There’s a hidden cost that’s driving up the prices Purchasing pays for many goods — but if you know about it, you can work it to your advantage. The cost of logistics - moving goods through the U.S. supply chain — is skyrocketing, reports the Council of Supply Chain Management Professionals. This is pushing up the costs of any goods — from raw materials to finished products — moving from one location to another.

In 2007, about $1.4 trillion was spent to send goods from one place to another, more than 10% of our country’s Gross Domestic Product (GDP). Historically, logistics costs as a percentage of GDP hit a low of 8.6% in 2003. Since then, transportation and inventory costs have steadily increased.

There are several factors at work in driving up transportation costs. Of course, there’s the price of fuel. But that’s taken an even bigger toll — more 2,000 trucking companies (of five trucks or more) filed for bankruptcy last year. It’s not getting better: More than 900 trucking companies filed for bankruptcy in the first quarter of this year alone.

So how can you turn this grim assessment into an opportunity?

First, it’s a good time to re-assess some of your Purchasing decisions. Maybe there’s a vendor you use already for one product, and you go to a second vendor for another product because he under-cut the first vendor.

How much money are you saving by buying from the second vendor? Could you purchase the same goods from the first vendor, at a slightly higher price, but more than make it up by paying one shipping bill instead of two? The rules have changed, and consolidating purchases among fewer vendors might save you more money in the long run.

 Second, it changes the dynamic in the bidding process. You can negotiate with vendors, promising more business for discounted shipping costs. Increasing your range of purchases with a specific vendor gives you more bargaining power — more money is on the table.

Finally, it wouldn’t hurt to check in with your shipping department to get their perspective on rising transportation costs, and what you might be able to do to help them save money. It could be yet another negotiating point with vendors.

Tags: logistics, purchasing, transportation, vendors