The Myth of Free FreightWritten by Neal Willis
It costs money to ship things and freight isn’t free. There’s no doubt the ruse of free freight can be very attractive to buyers. Many companies continue to make large purchases from vendor(s) to qualify for it and/or insist on free freight being included in their purchasing agreements and negotiations.
Some vendors will use this to their advantage and solicit business with the lure of free freight on qualifying bulk orders knowing that companies will place larger than normal orders simply to qualify for it. The problem with placing orders big enough to qualify for free freight is that, in some cases, it requires a company to carry more inventory than what is normally needed. Carrying inventory costs money and the carrying cost can sometimes run as high as 20%-30% of the product. Storage, handling, and depreciation costs can add up quickly, especially if the product doesn’t sell in a timely manner.
When sourcing products, having free freight included in the purchasing agreement may feel like a win but, odds are, you are paying the freight costs somewhere else in the cost of the product. Free freight is often used as a psychological selling tool, with the actual freight cost simply factored into the price of the goods you ordered.
Controlling Inbound Freight Costs
One company’s inbound freight is another company’s outbound freight and, whether the chosen business model of earning a profit is on freight rather than the product or it’s being used to cover hidden or unexpected freight costs, the practice of marking up freight charges is extremely common.
More often than not, when shippers think of reducing freight costs and negotiating freight rates, they tend to instinctively focus on their outbound routings and will easily dismiss or overlook the opportunity to reduce inbound freight costs. Some businesses would simply rather not have to deal with it, as they cringe at the mere thought of having to plan, direct, and control inbound routings and orders.
Controlling inbound carrier routings can be easily done with the right tools, such as vendor routing portals. By working with vendors to have all freight costs billed to and paid by them, a shipper can safeguard against higher than necessary vendor freight charges. Taking control of inbound freight routings can reduce and even eliminate vendor freight charge markup. Plus, the added inbound freight volume can be combined with existing outbound volume to increase purchasing power with the carrier(s).
Freight is never free. Someone has to pay for it. Need help? Contact ReTrans Freight today for more information. Fill out the form and someone will contact you shortly. For immediate assistance please call us directly at 1-800-426-8896 Ext. 329 or send us an email at email@example.com.