freight is to let their vendors select the carrier, arrange the freight and either have it billed to you or added as a line item on your vendor’s product invoice. Occasionally, the vendor will give you “free” freight (which isn’t really free as it gets embedded in your cost of goods). In every case you cede selection of the carrier to your vendor. Since the continuum of carriers includes all kinds… you let your vendor make decisions about what level of on-time delivery you will accept, what level of freight damage you will accept, and what cost you will accept. A good inbound freight program takes control of the carrier selection with knowledgeable logistics professionals using a dynamic carrier decision tree to choose carriers on the combination performance metrics that best meets your needs.
  • Visibility of inbound materials is essential operational planning. Since the vendor scheduled the motor carrier and arranged the pickup, you likely don’t know what day the freight was actually picked up or the estimated transit time to forecast arrival on your dock. And, if you want to know where freight is or when it might arrive you have to reach out to your vendor for a tracking number, then you have to contact the carrier. Lots of time invested with no return. An inbound freight program provides a consolidated point of information that provides you visibility of the shipment status of all your shipments in one place.
  • Performance measurement of vendors.  The material you need is late. It’s affecting your production schedule. Your vendor says it’s the trucking company’s fault. You don’t know when the freight shipped, in fact you might be paying premium freight costs without knowing it to cover up late production and shipping by your vendor! Measuring performance metrics as part of an inbound transportation program provides the details needed to manage processes as well as visibility of material shipping times to more accurately evaluate vendors.
  • Controlling cost of inbound materials is one of the fundamental drivers of profitability. There is no surprise to the fact that the largest, most profitable companies all control their inbound freight. They make this part of their normal operations. Your vendor doesn’t have any reason to find you the best freight rate… after all, it’s not their money they’re spending. Most companies even add an up-charge called “shipping and handling” when they set up shipments for you. They have turned their shipping department into a profit center. Inbound freight programs generally save from 10 to 20% on identified freight costs, savings which fall to your bottom line.