Ways to Shelter Income Utilizing Transportation
by Johnny Dollar
So who’s a clever boy now? How can I entice my vendor, schmooze my customer, and thrill my CFO by utilizing my transportation sleight of hand to shelter income? As my Dad used to say, ”Don’t do me no favors!”
In some industry segments, transportation is viewed as a profit center, a source of income, a freight cost reduction generator, etc. Often this is done at the expense of the vendor or customer (depending upon the agreed-to freight terms of the purchasing contract), who willingly goes along with the “transportation terms of the purchasing agreement” as part of some larger deal or agreement that falls outside the transportation area of responsibility. Typically transportation is not a party to such negotiations, but bears the budgetary responsibility for the freight expense. Sound familiar?
So, what are some of the ways that a company might use transportation to “shelter” income?
- ⦁ Use inbound collect freight terms more favorable than vendor’s prepaid freight rates.
- ⦁ Invoice prepay and add freight terms to customer at tariff rates while paying carrier at discount rate.
- ⦁ Use inbound backhaul to utilize capacity already paid for to avoid inbound freight expense.
- ⦁ Ship outbound LTL via a consolidator rather than shipping individual LTL shipments to the customer.
- ⦁ Utilize TL exclusive use to move outsized or awkward LTL cargo via drop ship to multiple customers, rather than shipping via LTL and incurring linear foot rule charges.
These are just a couple of examples of transportation tactics that can contribute to positive cash generation in the right circumstances. However, alignment of company strategic goals and objectives with transportation strategic goals can help clarify the circumstances under which sheltering income by using transportation really makes sense.
Utilization of an experienced outside supply chain coach resource can speed the process and expedite ROI, particularly where there is poor alignment between corporate goals and objectives and those of the transportation function. Continued inaction on your part is just preventing you from sheltering income by using transportation.
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