Answer extracted from The FreightFA Brief Podcast — listen to the full episode below.
How should CFOs distinguish between legitimate cost increases and billing leakage in freight expenses?
Legitimate cost increases—such as correctly billed tariffs and carrier rate hikes—are not leakage; they are simply higher costs to do business. Real leakage appears as missed billings, improperly applied charges, and inefficient routing, often disguised when multiple cost pressures hit simultaneously. CFOs must audit shipment profiles, routing efficiency, and actual carrier pricing to identify where leakage truly occurs.
The core confusion stems from timing. When tariffs rise, inflation climbs, and carrier prices increase all at once, CFOs face a perfect storm that masks billing errors. A 15% increase in freight costs might appear inevitable—when in reality, half of that could be undetected leakage.
Leakage takes specific forms. Warehouses that fail to measure and weigh items correctly cause shippers to be billed at higher rates than what appears on the manifest. As Oliver Najumi explains in the episode, this is where forensic-level auditing becomes essential. Incorrect dimensional weight classifications, missing surcharges that should have been applied to the bill (but weren't), and suboptimal routing all create cost leakage that compounds over time.
The three hidden sources of leakage
Missed billings occur when carriers fail to charge for services rendered—a benefit in the short term, but often a sign that your billing data is unreliable. More commonly, improperly applied charges show up when accessorial surcharges are applied inconsistently or when dimensional weight thresholds change without your routing strategy adjusting. Inefficient routing happens when shippers don't diversify carriers or don't consolidate shipments when it makes economic sense.
A practical example: if one customer's accessorial costs jumped $200,000 annually when weight and dimension thresholds changed, that shift alone can mask deeper issues in how shipments are being classified. The episode details how ICC Logistics processes roughly $9 billion per year of shipping cost transactional data, allowing them to spot patterns that individual shippers cannot detect alone.
The real risk emerges when you accept blanket cost increases without questioning their composition. If inflation is 3% but shipping jumps 15%, the difference isn't all legitimate—some portion is leakage buried in tariff confusion, billing errors, and miscalculation.
"There is no Bloomberg for freight, so it teaches you to be forensic in how you audit shipping operations."
Oliver Najumi — Executive Vice President, ICC Logistics. Najumi has led ICC Logistics' freight auditing practice since April 2014, working directly with CFOs and supply chain leaders to uncover hidden costs and optimization opportunities. He describes himself as a data-driven professional who leverages ICC's nearly 50-year track record of acting as an impartial extension of logistics teams, forensically auditing everything from service levels to rate competitiveness and supply chain execution efficiency.
One striking detail from the episode: Oliver Najumi shares how a $5 million UPS shipper customer saved $1.6 million annually—a 50% reduction—by moving just 30% of low-weight volume to an alternative carrier, revealing just how much leakage can hide in carrier concentration and suboptimal routing decisions.
How to audit your way to clarity
The auditing process starts with your data. Pull a representative sample of shipments over the past three months and cross-reference manifest weights against billed weights. Any gap signals either data quality issues or billing errors—both forms of leakage that compound monthly.
Next, analyze your routing strategy. Are all your small packages going through one carrier? Are you consolidating shipments efficiently? A simple carrier diversification test—moving 10–20% of volume to an alternative carrier and comparing rates—often reveals that your primary carrier's pricing has drifted upward without justification.
Finally, validate your accessorial charges. Review the last 12 months of invoices and categorize every surcharge: dimensional weight, oversized, hazmat, residential delivery, Saturday delivery, and so on. The podcast details how one furniture customer discovered that 47% of their $400,000 annual shipping spend came from accessorial charges alone—a red flag that routing and dimensional strategy needed urgent revision.
See also
What are accessorial charges and how dramatically can they impact total shipping costs?
Accessorials are surcharges applied to freight and other shipping components. In small package shipping, they can be far more impactful than base rates, with some charges increasing over 500% in a single decade.
How can companies validate tariff classifications to avoid unnecessary cost penalties?
Companies must ensure their HTS codes are properly classified and that all descriptions and labeling are in good order, as tariffs can become significantly more expensive when incorrect classifications are used.
Why do shipping cost increases consistently outpace inflation rates year over year?
Shipping rates increase at a much higher rate than inflation, averaging 6% per year across the board. Even when overall inflation is low, shipping costs consistently rise due to carrier capacity constraints and market dynamics.
Key takeaways
- Legitimate cost increases (tariffs, carrier rate hikes) are not leakage—real leakage hides in missed billings, improper charges, and inefficient routing.
- Leakage often stems from incorrect dimensional weight classification, warehouses that fail to measure items properly, and inconsistent application of accessorial surcharges.
- Audit your shipment manifest data monthly—any gap between manifest weight and billed weight signals data quality issues or billing errors that compound over time.
- Test carrier diversification: moving even 10–20% of volume to alternative carriers often reveals that primary carrier pricing has drifted upward without justification.
- When tariffs, inflation, and carrier prices all rise simultaneously, accept only 3–6% increases without forensic audit; anything higher likely contains hidden leakage.