Creator to Consumer – Distribution & Logistics
Season 2 – Episode 9 –
30 years and still learning - Having spent most of my career post leaving the Royal Navy working in consumer goods, primarily in the perishable food sector. I find it fascinating that I still learn every day, sometimes it’s a reminder of what I have forgot but for the most part, I learn something new every day… Today’s episode is about Distribution & Logistics.
Why do I need to know anything about distribution and logistics?
You don’t, but good luck moving product and understanding terminology.
Why is distribution so important in the US?
The continental US, as stated I before, is the roughly the equivalent geographical land mass of the west coast of Ireland to the eastern border of Turkey, which if you think about that from a logistics perspective, its way easier here in the US, at least there are no borders, language or currency hurdles.
What’s the cheapest way to ship product?
International The cheapest route is sea freight, dry goods, no refer needed. If chilled or frozen there is added costs. Always ship FCL’s, LTL quantities, partial loads need to be consolidated with others, causing delays and higher costs. Preferably always ship on 40ft containers not 20 ft, the ration of 40 ft to 20 ft is way higher in cost per unit and can make your product uncompetitive. For speed and shelf life reasons, some products need to be air freighted, such as fish, fresh produce etc. Make sure you cost in the additional costs to your COG’s.
Domestic
Like International, you are better shipping FTL Loads and not airfreighting unless needed.
LTL are expensive and depending on the temperature of the products shipping you may not be able to find consolidated loads, especially Frozen items. Most prices for LTL loads start at the highest for 1 pallet and move down as multiple quantities increase until you get to FTL costs.
Is there seasonality in trucking?
Yes, the peak season for any consumer goods freight is around the holidays, where the demand is the highest from consumers and therefore the most restrictions on flexible freight lanes. Other factors must be considered throughout the year, there is seasonality due to the produce and raw material peaks, due to harvesting, these peaks very often increase prices as freight capacity is fully utilized. Worth remembering in your annual shipping plan.
Why do I have to pay for a truck waiting?
You do not if you do your planning right, get your delivery appointments and if the trucking gods are in your favor! Basically, the drivers charge for their time, gas and cost of their rig, any time standing around doing nothing is time lost and if they are carrying LTL’s product then their next delivery window might be at risk, another reason to consider FTL’s.
Can I get a fixed rate for my trucking needs?
Yes, if you have the demand and volume to move, unless you are a huge organization with truck/container loads per week, you will probably pay slightly more over time to have a consistent price, as the trucking companies will make more margin in the lower freight periods and less in the peak periods by amortizing their costs over the whole years cycle. But at least you will have a stable cost to factor into you COG’s or COGS.
Do I need my own warehouse?
No, you can outsource all your warehousing and deliveries to a public warehouse company, there are many around and most of them have multiple temperature zones, so will service all your warehousing needs. In addition to you covering your product insurance for the product stored, they will take care of the rest, as if you had your own warehouse, they charge for every little movement or touch of your product, their rate cards are complicated, so the guide is this, use their services, they are a great resource, but consider very carefully every request before you ask them, it will cost.
Do I need to have my own trucks?
No, there are companies out there that will do deliveries, if you pay enough, they will brand their trucks with your brand. If your product needs Field Marketing Support, for localized promoting and deliveries it may be worth investing in small fleet. My guidance is to outsource as much as you can, at least in the early days, to reduce your liabilities.
What’s the best way to ensure I cover my freight costs?
Sell everything on an FOB basis, then if you need to organize freight you can do so and get a quote for each delivery at the time, most larger distributor customers will pick up and it’s in their benefit to pick up, otherwise their trucks are not getting fully utilized, out and in bound.
What is FOB Pricing?
FOB is the acronym for Freight on Board, meaning in loose translation, the price of the goods being picked up with no additional freight or handling costs included in the price. Some customers prefer FOB/Pick-Up pricing to utilize their empty returning trucks to pick up the product. Others prefer a delivered price, especially if they don’t have their own fleet or access to your warehouse location.
Now it’s all clear as mud, need more, please ask.
In our final episode, we will be talking about Sales Matter, thanks for reading and continuing your journey from Creator to Consumer.
Interested in reading or finding out more about selling your passion or our Creator to Consumer series please visit our Chatter page at www.beachcitysales.com/blog and click on Creator to Consumer 1 & 2 or our general site at www.beachcitysales.com, for more direct interaction please e mail us at info@beachcitysales.com
Remember, whatever you know “good luck keeping up”