Stop Burning Margin on Freight: Issue 17

COGS reality: Inbound and outbound freight are “sneaky” cost lines: hard to see, often buried inside big co-man POs, and therefore not visible. But there’s a fix.

FTL Premium stacks up from three leaks:

1. LTL – backfills and dribbling pallets because supply plans slip.

2. Expedites & rebalance – late WOs/POs, misaligned RM staging, emergency cross-country shuttles.

3. Location – shipping to the wrong coast/DC, then paying destination premiums to fix it.

The common triggers:

• “West DC is light, push a quick LTL.”

• “Coman doesn’t have enough RM, overnight a partial.”

• “Retail launch moved up, expedite finished goods to hit the window.”

Even with solid FTL cadence, those three leaks erase the savings.

The $1M sanity check

Reduce freight from 4% → 3% of COGS on $100M COGS = $1M cash freed.
Sounds simple - the numbers actually are. The tracking and execution is the hard part.

A diagnostic: are you overpaying?

• %FTL (Inbound + Outbound): <80% = you’re leaking.

• Avg truck fill (cube/weight): <90% regularly = structural waste.

• LTL ratio (by spend and loads): >10% = planning failure, not a transportation problem.

• Expedites as % of COGS: >0.3% = you’re using trucks as a time machine.

• Destination premium (miles × rate delta) per order: positive trend = wrong DC logic.

• Lead-time adherence (supplier/coman): <95% OTIF = expect LTL/expedites.

• WO alignment vs RM staging: frequent gaps = guaranteed “emergency” moves.

Track these weekly. If you can’t, that’s your first root cause.

Steps to get back the 1pp (and more)

1) Audit what your coman is actually charging

→ Self explanatory: if hidden in as one total price, make sure to demand freight share of total units costs.

2) If you source raw materials yourself, fix inbound first

• Are POs FTL-batched? Enforce truck-sized order minimums by lane and cadence.

• Are shippers best-in-class? Vet on-time pickup % → don’t forget, delays drive safety stock!

• Two-stop FTL policy: assess multi-stop rules when it cuts LTL by >2 loads/week.

3) Stage for production, not for comfort

• Align RM staging windows to WO start minus buffer (not “ASAP”).

• Require WOs frozen by a cutoff that matches transit + receiving capacity; no WO, no truck.

• Use mixed-ingredient FTLs to comans, optimize by pallets/weight/cube and WO needs (plus scrap).

4) Outbound: kill the “just ship it” reflex

• How many FTLs vs LTL to customers? If LTL >10%, implement ship-window consolidation.

• Mixed DC shipping: allow multi-stop FTL to key customers where receiving allows.

• Destination premium guardrail: if ship-from DC ≠ demand region, trigger a rebalance plan before orders drop.

5) Make the math visible

• Track the following: %FTL, avg. fill, LTL ratio, expedites % COGS, destination premium per order, top 10 lanes by leakage.

See you next time!

-Leon