Key points
- Expediting costs more than the freight invoice. Add overtime, rework and customer credits to see the real figure.
- Most expediting comes from a short list of suppliers and items. A 30-day log is enough to find them.
- A monthly expediting report and a supplier delivery scorecard turn firefighting into planning.
What expediting really costs
When a late order is rushed, the visible cost is usually the premium freight. The full cost also includes the overtime needed to pack and receive the order, the rework of a schedule that was already set, and any credit or penalty owed to the customer. Margin on the delayed order is often reduced too.
Because these costs land in different places, expediting is rarely reported as one number. That is why it so often looks like a cost of doing business rather than a failure to plan.
A worked example (illustrative numbers)
Suppose an order of 200 units earns a gross margin of $8,000. It was due on standard freight costing $600, but it arrives late and is sent by air for $2,400.
| Extra cost | Amount |
|---|---|
| Premium freight ($2,400 less the $600 standard cost) | $1,800 |
| Overtime to pack and receive out of schedule | $300 |
| Late-delivery credit to the customer | $500 |
| Total extra cost | $2,600 |
In this example, the extra cost equals about a third of the order's margin. If this happens a few times a month, the expediting bill can quietly outweigh the savings the purchasing team was chasing when it chose a cheaper supplier.
Find the pattern in 30 days
Log every expedite for one month. For each one, record the date, the item, the supplier, the stated reason and the cost. Then sort by cost and by frequency. Most businesses find that a small number of suppliers and items account for most of the spend. The reasons are often predictable: a lead time that is out of date, a purchase order placed late, a partial shipment that was not flagged, or a supplier that has been slipping for months.
Fix the cause, not the symptom
- Reset lead times from actual data. Reorder points based on a lead time from two years ago will keep generating emergencies.
- Track on-time, in-full delivery by supplier. A monthly scorecard gives purchasing something to discuss with suppliers besides price.
- Review slips early. A supplier warning of a delay three days out is far cheaper to handle than the same delay found on the day it was due.
- Set an expediting approval rule. Expedites should need a named approver and a reason code. Approval makes the cost visible, and visibility changes behaviour.
The aim is not to eliminate every rush order. It is to know what each one costs, and to make the recurring ones rare. Our Supply product is built to flag supplier delivery slips early, so the team can act before a delay becomes an expedite.