If you’re in any kind of inventory-related business it probably feels like the supply chain cost hits just keep coming. First tariffs, now freight. It’s like a game of supply chain cost roulette.
Gas is up a whopping 28.4% YoY as of April 2026 and CPI came in at 3.8% for April, the highest in nearly three years.
The U.S. Bank freight payment index, (tracking shipment spending and the number of shipments) saw freight costs increase 12.9 percent during Q1 2026 compared to Q4 2025.
If you’re in manufacturing, wholesale distribution, or ecommerce, I probably don’t need to tell you, because you’re already feeling it. What’s worth drilling into is where it’s hitting your business. Fuel doesn’t just show up as one line item on your P&L. It often shows up in five or six places.
But it’s not just freight. It’s everything downstream from freight.
The obvious place fuel costs land is inbound and outbound freight. Your carrier rates go up, your 3PL surcharges kick in, your last-mile costs spike.
What’s harder to see: fuel is embedded in almost every step of your supply chain. Your supplier’s manufacturing and transportation costs go up, so their price to you goes up. Sometimes this looks like a “material cost adjustment” buried in an updated quote. Your warehouse’s operating costs go up. And if you’re moving product internationally, air freight, which was already expensive, just got 20% more expensive year-over-year according to the latest CPI data.
The “double squeeze” economists are describing for consumers, acute pain from gas prices plus slow creep in everything else, is the same squeeze your supply chain is running right now. It’s just less visible because it’s spread across dozens of invoices.
Freight and your supply chain costs
The double squeeze of freight and inflation on your supply chain costs:
A business that was running 38% gross margin a year ago might be running 31% today, because landed costs crept up across six cost categories while prices stayed flat. If that business grew revenue 10% over the same period, they probably even feel fine. The number at the top of the P&L went up.
But.
This is where the landed cost conversation becomes non-negotiable. Landed cost isn’t just what you paid the supplier. It’s freight in, fuel surcharges, insurance, customs fees, port delays that turned into detention charges, and increasingly, the cost of sourcing from a supplier two time zones farther away because your original one got complicated.
If your ERP isn’t tracking landed cost at the SKU level, not just the product cost, but the full loaded cost to get that unit to your warehouse, your margins are probably off. Full stop. You might be profitable on paper and losing money on your top-selling SKU.
It happens more than people want to admit.
5 ways to tackle supply chain freight issues:
1). Freight contracts.
Most carrier contracts have fuel surcharge provisions. Do you know what yours say? At $107+ crude, those provisions may be triggering clauses you haven’t looked at since you signed. Pull them.
2). Landed cost allocations in your ERP.
If you’re in NetSuite or a comparable system and landed cost isn’t flowing through to the item level (down to the component level if you’re a manufacturer using NetSuite) you’re making pricing and/or sourcing decisions with incomplete information. This is fixable, but it requires someone who knows how the system is actually configured, not just how it was set up out of the box.
3). Get ahead of supplier pricing.
Some suppliers absorb cost increases until they can’t, then send you a new price list with 30 days notice. Others may be building it into quotes right now without calling attention to it. If you haven’t had a direct conversation with your top 5 suppliers about their cost exposure in the last 60 days, that conversation is overdue.
4). Your own pricing.
This is the one most owners are slowest to act on. Input costs are up. Freight is up. If your prices haven’t moved, you’re funding the gap out of margin. (See also: our last issue on the cost of delaying a price increase.)
5). Alternative sourcing by region.
With Strait of Hormuz restrictions affecting roughly a fifth of global oil supply, the cost gap between suppliers in different regions is shifting. A supplier in Vietnam or Mexico that looked 8% more expensive on product cost six months ago may look different when you run total landed cost today. Worth modeling.
A competitive advantage: Businesses that come out ahead
This could be seen as an opportunity: for businesses that know their numbers well enough to move strategically.
If your landed cost visibility is better than your competitor’s, you can price more precisely. If your competitor got hit harder by fuel surcharges because of their sourcing geography, your cost structure might actually be more competitive right now even if their catalog prices haven’t moved yet. The business that can say “we know our exact margin on every SKU at current fuel prices” has a meaningful advantage over the one that’s guessing.
That level of visibility comes with a finance function that’s custom-built for the business you’re running. One that can tell you, in real time, what a $10 move in crude oil does to your landed cost on your top 20 SKUs.
Tariffs and Supply Chain Costs
With it looking like high tariffs are here to stay, if you’re in wholesale distribution, ecommerce, or manufacturing, navigating your supply chain costs has started to feel a lot like roulette. You spin the wheel, place an order, source a new supplier, or route a shipment, and wait to see where the ball lands. Will it be a smooth delivery or a surprise customs delay?
This isn’t just annoying. It’s costly.
Anyone looking to improve their supply chain costs is ultimately trying to forecast demand more accurately and align inventory planning around it. But tariff volatility throws a wrench into that process. Sudden policy shifts can lead to order cancellations, delays, or last-minute scrambles with suppliers who may or may not be sympathetic.
This kind of disruption breaks the just-in-time model, where goods arrive exactly when needed to minimize holding costs. With ongoing tariff swings and geopolitical tension, that level of precision has become harder to maintain.
And more expensive to get wrong.
