The short answer
Freight recovery is the share of your freight costs you bill back to customers. To measure it, match twelve months of carrier and delivery costs to the invoices they served, then divide freight billed by freight paid, by branch, customer, and order size. NAW reports that the average distributor recovers only about 70 percent of freight costs, while the best branches recover more than they spend, and that unrecovered freight can take 60 to 150 basis points off a 4 percent EBIT16.
Why freight leaks
Freight policies are usually written once and then bent one order at a time. A rep waives a delivery charge to save an account, a branch runs a free-shipping threshold set years ago, a drop-ship goes out with no charge because nobody knew what the carrier would bill. Each decision looks small. Together they can cost more than the business earns on some of the customers it is shipping to.
The stakes have grown. NAW puts inbound, outbound, and drop-ship freight at 2 to 5 percent of revenue historically for a typical distributor, and expects that range to reach 4 to 10 percent16. When freight doubles and the recovery policy stays the same, the leak doubles with it.
Build the recovery rate from records you already keep
You need two sources that rarely sit in the same place: what you paid to move goods, and what you billed for it.
- Carrier invoices and your own delivery costs, including fleet, drivers, and fuel, for twelve to twenty-four months.
- Invoice lines with any freight or delivery charge, plus order value, customer, branch, ship method, and the rep on the order.
- Your written freight policy and any free-freight thresholds, by branch if they differ.
Match costs to orders as closely as the data allows. Where a truck carried many orders, allocate its cost by weight, stops, or order count. Perfect allocation is not the goal. A consistent one is.
Three cuts show where it leaks
By branch
By order size
By who waived it
Specimen · illustrative figures
A $90M distributor with five branches paid $4.3M for freight and billed $2.8M, a 65 percent recovery rate. Its best branch recovered 88 percent. Orders under $250 carried 31 percent of freight cost and 6 percent of revenue. Bringing the other four branches halfway to the best one was worth an estimated $450K to $650K a year.
Write the hunch down first
Ask operations and sales to write down what they think the recovery rate is before anyone runs the match. Most guess well above the real number. The gap becomes the reason to act, and writing it down first keeps anyone from deciding afterward that they knew it all along9.
What to change
Start with the free-freight threshold, because it is one number that affects every small order. Then give reps a visible freight estimate on the quote so a waiver becomes a choice rather than a default. Last, let a branch’s recovery rate show up in its results. Test each change in one or two branches against the others, with a stop condition agreed in advance, and watch order counts as closely as margin so you know the fix is not costing you customers.
Sources
- 16National Association of Wholesaler-Distributors, “The Growing Impact of Freight Recovery,” Intelligent Sales and Profit Acceleration series, 2021, updated August 2026.
- 9Fischhoff, B. (1975). Hindsight ≠ foresight. Journal of Experimental Psychology: Human Perception and Performance, 1(3), 288–299.
Market figures describe the landscape and are not Modven results.