5 Freight Policy Pitfalls

Many companies unintentionally hinder their profitability by committing these common but critical mistakes that generate hidden losses.

Absence of a Charge Back Policy

The lack of a freight policy to charge back freight costs to an end customer is one of the most common ways companies fail to recover costs. These expenses are a direct hit to their bottom line. To remedy this, companies should establish a clear and well communicated policy for charging back freight. Steadfast adherence to the policy will ensure that expectations are met.

Outdated Freight Policies and Metric

when freight policies remain static and metrics to measure go unchanged for extended periods of time they often become incongruent with ever-evolving market conditions leading to inefficiencies and increased cost. Regular reviews and metrics should be used to measure adherence to maximize utilization.

Neglecting Freight Costs in Customer Profitability Analysis (CPA)

When building a CPA, not including freight cost will create a distorted view of profitability by customer. Companies need to standardize capture on every order, tying back freight expense to the customer purchasing products. By using Applied Intelligence, KDL can quickly provide CFOs the means to aggregate data by customer for a true picture of profitability and areas for improvement

Overzealous Sales Overrides

Sales incentives driven by revenue or gross margin rather than by profit can lead to another common fault in freight policy. When sales reps are incentivized by top-line growth, they often prioritize winning without regard for expense. To promote a healthy bottom line shielding sales from direct involvement in freight decisions can help.

Customer Evasion of Freight Charges

Customers may employ a variety of tactics to avoid freight charges such as ordering just over the minimums for free freight. Companies should evaluate these levels regularly. Oftentimes they may be set lower to start and then never moved up. Small shifts upward may drive an increase in order volume, a decrease in order frequency leading to efficiencies in pick/pack and ship as well as added sales.

Leverage Applied Intelligence

Avoid these common mistakes and watch your business thrive. To fully realize the financial impact of addressing these pitfalls, companies can leverage KDL Logistics Applied Intelligence for a comprehensive view of how tightening up freight policies can affect profitability.