By Harry H. Blakeslee
HBA Enterprises
As entrepreneurs and business executives we continually look to grow our top line and get more of it to the bottom. An aggressive freight expense management program can improve our price competitiveness and find hidden dollars.
Do we really look at our freight expenses? Closely? Consider a professional logistics, transportation, or traffic firm. They can be your full traffic department or provide only selected services like trailer load moves. Smaller companies frequently like getting a professional traffic department without adding to their payroll. Medium and larger companies use their services as an adjunct to their internal management.
A logistics firm has broad knowledge of logistics and freight rates to save you in rate negotiations with existing carrier(s) or to replace your existing carrier(s) with others offering comparable service and better rates. Some firms can help with private fleet utilization or distribution and regional warehouse location planning, but that is another article.
Outbound freight expenses are identified, accumulated, and a no-cost-to-you review performed to quantify your potential expense reduction. Expect to share your "savings" for their ongoing efforts when you engage them. The split can sometimes be 50-50, but this is all found money. Expect the logistics firm to document and prove the savings.
When engaged they should audit the freight bills AND monitor your lane usage for competitive rates. Many firms stop at auditing and vouchering of freight bills. Though saving you the administrative cost of bill vouchering, the potentially larger savings - freight expense reduction - is left unnoticed.
Phase 2 is to investigate inbound freight on purchases. This is frequently buried in material or inventory costs. Even if you buy on a delivered basis, explore "unbundling" the costs - isolating the included freight cost or allowance. Even if your supplier uses her/his own trucks to deliver, shop around.
How much? and When do you see the savings? Eight to twenty percent savings are not uncommon and could begin immediately. Remember all savings fall to the bottom line if you are paying the freight charges. For a small to medium sized company spending a moderate $300,000 a year on commercial carrier freight , even splitting the savings, your half of $ 24-60,000 is a significant savings.
Spring 2001 - Volume 11, Number 2