The Hidden Cost of Unmanaged Freight in Mid-Market Companies
- Christopher Nadeau
- Jun 3
- 5 min read
Updated: 13 hours ago
What recovering those costs is worth to EBITDA during the hold period.
Freight invoices often go unaudited in mid-market manufacturing companies, allowing costs to compound quietly over time.
TL;DR
Freight spend in mid-market manufacturing and distribution companies is almost never managed as a dedicated budget line. It gets absorbed into cost of goods and compounds over time. For operating partners looking for value creation levers during the hold period, it's consistently overlooked. This blog breaks down where the money goes, why it stays hidden, and what one PE-owned manufacturer found when they finally looked: $6.1 million in freight costs they didn't know they were paying.
Mid-market manufacturers and distributors typically spend between 6 and 10% of revenue on freight. Take a portfolio company doing $50 million in revenue that spends 8% of that on shipping. That's a $4 million freight line. Haversack client data shows active freight management recovers 15 to 25% of total spend. At a 7x exit multiple, that recovery is worth $4.2 to $7 million in added enterprise value.
That value already exists — unmanaged freight in PE portfolio companies is almost always higher than it needs to be.
Where Do Freight Costs Hide in PE Portfolio Companies?
There are four places where freight costs build up inside a mid-market company.
1. Fees on shipping invoices that never get reviewed.
Carriers add charges to every invoice for things like fuel, delivery location type, and equipment used at pickup. These often auto-process. For a company with $3 to $5 million in annual freight spend, those unchecked fees can add up to $200,000 to $400,000 a year, some of which is disputable or recoverable with a basic audit.
2. Carrier rates that renew on autopilot.
Contracts with shipping carriers tend to roll over each year at whatever the carrier proposes. A company might be paying rates from five or six years ago with annual increases stacked on top without ever benchmarking it against the market or seeing if better terms are available.
3. Shipping methods that were set up once and never revisited.
How a company chooses to move freight — by truck, by air, individually or consolidated — gets configured early and rarely questioned. That default can cost 30% more than a better approach would, but because it's always been done that way, no one looks at it.
4. Invoices that go straight to payment.
Freight bills get matched to an order and paid. Errors, duplicate charges, and carrier billing mistakes, which show up on an estimated 4 to 8% of invoices, clear through to accounting without anyone reviewing them.
The Structural Reason Nobody Owns This Cost
In a company making $50 to $200 million in revenue, freight typically doesn't have a dedicated owner. It gets handled by whoever is closest to the problem at any given moment. Nobody is accountable for the total cost or the trend.
This is structural, not a reflection of how well the company is run otherwise. At this revenue band, companies have outgrown the stage where a founder is managing every vendor relationship personally but haven't reached the size where a dedicated freight manager is a natural hire. The function fills in around the edges of other people's jobs, and the costs grow quietly.
What $9.4M in Recovered Freight Looks Like
Haversack, an insource logistics management solution for PE-backed mid-market companies, documented this pattern across multiple portfolio engagements. A PE-owned cellulose insulation manufacturer found $6.1 million in freight costs they didn't know they were paying. It didn't appear as a freight line anywhere. It was absorbed into the cost of making and shipping products, and was invisible on the P&L.
Before engagement, freight was managed entirely in-house with no Transportation Management System (TMS). Carriers set prices with no competitive benchmarking, quotes came in by phone and email, and invoices were never audited. Furthermore, shipment sizes weren't standardized, which inflated costs on every outbound order.
Using Haversack's insource logistics model, the manufacturer then benchmarked carrier rates competitively, implemented a structured invoice audit process, and standardized shipment consolidation across all outbound freight.
Three years later, the total recovery came to $9.4 million. At an 8x exit multiple, that recoverable EBITDA equals $75.2 million in enterprise value.
Why the Hold Period is the Window to Fix Unmanaged Freight
Documented results need time to accumulate, and buyers want to see a trend, not a project that just finished.
A portfolio company that enters a sale with three years of documented freight savings, benchmarked carrier rates, and a clean audit history tells a different story to buyers than one that doesn't. It signals operational discipline. That gets reflected in how buyers underwrite the business and, ultimately, in the multiple.
Freight won't make or break a deal on its own. But as a value creation lever, it's one of the more consistent ones available across a mid-market portfolio. It's also relatively fast to implement and directly visible in EBITDA.
FAQs
How much freight spend is typically recoverable in a PE-owned manufacturer?
Active freight management typically recovers 15 to 25% of total freight spend. For a portfolio company with $4 million in annual freight costs, that's $600,000 to $1 million per year. At a 7x exit multiple, that recovery translates to $4.2 to $7 million in added enterprise value.
Why don't mid-market companies manage freight costs on their own?
At the $50 to $200 million revenue band, freight rarely has a dedicated owner. The function gets distributed across operations coordinators, warehouse managers, and finance staff. The costs accumulate because no single person is accountable for the total number.
What does an unaudited freight invoice cost a portfolio company?
Industry estimates suggest billing errors, duplicate charges, and carrier overcharges appear on 4 to 8% of freight invoices. For a company with $3 to $5 million in annual freight spend, that means up to $400,000 in recoverable charges processes without review each year.
How quickly can freight improvements show up in EBITDA?
Some recoveries, particularly invoice audits and carrier rate renegotiations, can begin producing results within the first 90 days. Building a multi-year track record that is visible and credible to buyers takes longer, which is why addressing freight early in the hold period matters.
How do I know if a portfolio company has an unmanaged freight problem?
Benchmark freight spend as a percentage of revenue against industry comparables. A company running 8 to 10% with no dedicated freight management function, no evidence of carrier contract renegotiation, and no invoice audit process has the pattern.
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