Almanac · 10 · Money · essay
Profit accelerator
Rob Balawender · Editor
A saving you keep is margin. A saving you give away — or cannot defend — is not.
Say it in plain terms. A saving you keep is margin. A saving you give away to win a deal is a gift. A saving you cannot defend — a surprise accessorial on a bill, a markup with no audit behind it — is not a saving at all.
Most freight programs brag about cost-out and then hand the dollar to the customer, the channel, or a sloppy price list. Finance never sees it. Sales uses it to close. The program looks busy and the P&L does not move.
A profit accelerator is a deliberate way to turn a transportation improvement into money the company can keep: recover freight on the invoice when you can defend it, price it as a fee or a percent, stop giving away service that has a cost. It is not a trick on the customer. It is refusing to treat freight as a rounding error.
What this needs: freight cost known at ship time, not three weeks later. A rule for when freight is in the product price, on the invoice, or in the margin. A report that shows recovery next to actual, so someone can be wrong in public.
Picture this
Where a “saving” goes
The CFO question is simple: of last quarter’s freight “savings,” what hit EBITDA, and what evaporated in price? If the answer is a shrug, you do not have a savings program. You have a hobby.
See also: Conversion of savings to margin · Cost savings
When you want that number on your own books: the diagnostic.
Working on this? Elite Logistics, our alliance partner →