Poor freight planning can throw off your production targets, increase labor inefficiencies, and even lead to penalties if you fail to deliver on time.
What Happens When You Don’t Plan Freight in Your Production Timelines?
Freight in production helps lower costs by ensuring that raw materials are delivered when needed. It also keeps finished products moving on time that prevents delays in delivery. By managing freight well, you can maintain the right inventory levels and stay on track with your production schedules.
But what happens when freight isn’t planned properly?
Find out in this blog.
KEY TAKEAWAYS
- Freight-in is not a shipping fee but an important part of your material costs. Ignoring it can lead to underestimating true production expenses and poor pricing decisions.
- In the context of accounting, freight directly raises inventory value and Cost of Goods Sold (COGS). Poor planning creates inaccurate financial statements reporting, unexpected expenses, and cash flow problems.
- Delays, rushed shipping, and higher costs are the hidden risks of ignoring freight planning. These issues significantly effect efficiency, profitability, and customer trust.
- Late shipments leads to missed deadlines, supply chain disruptions, and strained business relationships—costing you revenue and reputation.
- Partnering with a cargo shipping company ensures reliable freight-in and freight-out coordination, reducing delays and securing smoother supply chain performance.
What is Freight-in? (and Why it Matters)
In simple terms, freight-in is the transportation costs for goods you purchase and bring to your company. Think of freight-in as the hidden price tag attached to every raw material you buy. Compared to general shipping or delivery fees, freight-in specifically applies to materials or products you’re buying, not what you’re selling.
Freight in Manufacturing
In manufacturing, freight in refers to the cost of transporting raw materials and goods into your facility.
Think of it this way: if you’re buying materials from a supplier in Cebu and having them shipped to your factory in Manila, that shipping fee isn’t just a side cost, it’s part of the total cost of your materials.
Why does it matter? Because if you ignore freight-in while calculating costs, you’re underestimating the true expense of your raw materials. And in manufacturing, even a small miscalculation can add up quickly across hundreds of thousands of units.
Freight’s Direct Role in Production Scheduling and Inventory
In these aspects, freight is responsible for ensuring a smooth movement of products along the supply chain. This includes managing proper process flow, delivery timing, and proper costs of raw materials and finished goods.
Freight essentially serves as the “link” that connects manufacturers with their suppliers and customers.
An Example of Freight-in: Material Cost Calculations for a Welding Company
To have a better understanding, consider this example scenario of a local welding company that makes bedding frames.
The company plans to produce 50 steel bedframes, each intended to sell for PHP 35,000. To make these bedframes, the company needs 100 steel bars, which they purchase from a supplier in Cebu at PHP 20,000 per bar. The supplier also charges PHP 45,000 for cargo shipping cost from Cebu to Manila.
Despite the relatively straightforward purchase, the total shipping costs ended up being almost as high as the selling price.
Breakdown of Costs (Freight-in and Production)
| Cost Component | Description | Amount (PHP) |
|---|---|---|
| Steel Bars | 100 × PHP 20,000 | PHP 2,000,000 |
| Trucking (Cebu port to Manila) | Transportation cost | PHP 25,000 |
| Loading and handling fees | Labor and equipment at ports | PHP 15,000 |
| Insurance | Shipment coverage | PHP 2,000 |
| Miscellaneous | Fuel, tolls, admin fees | PHP 3,000 |
Total Freight-in Cost: PHP 2,045,000
What Your Competitors Know About Freight that You Don’t
Learn in this blog the eight powerful freight management strategies that your competitors know to stay ahead in the market.
READ MOREHow Freight Impacts Inventory and Costs of Business
Freight costs affect the increase (or decrease) of inventory expenses and the Cost of Goods Sold (COGS) once the items are sold. This practice, called capitalization, ensures that the inventory value includes all costs incurred to deliver the items.
If not properly planned, your business may face the following challenges:
inaccurate cost reporting
unexpected expenses
cash flow issues
Now, let’s revisit the freight costs of the welding company:
Revenue and Profit Analysis
- Revenue from Bedframes: 50 × PHP 35,000 = PHP 1,750,000
- Production Cost: PHP 2,040,000
- Profit: Revenue − Production Cost = PHP −290,000
As shown, the production cost exceeds the overall profit. A major factor contributing to this is the freight-in fee, which, when reviewed, is even higher than the selling price of the item once all costs are accounted for. Because of this, the company must increase its prices to generate profit and avoid losses.
| Freight-in fee | Selling price |
|---|---|
| PHP 45, 000 | PHP 35,000 |
Clearly, the company is operating at a loss because the total freight-in costs and production expenses exceeded the profit from selling the bedframes.
