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What Your Vendor Is Not Telling You

Hidden Costs Cause Unnecessary Spending In Shipping.

Philadelphia (September 26, 2007) Most distributors do not manage or control the flow of their inbound goods and materials. This lack of action leaves the opening for vendor provided logistics, where they become the ones calling the shots and therefore taking the profits.

It is easy to get swept up in this especially when you know how much work inbound freight actually involves. Inbound freight involves the organization of freight from national and foreign vendors, consolidating vendor shipments, taking care of direct shipments, setting up multiple shipping points, and etc.

Letting vendors take care of all of the transportation choices themselves can look like a clear and easy choice for you to make. But when you do not have any control or input it can actually lead to delays in arrivals, increases in safety stock, lost revenue, high overhead costs and diminished customer satisfaction.

Why this is able to happen:

• Negligence- because of the inattention paid to the inbound flow of goods and materials vendors are able to say to the client (you) that shipping is included in the package, and you will believe them, not taking the time to dig deeper into the real costs.
• The Hidden Costs- the vendor can collect the profits for themselves by creating excess freight and handling charges and adding them to your invoice price by “masking” the charges in the form of delivered, prepay-and-add and “packaged” product prices.
• Keep the Change- the vendor very well might be able to negotiate a reduced freight rate, but when that happens do not expect them to let you know. They will usually keep those savings for themselves.

Where to Go From Here

Now that you are aware of what is probably occurring with your inbound goods, you need to develop a plan.

First you will need to find out if this is actually happening, and if it is then you will need find where you need to take control of the freight. To figure out what the answers are you will need to learn what the current market rates are for each type of transportation. Then write down exactly who your vendors are and how much they charge. Figure out the difference between each vendor's delivered pricing vs. F.O.B. origin pricing.

After completing those steps, you will then compare the numbers and be able to see where you need to take control of the freight.
A third party logistics provider (3PL) can come in to assist you with everything because from this point it will only continue to be confusing to the untrained eye.

“Inbound freight costs can be as much as 35% of the total logistics cost, when you are dealing with something that substantial you need to make sure that whomever is working on it knows exactly what they are doing. And the savings that will come from using a 3PL can go directly to the bottom line,” said Tom Torcomian, President/CEO of Leading Edge Logistics.

Benefits that come from using a 3PL can be in the form of both knowledge and money. A 3PL will keep you involved in the decision making process, and what progress is being made. They will also have specialized software that can be used to perform such functions as

• Consolidate shipments.

• Select the mode and carrier.

• Develop the least-cost shipment route.

• Allocate transportation to the most efficient carriers.

• Make available corporate-wide visibility of all critical transportation data. 
 

3PL will save you money while making sure that what they plan out and what they do is cost-efficient. A 3PL can act as a business change agent, driving customers’ ability to grow, innovate and compete. 

About Leading Edge Logistics

Leading Edge Logistics is a non-asset based, third party logistics provider that guarantees customer cost reduction by using a proprietary approach, including customized monthly reports, to focus on the root causes that effect logistics costs. LEL operates i2 Supply Chain Software... one of the most powerful logistics tools available. Leading Edge Logistics’ special service philosophy is to work for their customers as opposed to working for their own assets.

For More Information on LEL services, go to http://www.leadingedgelogistics.com