CFOs: Find Hidden Gaps Inflating Your Freight Expenditures

In today’s competitive business environment, effective freight management is critical to maintaining profitability and ensuring customer satisfaction. But many companies face significant challenges in this area, including outdated sales policies, lack of enforcement, and inconsistency. KDL helps our client’s CFOs optimize their freight policies to enhance profitability.

Most Common Problems

Outdated Sales Policies

Many companies continue to struggle with outdated sales policies that either absorb freight costs or charge customers based on order size. This often leads to inefficiencies and increased costs. Key issues include:

• Inconsistent enforcement of freight policies.
• Lack of proper controls to ensure adherence to policies.
• Lack of visibility/reporting on the effectiveness of policies
• Absence of a Transportation Management System (TMS) and performance dashboards.

Inaccurate Freight Charges

Another prevalent issue is the inability to consistently and accurately enter and charge freight costs to end customers. Common problems include:

• No direct ERP integration for managing freight charges.
• Skipped or inaccurate data entry leading to financial discrepancies.

Key Questions for CFOs

To address these issues and optimize freight management, CFOs should consider the following key questions:

1. Freight Absorption vs. Customer Charges From an economic perspective, which orders should ideally receive “no shipping fee” benefits? Is mode a consideration? Is there a defined target for offering “no shipping charges” linked to percentage of sales orders? Should this be 20%, 30%, or another figure?
2. Performance Measurement Does the necessary data exist to measure performance against freight policies? Do you have access to a complete list of customer sales detailing freight absorbed, passed on, or added as a profit center?
3. Policy Evaluation and Adherence Are current freight policies evaluated and updated annually to ensure relevance and effectiveness? Most companies don’t consistently update policies to keep pace with inflation. How often are prices and policies changed to ensure that the desired metrics are attained? Do you have the tools necessary to properly evaluate? Does your team have the discipline to resist offering shipping fee waivers to close a sales order? Are there mechanisms in place to regularly review and adjust freight policies to maintain alignment with overall business objectives and market conditions?

Not having positive responses to these questions means your freight cost is cutting into your P&L performance. Finding the answers can help CFOs gain a deeper understanding of their current freight management practices and identify areas for improvement. Implementing disciplined, data-driven policies will help ensure that freight management contributes positively to the company's profitability.

Conclusion

Optimizing freight management requires a strategic approach to policy enforcement, accurate data management, and regular performance evaluations. By addressing these areas, CFOs can significantly enhance profitability and ensure a more efficient, customer-centric freight strategy.? A proven partner like KDL can work with CFOs to create a comprehensive review of their freight policies, implement necessary controls, and leverage technology to streamline freight management processes improving their organization’s financial performance.