What Happens to Your Business When You Don’t Properly Plan Your Freight?
Not planning your freight properly can lead to delays in the arrival of raw materials needed for production. This often causes downtime on the manufacturing floor. And if the freight process is neglected, your business may face higher costs due to last-minute or rushed cargo shipping.
In addition, transporting products during emergencies becomes more difficult and inefficient. The manufacturing industry and e-commerce business owners are often the most affected by unplanned freight.
Customer dissatisfaction caused by shipping delays
According to a 2023 case study conducted by the International Journal of Business, Law, and Education (IJBLE), consistent late deliveries commonly lead to customer dissatisfaction and declining sales revenue. This results in significant losses in customer loyalty and damages brand reputation, which can eventually have a major impact on a company’s profit margins.
The Risks of Ignoring Freight in Production Timelines
Freight planning is an important part of manufacturing operations. Ignoring it can often lead to serious production and business consequences
Delays in freight delivery can cause missed deadlines, leading to contractual penalties and unhappy clients.
Poor freight planning can result in stockouts or overstock, halting production or tying up capital unnecessarily.
Late or rushed shipments strain client relationships. This affects trust and future business opportunities.
Using the welding company scenario, let’s look at how freight in affects the production schedule.
Suppose the supplier shipped late. Instead of arriving in Manila on Monday, the steel bars arrive on Friday. That one delay pushes back their entire production timeline. Suddenly, their skilled welders are on standby, welding machines are idle, and their delivery to customers are at risk.
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START YOUR SHIPMENTFreight In vs Freight Out: Why the Distinction Matters in Planning
Freight in is the movement of materials from a supplier to a factory. Delays here directly affect the process of production and expense. Freight out on the other hand, moves the finished goods to a customer. Delays here can impact delivery commitment and customer satisfaction.
Take a look at this table and examine it closely to better understand their differences.
| Aspect | Freight In | Freight Out |
|---|---|---|
| Definition | Cost of transporting raw materials in the production line | Cost of delivering products to customers |
| Accounting Treatment | Added inventory value | Treated as a selling expense |
| Impact | Production costs and inventory valuation | Product pricing and profit margin |
Importance of Understanding the Difference Between Freight In and Freight Out
If freight in isn’t properly planned, your freight out commitments can fail, resulting in penalties, missed deadlines, and lost revenue. Properly distinguishing and managing both ensures smoother operations and a reliable supply chain.
Is Freight-In an Asset or an Expense? (How It Affects Production Planning)
The answer is: both (depending on timing)
- At purchase: Freight in is treated as part of inventory, which is an asset.
- When items are sold: Freight in becomes part of the cost of goods sold (COGS), which is an expense.
In accounting, freight-in is considered an asset because it becomes part of the inventory cost. These costs stay on the balance sheet until the goods are sold, at which point they move into COGS. However, poor planning can turn this asset into a financial strain.
Unexpected or unbudgeted freight charges increase overall expenses, reduce profit margins, and may even distort your company’s financial reporting.
This distinction matters because mismanaging freight in can lead to incorrect financial reporting. Over time, that could cause budgeting errors, poor pricing decisions, or even compliance issues.
How Logicore Express Helps Improve Your Production Timeline with Robust Freight Planning
Every missed shipment or delayed delivery can set back your entire production schedule. This leads to lost revenue, wasted resources, and unsatisfied customers.
But you don’t have to let poor freight planning delay your production
With Logicore Express, you gain a cargo shipping partner that ensures your products will be delivered on time. We have streamlined shipping routes, so the movement of your goods won’t be interrupted.
From freight-in coordination that keeps your raw materials in good condition, to freight-out solutions that guarantee timely delivery to your clients. Here at Logicore Express, we cover every detail of your supply chain!
Conclusion
Freight planning is not just a back-office task but an important factor that directly influences production timelines, costs, and customer satisfaction. Ignoring the importance of freight-in can lead to delays, increased expenses, and inefficiencies that weaken your business’ competitiveness.
To stay ahead, make sure that you embrace proactive freight management in your production process. It could be in the form of using logistics planning tools or partnering with an experienced inter-island cargo shipping company like Logicore Express.
Keep in mind that having the right freight strategy in place, you can effectively streamline your supply chain, improve production flow, and secure stronger profit margins.
Let Logicore Express Help You with Your Freight Planning
As a trusted cargo shipping company in the Philippines, we specialize in freight management solutions that keep your supply chain running smoothly. From sourcing to delivery, our team ensures your raw materials arrive on time, so you can focus more on production, and less in shipping delays.
Don’t let poor freight planning derail your production timeline.
Explore our freight services and see how Logicore Express can streamline your operations today.
