Four Steps to Gain Control of Inbound Shipping

The following article is presented by PartnerShip. PartnerShip has decades of experience managing LTL freight, small-package and truckload shipping for thousands of businesses. PartnerShip is one of the many free PMPA member benefits and helps members save on every inbound, outbound, small and large shipment through its PMPA Shipping Program.

Reducing inbound shipping costs is one of the easiest, yet most overlooked ways to reduce overall transportation expenses. Like many small businesses, you may not currently have control over the shipments coming into your business. It is not uncommon for small businesses to let the vendor shipping the product to you arrange the carrier, select the mode of transportation and manage the actual pickup and delivery times. In some cases, the convenience of this arrangement may work well for your situation.

However, that convenience comes with a cost: you may find that you are paying significantly more for inbound shipping than if you had arranged for it on your own.

Here are four steps you can follow to better understand your true inbound shipping costs and the cost savings opportunities you may be missing.

1. Find a 3PL Partner

For many small businesses, there are distinct advantages of working with a 3PL partner. If you’re looking to gain control of your inbound shipping, make sure you find a partner that has demonstrated experience and established tools for helping businesses manage their inbound.

Additionally, most 3PL freight partners are able to aggregate the freight volume of many small-to-medium sized businesses and help them negotiate better discount rates and terms. They can also provide additional value-added services, sometimes at no additional cost, that are designed to lower your overall logistics expenses.

2. Analyze Your Inbound

In order to understand your true, inbound shipping costs, you first must complete a thorough shipping analysis by reviewing recent purchase invoices from your key suppliers. Most businesses may be surprised to find that vendors often add 2 to 10 percent to the value of their purchased merchandise.

When reviewing your purchase invoices, here are some terms you should keep in mind:

• Free Freight: There really is no such thing as free freight. Look closely as your vendor has probably buried their shipping costs into the purchase price of your goods.
• Prepaid and Add: This means your vendor is paying the freight for your shipment. It also means they are controlling the routing and adding this expense – often with additional “handling fees” to the cost of your merchandise.

3. Negotiate Better Rates

When you work with an established 3PL freight partner (either directly or through an industry or association shipping program), you will generally be able to secure your business the best possible inbound shipping rates. An experienced 3PL partner will be able to aggregate your needs with the needs of hundreds or thousands of small businesses like yours in order to secure the most competitive deals.

Be careful of “fly-by-night” freight brokers or 3PLs that work with thousands of carriers. Often, the quality of the service you get from, say, “Bob’s Trucking,” will be comparable to the cheap prices you pay. So be sure you engage with a 3PL that only works with the most reputable carriers in the industry, such as UPS Freight, YRC Freight, Con-way Freight and FedEx.

4. Create Inbound Routing Instructions

With your 3PL partner relationship, your analysis of purchase invoices completed and your competitive inbound shipping rates in hand, you’re now ready for the final step of creating inbound routing instructions and sending them to all of your key vendors. This is where your 3PL partner will either impress or disappoint. A 3PL with inbound shipping experience will be able to help you create your inbound routing program with the following services:

• Identify and manage lists of key vendors.
• Create clear inbound routing instructions for each vendor.
• Draft and send routing instruction letters to each of your key vendors on your behalf.
• Monitor and report on vendor compliance.
• Consolidate your billing and report to you the savings you are receiving through the program.

Inbound shipping costs are a major expense item for many businesses, particularly when you leave the control up to each of your vendors. If approached correctly, an inbound shipping management program can be an easy way to reduce your overall transportation expenses.

Inbound shipping programs are often best managed through a third-party logistics provider. A good 3PL can help you analyze your purchase invoices for savings opportunities, develop routing instructions for your vendors, monitor compliance and audit and consolidate invoicing to ensure you’re saving the most on inbound shipping.