Note: This is a continuation of a previous blog Bulk Olive Oil - Direct Delivery vs. Direct Delivery Programs. Please click here to read that article first for a thorough understanding.
What is a 'Direct Delivery Program'?
A 'direct delivery program' is when container-sized deliveries (20 pallets) are scheduled in advance with your supplier, and shipped to you direct from the manufacturing location.
With this system, you give your supplier an average timeline that your shipments will need to deliver over the course of the contract period. For example, a direct delivery program could entail receiving one truckload of olive oil every other week, direct from the Mediterranean. Your supplier schedules the orders, makes sure that inventory is available and coordinates all of the shipping details. This system offers volume discounts and may allow you to lock in the price of the oil at the time that you contract. This program has a set up time of 6-7 weeks.
These direct delivery programs have two options:
a) orders deliver to your location in full truckloads or
b) a local storage system can be set up to help companies with limited space.
Option #1: Delivery to My Facility
In this system, full containers (20+ pallets) of oil will deliver to your facility, direct from the Mediterranean. This is the easiest option, but requires that you have plentiful storage space in your facility. Ordering is simple, and your inventory will be easily accessible.
Option #2: Local Delivery Program
Do you have limited storage space? If so, setting up a local delivery program would be ideal. Here’s how it works:
Each truckload of oil will deliver to a local storage facility in your town, and you can pull from that inventory by the pallet as you need it. Your supplier will handle all of the coordination with this facility, costs, etc.-- you will simply place your POs as usual and your oil will deliver. You will have lower shipping costs than if it were shipping from your supplier’s facility (because it will be right in your town), and you’ll only pay for inventory as it delivers.
The cost of setting up a local delivery program is normally $0.04-0.05 /lb more than a direct delivery to your facility. Even with the cost of cross-town delivery factored in, this program is still substantially cheaper than having 1-2 pallets shipped direct from your supplier’s warehouse, if it is located halfway across the country. Supply contracts are required.
Does Your Olive Oil Usage Warrant Direct Deliveries?
Either of these delivery options make sense for many companies, even those using surprisingly low volumes. If you can use 20 pallets within 8-9 months, direct deliveries will be worthwhile. This means that you must be using at least 8 drums or 2 totes per month. That usage can be a mix of olive oil grades, though it’s easier with just one. Keep in mind that olive oil has a shelf life of 24 months from the date of manufacture.
Curious to see some real numbers? Click here to compare the pricing of each of those delivery systems.
Topics: Shipping & Logistics