As a youngster growing up, I had the pleasure watching two of baseball’s greatest players, Dizzy Dean and Pee Wee Reese, provide the play by play description of the televised weekend ball games. They did a wonderful job. One of Dizzy Dean’s favourite expressions was “Oh, those bases on balls.” As a former star pitcher, Dizzy would often lament the damage done to baseball teams when they would walk opposing batters who would subsequently come home to score on a hit or walk later that inning.

In freight transportation there is a similar problem. Oh, those inbound freight costs. Many companies don’t manage and control these expenses. Instead, they let these costs get away from them. I often hear shippers say, these freight costs are paid for by their vendors. Often this is only partially true. Ultimately the purchaser of inbound materials is paying the freight as part of the landed cost of the goods. In a recent post, David DiSanto of DiSanto & Associates points out that “when you leave shipping choices up to your vendors, you really have no control over the inflow of your goods and materials, which can lead to production delays, stock shortages, late deliveries, unhappy customers, and higher costs for your company.”

One of the other familiar refrains I hear is that inbound freight is managed by Purchasing, a different silo with a different reporting structure. The company’s Transportation department has no say in the management of these costs. Again, while this may be true, it does not excuse the company from managing this important expense item. Ultimately both transportation and purchasing report to the same CEO.

What some companies don’t realize is that other companies manage these costs as a profit centre. One company’s inbound freight is another company’s outbound freight. The outbound shipper that is supplying the goods often negotiates effectively with their carriers and applies a mark-up on the freight. The unsuspecting inbound receiver is paying more than if they had negotiated the freight rates themselves.

Of course, that is only one of the missed opportunities for shippers that neglect their inbound freight. Since inbound traffic can represent a significant volume for some companies, there is often an opportunity to leverage both inbound and outbound freight to create,

• inbound consolidations; and/or
• inbound milk runs by combining freight from multiple vendors at the most appropriate consolidation point; and/or
• round trips; and/or
• continuous moves;

all of which can result in reduced freight expenses. As DiSantos points out, “You are the customer and you have the right to determine the freight terms and shipping arrangements that are best for you. Evaluation should be performed on your current terms and arrangements, your shipment volumes, and your alternatives to determine the purchasing terms that are best for your company. Remember…’leverage’ is the key term to optimize your distribution network.”

The effective management of inbound freight begins with a sound business strategy and logistics strategy. The strategy focuses on creating the optimum network design. This implies the careful planning of customer service requirements, plant and warehouse locations. It also encompasses the thoughtful selection of vendors based on location, costs, production times, transit times, inventory turnover levels, quality control issues and reverse logistics requirements. It includes consideration of the opportunities to use a company’s private fleet versus common carrier. Specifically, to what extent can inbound loads be matched to outbound loads to maximize private fleet utilization? How successfully can empty miles be kept to a minimum?

I would like to thank David DiSanto of DiSanto & Associates, whose posting on another blog inspired me to write this blog this week.