How Can I Improve My Gross Margin?
Problems:
Inbound freight cost as a percent of gross sales is 2% to 4% for domestic and 6% to 12% for imported product. These costs are not only eating company profit, but as a component of the cost of goods sold on your P&L, inbound freight is reducing gross margin and causing companies to charge more for product. By allowing the vendor to select the freight carrier and routing, you generally pay a premium, as freight is a profit center for many vendors.
Solutions:
- Insist on paying for collect freight rather than allowing the vendor to pre-pay the freight.
- Develop and implement a routing guide to gain discounts from selected carriers, and audit your freight bills to enforce routing guide and carrier use.
- Use a UPS or FedEx program that combines small package inbound and outbound volumes and discounts.
- For LTL (less-than-truckload) freight, join a freight consortium to take advantage of multiple customer shipping volumes, routes and discounts, and significantly lower costs.
- Use an experienced transportation consultant to make sure you are getting the best possible negotiated rates.
Benefits:
- Reduce the rate of cost increases on inbound freight.
- A freight consortium can reduce costs 6% to 25% annually.
Call or email Jeff Barry at 804-264-8040 or jbarry@fcbco.com to schedule a call to discuss how to improve your gross margin through improving inbound freight costs. F. Curtis Barry & Company is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing distribution centers, order management systems, warehouse management systems, inventory management and forecasting, and freight rate analysis.
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