The idea of profitable inbound freight sounds counter-intuitive. Shippers must spend money to obtain products and get them to their locations. Unfortunately, they lose sight of what profitable inbound freight management is about; shippers should have control over their inbound freight spend. The responsibility to get freight to your company is on suppliers, but the proactive management of inbound freight costs falls to the shipper. Instead of just winging it, shippers should learn to recognize the signs of weak profitability in inbound freight management, understand how better inbound freight management contributes to profitability and follow a few steps to ensure their vendors perform as expected.
Many signs can help shippers recognize when profitable inbound freight is simply a sinking ship. These include:
The average company spends more than 40 percent of its annual freight budget on inbound freight according to the Aberdeen Group via Logistics Management, and companies spend approximately 40 percent of total yearly freight budget on inbound freight. Yet, shippers continue to leave inbound freight management in the hands of vendors and suppliers. Suppliers do not pay the cost; your organization does. Unfortunately, this is a common practice, and as vendors markup outbound freight costs to the tune of 10 to 15 percent, reports Alex Khan of Inbound Logistics, shippers end up with lower profit margins. Instead of leaving vendors to their own management styles, shippers must retake control over inbound freight, including gaining visibility into all costs and activities and transform inbound freight management from a cost center to profit center.
These steps also provide a checklist for what vendors may be contributing to higher inbound freight costs. If they do not fall in line with these steps, they are eating away at your organization’s profitability.
Evaluating vendors for their practices in managing inbound freight might seem like a costly process, but failure to understand your vendors’ activities and their impact on your bottom line will result in higher freight costs. Shippers should learn to recognize the signs of weak profitability in inbound freight management, why better management of vendors leads to better freight cost control and follow the steps to achieve profitability in inbound freight management.
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