Saving Costs: 3 Ways To Reduce Inbound Freight Costs

Often, when businesses are looking to reduce freight costs, the focus is on outbound shipments. The cost to ship goods must be factored into pricing, and the more efficient your shipping operation, the more savings you can pass on to your customers. There are typically savings to be found in inbound freight. Because of the complexities involved in managing inbound freight and tightening the costs associated with it, much of the focus remains on outbound shipping and commercial costs. 

Consider how many vendors and suppliers you work with and how many carriers are delivering your freight. Depending on your business, you may have several hundreds of suppliers, all of whom have their own freight forwarders, customs brokers, and logistic providers. As freight changes hands and moves through the system, transparency in costs diminishes. 

This doesn’t mean you can’t pull back the curtain on your inbound freight processes and make changes to reduce your costs, however. By making a few changes to how you approach freight management, you can take a big bite out of the costs and increase your profit in the process. 

How To Keep Your Inbound Freight Costs Down 

Use Analytics 

Do you know how much you’re actually paying for inbound freight? Have you ever analyzed what you're spending and why? 

A freight cost reduction program begins with an audit of your invoices and freight bills. In many organizations, bills are simply forwarded to accounts payable and paid, without too much analysis of what’s actually being charged. You may be surprised at what’s actually included in the bills, for example:

●      Ancillary fees - inside delivery or delivery confirmation;

●      Fuel surcharges

●      Fees and charges for misclassified or overweight deliveries;

●   Increased rates 

Auditing and analyzing your invoices can help you identify where you are spending more than necessary to reduce your inbound freight costs. This can also give you leverage to demand more pricing transparency. For instance, if your invoice terms are classed as “prepaid” or “pay on delivery”, you are allowing suppliers to manage freight costs for you, which isn’t always the most economical choice. Changing your invoice terms could enable freight costs to be separated from the rest of the bill and give you the opportunity to negotiate better terms. 

Implementing analytics via a Transportation Management System (TMS) can also provide insights into shipments and allow you to proactively route shipments in real-time. Instead of managing shipments using email or spreadsheets, a TMS uses real-time tracking data to ensure that freight is shipped following your defined policies and preferences. It also ensures vendor compliance with those instructions by issuing chargebacks and other sanctions, thereby reducing your costs and giving you more control over your shipments. 

Maximize Distribution Centers 

Warehousing and distribution costs can quickly drive up your inbound freight budget. Although you may choose a location based on tax advantages or low lease costs, if the location is too remote from your customers, it may be a false economy. When goods are shipped to a distribution center that’s located out of the way or that requires multiple handoffs and extra miles driven to make deliveries and pickups, freight costs skyrocket. Opting for a more centrally located distribution center is almost always the more economical option, even if upfront costs are more. 

Create Strict Protocols for Managing Inbound Freight

Implementing strict processes and protocols for managing inbound freight can go a long way towards reducing costs, especially when it comes to making claims. Teams should be trained on freight acceptance protocols, which begin with a full inspection of deliveries to identify any visible damage or shortages. For example, if your freight is equipped with temperature indicators, teams should be trained to check those indicators and the process of refusing packages that have been compromised. 

Because carriers have increasingly strict rules regarding claims, especially when it comes to concealed damage or shortages, it should be a matter of policy to inspect the content of shipments within 12 hours of arrival to meet those requirements. These standard operating procedures, which should also include guidelines related to ancillary services, delivery refusals, and invoice auditing, should be regularly reviewed and analyzed to ensure your business isn’t paying more than necessary for inbound shipments.