The Top Bulk Oil Inventory Buying Mistake For Small Businesses

Posted by Alexa Ketterling

 

Maintaining the right levels of inventory for all of your ingredients can be a challenge, especially for small and fast growing businesses. Many small businesses want to buy in bulk, but struggle with holding too much inventory at one time.

Buying just one drum of olive oil from a bulk supplier can be tempting. If you’re used to buying just a few cases at a time, it can seem like the next logical step up. However, you’re entering into a whole new world of bulk freight shipping, where your drums are packed on a pallet and shipped on an 18-wheeler, rather than being shipped with UPS or FedEx.

One of the major “mistakes” we see from small businesses (and even worse, when we see it from larger manufacturers!) is when you buy just what you need for that very moment — for example, one drum — rather than thinking ahead and ordering a full pallet.

Looking at this example closer, a business may need one drum of olive oil this month, one drum next month and two drums two months from now. They can buy these drums as they need them each month, OR they can buy a full pallet of four drums all at one time.

For some buyers, it is a no brainer to buy a full pallet: then they have oil on hand in case of unexpected production increases. However, some like to buy the oil only as they need it, which brings us to reason number two below: there’s a huge cost savings to ordering a full pallet!

 

Why Will You Lose Money Only Buying 1 Drum 

You will lose quite a bit of money if you order one drum four times in a row vs. buying four drums only once.

One of the big things that can cause you to lose money is the shipping. Oftentimes, the cost to ship 1 drum is the same (or very close) as if you were getting four drums shipped to you.

After all, the drums are strapped to a 40” x 48” pallet, so it doesn’t matter if there is 1,2, 3 or 4 on there — it will still take up 40” x 48” of space in the truck. On the other hand, less drums will not weigh as much, which will save on gas. This saves a little bit of money, but not much.

To give you an idea, if 4 drums cost $250 to ship, one drum is likely to cost $200. If you use this math on the example above, the shipping cost to buy one drum, in four separate orders is as follows:

$200 x 4 orders = $800

$800 / 4 drums / 419 lbs = $0.48 /Lb added cost for shipping

In comparison, the shipping cost to buy four drums all at one time is as follows:

$250 = $0.15 /Lb added cost for shipping

As you can see, shipping one drum four separate times will end up costing you $550 more over the course of the 4 drums… that’s $0.33 /Lb of added cost that you didn’t need to pay!

In addition, many companies have a fee for partial pallets or a volume price discount for a full pallet… so you may also save money on the oil itself too!

 

In Conclusion 

No matter how you look at it, you will notice you may end up spending a decent amount of money shipping a single drum at one time.

Instead of ordering what you need in the moment, you may want to consider ordering a full pallet as you can store and use the oil for anywhere between 12-24 months (from the date of manufacture) if stored properly.

Topics: Food Manufacturing, Industry Trends, Small Businesses Advice, Purchasing & Procurement, Business & Leadership

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