May 25, 2020  
 
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Logistics and Shipping

 

How to Lower Inbound Freight Costs

Wondering how to lower inbound freight costs? Smart move. Many companies optimize outbound shipping costs but never bother to scrutinize their inbound freight costs.

You know how much it costs to ship freight out of your warehouse.

In fact, you've probably performed a cost analysis and implemented optimization strategies to reduce shipping costs. But do you know how much it costs to ship freight into your business? If not, you're probably paying way too much for inbound freight.

Inbound freight costs are a hidden expense that is ripe for potential savings. The tricky part is that inbound freight is usually priced into the cost of the materials you receive from vendors and suppliers. More often than not, suppliers treat shipping as a profit center, charging additional fees beyond the actual shipping costs.

Your suppliers have zero motivation to reduce your inbound freight costs. But your company has plenty of reasons to reduce costs wherever possible – and that means you need to know how to lower inbound freight costs on the materials you receive from your vendors.

Inbound Logistics Management

Inbound freight optimization begins by identifying how much you are currently spending to transport materials to your warehouse or production facilities. This may not be an easy process because it's in your supplier's interest to protect their profit center by hiding the shipping costs from you. But with effort and persistence, it's possible to receive a breakdown of shipping costs. You can then use the cost breakdown to renegotiate terms with your vendor. If renegotiation isn't an option, consider the possibility of opting out of prepaid shipping and establishing your own inbound freight management system. Another alternative is to contract with an inbound logistics provider to handle incoming shipments for you.

Inbound Optimization Benefits

  • Lower costs. The primary reason for conducting an inbound freight optimization process is to reduce costs. According to some estimates, companies can shave as much as 20% off the expense of their inbound freight by managing their inbound deliveries themselves.
  • More control. Whether you handle inbound freight activities yourself or outsource it to a third-party specialist, your company will gain more control over inbound shipments. Rather than relying on the supplier, you can set your own schedule and manage your own deliveries.
  • Improved customer satisfaction. Many companies achieve smoother workflows when they take control of inbound shipping – and that translates into improved customer satisfaction.

Freight Forwarding

Freight forwarding can deliver a big boost to your company's shipping activities. If hiring a freight forwarding company sounds like a possible next step, here are a few things you need to know about freight forwarding.

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The task of managing your company's freight logistics is not for the faint of heart. Freight and shipping has become a highly complex business activity and if you don't know what you're doing, the result will be inflated freight expenses, missed shipments or both.

Third-party providers have sprung up to facilitate nearly every aspect of the shipping process for companies of all shapes and sizes. Freight forwarding providers offer a particularly attractive service to small business owners because they handle your relationships with carriers and oversee the movement of merchandise along supply lines.

If shipping is taking up an inordinate amount of your company's time and resources, it might be time to explore the idea of hiring a freight forwarder. Here's what to expect from a first-rate freight forwarding and logistics provider.

Core Functions

Freight forwarding companies don't move products and shipments themselves. Their role is to facilitate the shipping process by managing carrier relationships, guaranteeing that your shipment arrives on time and in perfect condition. A freight forwarding service is especially useful if your company ships to international destinations requiring multiple modes of transportation and import restrictions. Expect a decent freight forwarder to provide you with multiple shipping options and cost scenarios for each shipment – all of which should take meet your freight's unique shipping requirements.

Benefits

Freight forwarding companies eliminate the hassle that is involved with sophisticated shipping jobs. In addition to establishing and supervising carrier relationships, freight forwarders take care of customs, insurance and other headaches you can live without. Freight forwarding can also translate into cost reductions when you consider the amount of staff resources you would need to invest in overseeing your own shipping arrangements.

Considerations

The key to successful freight forwarding is to thoroughly evaluate the freight forwarding company before you entrust them with your shipments. There are many excellent freight forwarders out there, but there are some inexperienced charlatans, too. Conduct due diligence and formalize your partnership with a detailed freight forwarding contract.

Related Articles

Want to learn more about this topic? If so, you will enjoy these articles:

Pros and Cons of Outsourcing Order Fulfillment
How to Select an Order Fulfillment Service Partner
Freight Optimization
Managing Logistics/Warehousing Off-Site


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