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How do you handle interplant freight costs?

My company's interplant freight costs have ballooned in recent years, due in part to inefficient planning. About half of the cost is semi-finished products shipped to a different plant for completion. Others are raw materials resupplied to plants in need. The available data does not split the sources - truckloads are often mixed between the two. My question is.. 1. How do other companies treat this cost from an accounting perspective? Especially where segregation is not possible, is this included in raw material costs? As with inbound supplier freight.. 2. From a cost controlling perspective, how do other companies segregate this cost (i.e. separate cost center?) to ensure visibility and proper accountability, and to keep this separate from pure inbound supplier or outbound customer freight costs. Any advise or insight appreciated.


Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Couple of thoughts:
1. What aspects of planning are poor? - production scheduling at each plant? - bad purchasing of raw materials, i.e. sent to wrong plant? - failure to allocate sales orders to the correct plant in the first place? -
2. Are the plants set up optimally? - does customer proximity influence where an order can be produced? -can you run multiple shifts at each plant to handle extra demand without interplant transfers?
3. Does your company make use of S&OP processes to help manage demand and supply?

I think the operations need more help and attention than the accounting of freight. Address operations improvement and the interplant freight becomes a minnow:)

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Besides Len's excellent response, my feeling is that you capitalize the freight.

Rationale is that you are shipping the material as part of the manufacturing process, and as such it is part and parcel of the cost.


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