Almanac · 04
Inbound terms
Prepaid is not free. PPA is often a more expensive collect.
Inbound freight is where purchasing and transportation stop speaking. Vendor ships prepaid and buries it in the piece price. Or you take a prepaid-and-add allowance that is larger than the actual collect rate. Either way, the company thinks it does not spend much on inbound.
Prepaid — vendor controls the carrier and the markup. You see a unit cost. You do not see freight. Collect — you control the carrier and the rate. You see freight. You can allocate it. PPA — the vendor pays, then adds freight back. If the add-back beats a decent collect rate, you are funding their transportation department.
Pull a sample of inbound and ask for the allowance or the buried freight, not the story. Rate those shipments as if you had collected them. Where the allowance is richer than the collect, change the term. Where prepaid is a black box, you do not have landed cost.
Picture this
Who is actually paying inbound
Purchasing will hear this as an attack on their unit price. It is not. It is the only way their unit price is true. Show them one vendor, in dollars, and let them keep the win.