CFO's Lead the Charge in Lowering Freight Costs

By Timothy Walsh, VP Sales, Logistics Management Inc.

Taking a lead role on freight cost management and business processes in this cost center is often off the radar screen for most CFO’s and Controller’s, and probably is as interesting to a finance manager as G/L accounting is to a shipping manager.

You know that your company wants to deliver your orders to customers and move raw materials at the lowest cost, without loss, damage or exceptions. However, CFOs, Controllers, and finance managers do not typically get involved in this area, even though it can often be a TOP 5 cost center they preside over.

At most companies, freight cost reduction and associated business process management decisions are logically entrusted to the shipping or operations staff. This "gray area" of financial control is assumed to be objectively scrutinized by the shipping and purchasing departments who make the daily decisions over the costs generated on the movement of inbound, outbound, and drop shipments.


The expectation of the finance department is that the shipping/traffic department has the knowledge, initiative, objectivity and company interests in mind when spending hard earned dollars on transportation purchases. This assumption and lack of strict accountability and transparency over freight spending, can cost many companies dearly in unnecessary freight expense and administrative costs.

Of course, every company wants to achieve the optimum combination of best service at lowest cost, and these decisions are obviously made by the shipping and purchasing people based on the requirements at hand. At face value, it many not seem necessary for the financial manager to be involved in such operational issues, as they do not directly affect them.


However, a large and growing number of financial executives are interjecting themselves into the logistics and freight cost management business process. In particular, they want to insure that every effort is being made to maximize the overall corporate benefits that can be achieved by benchmarking this non core-competency, by engaging the services now available from logistics outsourcing firms.

The logistics cost center is too significant for controllers or CFOs to ignore. Many have found that they can easily secure tens and even hundreds of thousands of dollars in immediate cost savings by outsourcing routine logistics functions and by leveraging lower rates and fuel surcharges through group purchasing facilitated by a high quality logistics service partner.


Like every other major cost area within the company, CFOs, Controllers and senior financial managers are benchmarking this cost center and if benefits can confirmed, engaging reputable freight cost management services to significantly reduce freight costs, freight administration and payment functions. Companies can also secure enhanced expertise and technical resources to enhance controls over freight spending.


Financial managers often become aware of inefficiencies that may have been swept under the rug or ignored inadvertently without senior management visibility. Finance managers better understand opportunities that may be available by sharing logistics information and costs across the various enterprise departments (sales, marketing, customer service, purchasing) to achieve higher levels of profitability and sales with an increased understanding of how logistics costs effect each area.


For example, can your sales force, quote a complete price including shipping and a delivery date, or do they have to get back to the customer later? Does your marketing department understand the impact of different "free shipping" offers on average order size and associated shipping costs?

Finance managers should take the lead role in freight cost management because it is a major cost center and they have the objectivity and analytical skills necessary to insure that every cost reduction and business process improvement opportunity is investigated and implemented. They also have the authority to minimize cross departmental resistance to business process changes that can benefit the organization.

Also, in contrast to financial executives who routinely investigate solutions to reduce costs throughout the company, I have found (during 20 years selling 3PL services), that shipping and traffic mangers often dismiss the opportunity to discuss freight cost containment and business process outsourcing. They often will not even entertain an appointment with a solutions provider, even when ROI is significant and they know that other companies are benefiting from such outsourcing programs.

This is why business process outsourcing companies, who specialize in freight cost management, target controllers and CFO’s. Furthermore, it is common for the shipping staff to have strong personal relationships with their preferred trucking companies causing a loss of objectivity and incentive to investigate any other options for cost reduction or process improvement. It is not hard to make carrier relationships, rates and tariffs seem overly complicated in order to insulate themselves from accountability or questions from financial managers.

My experience over the past 20 years at a logistics outsourcing firm has confirmed that cross-departmental benefits, savings and process improvements are best understood and implemented by the financial management of a company. Controllers and CFOs understand the bottom line impact of both soft and hard savings that an outsourced business solution can offer.

The unique skills that financial executives routinely use to analyze and implement process improvements can be used in the transportation area, with great savings as the prize. Don't be scared off by the strange vocabulary and terms. A quality outsourcing firm can quide you through the process to improve your understanding of this major cost center and to identify opportunities.

TIM WALSH has worked in the transportation industry for over 25 years. For the last 20 years, as VP of Sales for Logistics Management, Inc., he has helped companies understand and more effectively manage their North American transportation needs. You can contact him at 908-879-2940 or by email at twalsh@lmiservices.com