Recently I noticed a posting on LinkedIn from Parspec regarding electrical distributors and freight costs. Given diesel fuel costs over the past six months, it’s expected that freight costs would be going up. Every distributor knows that there is a percentage of freight costs that is never recovered from their customers. The list of “why” is many.

Parspec has a unique vantage point as it facilitates quotations for many electrical distributors, albeit mostly lighting, so the insights that they shared, most likely, are only the tip of the iceberg. Your exposure could be much worse.

Here’s a synopsis of their findings. For the full report, with much more detail, click here.

Impact of Rising Freight Costs on Electrical Distributors

For electrical distributors, managing logistics expenses has become an escalating tightrope walk. Recent quoting data analyzed by Parspec highlights a critical industry blind spot: transportation costs are surging, yet many businesses lack the granular visibility needed to protect their bottom lines.

Understanding what contemporary quoting data reveals—and implementing systematic safeguards—is essential for maintaining gross margins in an increasingly volatile freight market.

What Parspec’s Quoting Data Reveals About Rising Freight Costs

An analysis of electrical distributor quotes generated via Parspec uncovers several structural patterns regarding how freight expenses interact with project pricing:

• +36% Surge in Median Flat Freight Charges: Flat freight charges jumped significantly from a historical median of $508–$550 early in the year to $750 by late September—a steep $200 to $242 increase per quote carrying itemized delivery fees.
• Fewer than 1 in 10 Quotes Itemize Freight: Only about 7.2% of quotes feature freight as a distinct line item (rising slightly from ~6.4% in prior periods). While contractors often request a single bundled material price, this lack of visibility masks underlying margin erosion if freight costs are lumped into material estimates without precise internal tracking.
• Disproportionate Impact on Small Orders: For quotes under $5,000, itemized freight accounts for a median of ~10% of the total quote value. Conversely, on mega-projects exceeding $500,000, freight drops to less than 0.5%.

Why Freight Slips Through the Cracks

Accounting for freight from the initial quote stage down to final invoicing is inherently complex due to several overlapping operational factors:

1. Multi-Manufacturer Complexity

A single electrical project frequently incorporates materials from a dozen different manufacturers. Each vendor enforces distinct freight allowances, minimum order quantities (MOQs), and rules for oversized materials. One manufacturer might offer prepaid freight on orders above $10,000, while another charges a percentage-based rate or applies flat surcharges for bulky conduit and gear.

2. Order-Level vs. Project-Level Eligibility

Freight eligibility is determined at the individual manufacturer order level, not by the cumulative project value.

A Real-World Example:

Consider a $75,000 overall project quote that includes $9,700 in material from a manufacturer with a $10,000 prepaid freight threshold.

• Even though the total bid is large ($75,000), that specific $9,700 manufacturer order falls short of its threshold and incurs a $500 freight fee.
• While $500 is less than 1% of the total project value, it represents more than 5% of that specific $9,700 line item.
• If estimators overlook this sub-threshold order, that $500 directly cannibalizes the distributor’s expected net product margin.

3. Post-Award Order Splitting

Initial quotes rarely remain static. Quantities shift after job awards, product substitutions occur, and contractors release materials in separate phases. An order that cleared its prepaid threshold during the initial quote phase can easily fall below the threshold once divided into multiple smaller purchase orders during fulfillment.

3 Ways to Protect Margins

To prevent logistics expenses from eating away at profitability, distributors should adopt three operational practices:

1. Apply Manufacturer Freight Terms and Thresholds Consistently

Stop relying on memory or disconnected spreadsheets. Maintain a centralized, up-to-date digital database of every manufacturer’s specific freight terms (including prepay-and-add, freight collect, percentage charges, and MOQ rules).

• Automated BOM Evaluation: Evaluate allowance eligibility automatically as estimators build bills of materials (BOMs).
• Continuous Rechecking: Recheck freight eligibility every time a purchase order is officially released to ensure initial assumptions do not quietly break down during fulfillment.

2. Differentiate Policies by Order Size

Because freight represents roughly 10% of small orders compared to a fraction of a percent on massive projects, broad-brush freight policies fail. Establish stricter controls, mandatory minimum charges, and transparent cost-recovery protocols for smaller orders to ensure unexpected transit spikes do not wipe out project contributions.

3. Leverage Automation and Integrated Platforms

Manual tracking leaves too much room for human error. Utilizing an AI-native platform like Parspec allows teams to store vendor-specific terms, automatically surface freight thresholds during quoting, and track how close an order is to missing a prepaid allowance. Internal tracking ensures that even if a customer receives a bundled price, your team maintains precise visibility into the exact logistics costs built into the estimate.

And maybe there should be a fourth … make sure you check all rep / lighting agent quotes to make sure that they either have added the freight costs or, at the list, mention what each manufacturer’s freight cost is if there are multiple manufacturers on the quote.

While freight costs may get mitigated when you place the order with the factory, especially if you combine the order with other material needs, if this is a project and the order is placed alone, you may incur a separate charge.

Also, advise your staff if you have special / preferred freight terms with the supplier, especially if it is part of your rebate program or “preferred” status with the manufacturer. Branches of national chains should check in their portal or with corporate; members of AD should do the same.

And the challenge in lighting is that, with so many “small / independent,” manufacturers there may be few “programs” as well as poor documentation (and you may have infrequent usage / knowledge of the line.)

Final Thoughts on Freight from Parspec

As transportation and fuel volatility continue to pressure industrial supply chains, treating freight as a passive expense is no longer viable. By combining granular quote-stage visibility with automated threshold tracking, electrical distributors can safeguard their hard-earned margins on every project they bid.

To learn more about optimizing quotation workflows and quoting accuracy, visit Parspec.

Thoughts

5 freight / freight recovery questions to ask your team:

1. What are we / should we be doing to mitigate the impact of freight increases on our bottom line?
2. Are we recouping / billing customers as much as we can?
3. What percentage of our quotes include a freight estimate? Or at least a disclaimer that we will rebill freight costs?
   1. Are we getting freight quotes from our suppliers? Are we using their suppliers or ours? (yes, sometimes this is an option.)
4. Since FedEx, UPS and now USPS are instituting freight surcharges, should we? Do we know what are competition is doing?
5. Do we have “preferred” programs with our carriers? Who is monitoring this to ensure our programs are competitive?

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