You think supply delivery expenses only take a nick out of your bottom line? With today’s fuel prices,  transportation costs are a major influence on your company’s profitability.

How major? Hold on to your wallet: Transportation costs on inbound shipments can amount to nearly 40% of the product cost.

The primary cure to this: Keep transportation decisions out of suppliers’ hands. If suppliers are calling the shots, they usually aren’t compelled to make transportation decisions that are cost-effective.

Most companies don’t give this too much thought. The standard instructions in many contracts between supply chain networks and suppliers is to designate incoming shipments ”Freight Pre-paid and Added.” 

With this kind of situation, there’s no incentive for the supplier to conserve delivery costs. The shipping expenses are added to the product invoice. The company then gets the stuck with the bill, so who cares?

When the supplier makes that transportation arrangements, it costs nearly 40% more than it does when the company makes it own freight arrangement.

Solution: Buyers should spend a little time looking around for their own freight carriers, and work with those carriers to hash out delivery schedules and financial arrangements. By consolidating your freight shipping operations and making the contract calls yourself, it’s likely you’ll come out ahead.

Tags: freight, suppliers, supply chain, transportation