In an effort to reduce transportation costs and improve product availability, industry observers report, retail consignees are increasingly opting to receive shipments "freight collect," where the buyer pays the freight charges on delivery, rather than "shipper prepaid," where the shipper pays the tab up front.

Consignees are employing this strategy in two ways, says Mathew Menner, director of transportation sales for Atlanta-based software vendor Manhattan Associates. First, retailers are using freight collect to take greater advantage of their transportation purchasing power. And second, they are making more effective use of their in-house or dedicated fleets to fill backhauls.

Retailers believe they must control transportation if they're to rein in costs. "You can't manage what you don't control," says Adrian Gonzalez of Dedham, Mass.-based ARC Advisory Group, a consulting and market research firm.

Experts recommend that consignees conduct a transportation network analysis to evaluate whether they would benefit from switching to freight collect. That entails determining the cost of moving products over specific traffic lanes to calculate whether it's feasible and cost-effective to piggyback inbound shipments on backhauls. The consignee also must determine whether it's cheaper to go prepaid, taking advantage of the manufacturer's volume discounts, or take delivery collect using its own carrier.

To conduct that analysis, consignees need to ask manufacturers to share their transportation cost data—a request generally met with reluctance. That's because the producer must unbundle the product sale price and break out transportation costs, which may include some margin. "That's the part that has always been hidden," Gonzalez says.

Recently, though, some large retailers, such as the Hannaford Brothers supermarket chain in Portland, Me., JCPenney, and Rite Aid, have convinced some suppliers to provide transportation costing data, Gonzalez notes.

Those suppliers have agreed to share transportation costs because doing so strengthens the ties between customer and vendor, making the retail consignee more competitive and ultimately a more viable and loyal customer, Gonzalez says.

It also facilitates sharing of supply chain data, which helps both the manufacturer and the retailer. If the manufacturer can better plan production, the retailer has a shot at avoiding the average 4-percent loss of sales incurred due to stock-outs and delays. Research has shown that when a desired product is not on the shelf, the customer often walks out of the store empty-handed.