Why Tariffs and Hidden Supply Chain Costs Are the Silent Margin Killers
Tariffs are the obvious headline. But for many businesses, it’s the hidden costs that quietly erode margin: detention and demurrage charges, documentation mishaps, last-minute freight surcharges, and so on.
With the global supply chain under near-constant pressure, from geopolitical conflicts to ever-evolving trade policies, businesses need more than a “just-in-case” plan. They need to understand where the traps are and how to plan around them.
Tariffs: When Selling a Product Means Losing Money
I know some clients who actually have contracts with their customers to sell a product at $10 a unit. With the new tariffs, it’s now costing them $20 just to buy that same product. So every time they sell it, they’re literally losing money—and because they’re in contracts they signed before the recent tariffs, they’re stuck.
That’s crazy to deal with right now. It’s sort of unprecedented times with tariffs moving all over the place.
During COVID, freight costs would go up, then down. It was really hard to plan for those fluctuations. And that’s just one example of how your margins can erode. Sometimes without you even realizing it.
This is why tracking the true landed cost of the materials you buy is so important. You need a full understanding more than product cost. That’s usually the easiest part, because you have a contract with your supplier. But those hidden supply chain costs like tariffs and freight that aren’t always clear upfront. That’s where margin compression tends to happen.
Supply Chain Costs: What You’re Up Against (and Might be Missing)
Here’s a non-exhaustive list of costs that may be hiding in your supply chain. These aren’t just rounding errors—they can crush your landed cost if you’re not paying attention.
| Hidden Cost | Where It Hits | Why It Happens | How to Mitigate |
|---|---|---|---|
| Tariffs/Duties | At customs or during vendor invoice review | Changes in country-of-origin rules or misclassification of goods | Work with a trade compliance expert. Automate HS code validation. |
| Detention/Demurrage Fees | Ports or distribution centers | Containers sitting too long due to paperwork issues or lack of trucks | Track container status in real-time. Build in buffer for drayage. |
| Currency Fluctuations | Supplier payments | Unhedged exposure to foreign exchange rates | Hedge currency or pay in USD when possible. |
| Last-Mile Surcharges | Freight or parcel carriers | Fuel spikes, capacity constraints, or rural delivery zones | Negotiate contracts with caps. Diversify carriers. |
| Non-Compliance Penalties | Regulatory authorities | Mislabeling, missing certificates, or safety standard failures | Standardize product data. Stay current on destination rules. |
| Unexpected Tariff Changes | When global politics shift overnight | Trade wars, sanctions, retaliatory tariffs | Monitor trade policy closely or subscribe to trade alerts. |
The Trap of “Business as Usual”
Many businesses assume they can eat these costs as they arise. But that’s playing defense. With margins already under pressure, adding 5–10% in surprise costs can be the difference between profit and pain.
Worse, many ERP or accounting systems are not configured to track landed cost accurately, especially if your NetSuite implementation was out-of-the-box without customization.
5 Actions You Can Take to Cope with Tariffs & Supply Chain Costs
- Get Granular with Landed Cost Accounting
If your ERP (like NetSuite) isn’t accounting for freight, tariffs, and insurance at the SKU or component level, your margin math is off. For manufacturers and assemblers, landed cost should flow through all upstream tiers—not just the finished good. That means allocating costs based on BOM structure and applying accurate landed cost at every step of the supply chain. - Reclassify Goods Strategically
HTS codes can be a goldmine… or a trap. Proper classification can reduce duties by double digits. Don’t rely on your supplier’s codes alone. Check in with the USITC’s HTS schedule to be sure. - Automate Steps in Your Supply Chain
Subscribe to a trade intelligence feed (e.g., Descartes, Import Genius) or use a customs broker that offers proactive tariff updates. Look into how AI agents can help review a BOM to review landed costs and HTS codes and make suggestions of how to increase your margin. - Model Alternative Suppliers by Region
Don’t assume your supplier from China is your only option. Run total landed cost comparisons between Vietnam, Mexico, and others, even if product cost is higher, tariff savings may tilt the scale. - Align Procurement & Finance
Run demand planning for competitive pricing. Finance needs to be at the table when sourcing decisions are made. Real margin protection doesn’t happen in month-end cleanup. If your tariff exposure is lower than a competitor’s, you may be able to raise prices strategically, boosting both profitability and market share. Jacking up the cost of a your product by a 20% tariff seems high. BUT, if your competitors were hit with 30-40% tariffs, then your 20% doesn’t look too shabby anymore.
Bonus Tip: Beware the “Free Shipping” Illusion
For ecommerce businesses especially, don’t let “free shipping” to your customers become a silent killer in your supplier relationships. You may think you’re getting a deal, but those costs are buried somewhere. Unpack every line item.
Key Takeaway
A supply chain designed with freight and tariffs in mind will give you true end-to-end visibility into landed costs, down to the product and customer level. By accounting for actual logistics flows, tariff exposure, freight increases in multiple places and production effects, it paints a far more accurate cost picture than standard ERP reporting. This level of granularity can expose unprofitable SKUs or customers and drive smarter decisions around pricing, sourcing, cost reduction and product rationalization.
Related Read: Our Top 7 NetSuite KPIs
If your supply chain feels like a game of roulette, it’s time to start playing chess instead. The companies that win in this environment are those who make margin protection part of their operating model, not just an afterthought.
Want help tightening up your cost controls and optimizing your NetSuite accounting setup to protect your margins? Let’s talk.
