Supply chain directors keep track of a lot within daily operations, including managing freight spend. Keeping tabs on freight costs is key to lowering shipment costs and freight spend.
Technology definitely enabled better freight spend control. More options are available for managing the supply chain network, including an automated transportation management system (TMS).
Unraveling the Mystery of Hidden Freight Costs in the Supply Chain
Supply chain managers need to focus their attention on hidden costs.
To do this, they must first accept the need for a reliable transportation management system. A TMS can be critical for many shipping and truckload management networks, including:
- Manufacturers that handle large bulk orders.
- Brick-and-mortar and e-commerce businesses.
- Retail businesses that need accurate shipping data.
- Distributors who oversee shipping and handling of loads.
- Supply chain management professionals that need visibility and connectivity.
- Companies that provide logistics services, including 3LPs and 4PLs.
Understanding freight costs and how they can impact profit margins is an essential part of supply chain management. A transportation management system optimizes freight spend and lowers fees and expenses, reducing hidden costs and excessive fees.
Examples of Three Commonly Overlooked Freight Costs Found in the Supply Chain
Within the typical supply chain network, three commonly overlooked expenses can quickly add up. When multimodal freight spend areas get out of control, they can quickly derail the most potent supply chain and quickly eat into any profits.
Free Shipping Expenses
This popular service makes it easy for the customer to save money. However, it adds a surprising amount to the overall freight costs that shippers and carriers incur.
According to Purolator International, “free shipping and product returns are among the many factors that often go unreported when considering overall transportation spend or logistics costs. Such ‘hidden costs’ can result in a business losing track of the actual costs of transporting goods or, worse, being unaware of the additive impact of these costs on the bottom line.”
While free shipping is often required to compete today, it is an example of the growing freight costs that managers must consider.
Special Delivery Services
Shippers that offer unique services such as guaranteed delivery, overnight or two-day delivery, and unique content handling services automatically incur higher fees. Any specialized shipping service will be inherently more expensive than standard shipping and will often incur accessorial charges and additional fees.
These fees must be absorbed somewhere in the chain to avoid the total cost being handed directly to the customer. This adds to the freight costs shippers have to consider when budgeting and planning for load capacity.
Shipment Size
Another typical expense that often slips through the cracks and is not given much consideration until the fees stack up is the size of shipment loads.
There can be a big difference in shipping costs and fees between a load made up of 100 smaller shipment orders and a load of the same weight that consists of only 20 shipment orders. Freight costs associated with high-volume parcel shipments can be challenging to plan for but critical for successful profit predictions.
Fortunately, using a transportation management system provides the visibility needed to track those three values in tandem with forecasts to manage freight spend. That’s how a TMS optimizes spending across all modes and proactively reduces the burden of logistics.
Optimize Freight Spend and Reduce Freight Cost With the Right TMS Partnership
Keeping tabs on how much money is spent on fees and shipping expense is critical to securing the maximum ROI possible.
Knowing with some degree of accuracy what expenses will be incurred is an integral part of monitoring freight costs within the supply chain. And the one commonality in that goal is using a TMS to track all movements, all fees, accessorials, and seeing the data within a centralized control tower to find and eradicate inefficiencies continuously.
That’s why working with an expert TMS provider makes all the difference in the world. Request a demo today to see our tools in action.
