Beneficial Cargo Owners · 4 min read
Total landed cost, not freight rate: the decision most cargo owners get backwards
Awarding carriers and 3PLs on rate per unit feels disciplined. It often moves cost somewhere less visible.
ALKIMIUS ·
Freight tenders are designed to lower the rate. But rate is only one part of what a shipment costs the business. Service failures, expedited freight, extra safety stock and longer cash cycles rarely appear in the tender spreadsheet.
What total landed cost includes
- Freight, accessorials and fuel.
- Duties, tariffs and brokerage.
- Inventory carrying cost and safety stock driven by lead-time variability.
- Expedited freight and the cost of service failures.
- Working capital tied up in transit and in warehouses.
Why expedite is a symptom
When expedited freight rises, the instinct is to negotiate a better expedite rate. More often the cause is upstream: late purchase orders, unreliable suppliers or planning parameters that no longer fit demand.
How to award on total landed value
- Score carriers and 3PLs on cost, service, capacity, risk and integration together.
- Model award scenarios before negotiating, not after.
- Validate the change on one lane or region before a global rollout.
- Verify savings with finance after implementation, before they are reported.
The decision for you
Before your next tender, calculate landed cost for your top ten lanes. If the ranking of providers changes when you look beyond rate, your award criteria need to change too.