Shipping has a big impact on the total delivered cost of your bulk oil ingredients--or any ingredients for that matter. The amount that it costs to have products shipped from your suppliers door to your own gets added to the FOB cost that you were originally quoted. Together, these two factors (FOB cost + shipping cost) make up the total price that you pay.
That being said, it’s very important to understand what makes your freight cost what it is, because it can make or break how competitive your delivered prices are. There’s lots of complex ins and out of the transportation business, but we’re going to focus on the basics. There’s two common different ways that freight costs are calculated: weight based rates or flat pallet rates.
Weight Based Shipping
Weight based shipping rates are exactly what they sound like: the price is dependent on how much the pallet weighs. That means, the price will depend on how many drums or cases of oil are stacked on that pallet. The less product is put on that pallet, the less it will cost. Learn how much product makes up a full pallet here.
But there’s a few important restrictions:
- There is normally a max weight that can be loaded on this pallet.
- As you decrease the weight of the products shipped (from a full pallet down), the cost does not decrease proportionally. Let’s imagine that shipping 4 drums costs $400. Shipping 1 drum will NOT, therefore, cost $100. Likely it will cost between $200-$250, because the shipping industry lives by the same “volumes of scale” rule that they rest of the world does: the more you buy, the less each one will cost.
This type of shipping is ideal for smaller shipments (like 1 drum) traveling 200+ miles.
Flat Pallet Rate Shipping
A “flat pallet rate” is when shipping costs the same no matter how much product is put on the pallet. For example, if you were shipping with a carrier who had a “flat pallet rate” it would cost the same if you shipped 1 drum on the pallet as if you shipped 4 drums. If this is the type of rate you have, it’s important to load up that pallet with as much product as you can to get the most bang for your buck.
There’s a few important restrictions:
- There is normally a max weight that can be loaded on this pallet. Over and above that, there will be additional charges.
- There’s always going to be additional charges for special delivery requests like a lift gate, delivery appointment, etc.
This type of shipping is ideal for shipping 1-4 full pallets at a time
How Does These Different Types Of Shipping Rates Affect Your Business?
Understanding HOW your shipping is billed can help you plan accordingly and reduce your overall freight costs. Doing so will always add to your bottom line. If you are arranging your own freight, this is especially important.
Is Your Supplier Already Analyzing The Best Option For You?
If your supplier is prepaying for your shipping, it’s likely that the best option is already being analyzed for you. For example, when Centra Foods ships out orders, we offer to arrange the freight. We quote out with many different carriers that have proven to be reliable and competitive. Based on your exact shipment, we find the best rate and prepay it for you so that you even get credit terms on your transportation.
So we’re already figuring out if a weight based rate or flat pallet rate is cheaper for your order. Of course, if you can find a carrier that’s cheaper, that we also allow pick ups. It’s the best of both worlds!
Be informed about how your bulk ingredients are being transported to you to save the most money possible and add to your bottom line.
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Topics: Shipping & Logistics