The question of whether or not the price of goods includes shipping costs is becoming increasingly important for consumers to ask. Transportation can impact the price of goods at a retail store by 10 to 20 percent. For consumers, that might be easier to understand for big items such as furniture. However, it is not so easy to understand when it comes to the cost of small, essential necessities. The impact of increasing shipping costs is unlikely to change for the foreseeable future due to COVID-19. In this article, we explore truckload transportation spend and the variables that affect the price consumers pay for goods.
Truckload Transportation Spend: The Cost of Doing Business
Variable Transport Costs
Transport attracts both fixed and variable costs. Variables in transportation costs include the price of fuel and the amount of fuel used, depending on the destination. Currently, the national average for a gallon of gas is at the highest since 2014. Fuel costs are just about the same whether or not a truck is fully loaded. If there is no full load for an outbound truck, the transporter will still require consumers to pay the full cost. Similarly, if there isn’t a load for the truck to return home with, somebody has to pay for an empty truck to return.
Fixed Transport costs
The fixed costs involved in transporting goods include the driver, the packers and off-loaders. They get paid a fixed salary regardless of how much they pack or offload. Those costs are also included in the transport cost divided by the number of items loaded. The cost of the truck and truck maintenance is an example of the hidden costs of transporting goods.
Transport cost is worked out on the greater of product weight (density) or volume (space). The shape, size, and packaging of a product are all important variables for anyone working on a transportation spend budget. Small, uniformly shaped products are easier to pack on a pallet and store efficiently in a container or on a truck. This results in a quicker turnaround time for the truck. Some products come in a flat-pack or in components that are only assembled at their destination. This can also help to reduce transportation costs.
Legislation can also play a role in the cost of transport. In most cases, the Department of Transportation (DOT) requires flammable goods and substances to be transported independently of other types of goods. Products with a limited shelf life require fast and refrigerated transport. Therefore, products such as fresh vegetables might require air transportation, which is more expensive than ocean freight.
International Currency Exchange Rates
Fluctuating international currency exchange rates can also have an impact on the cost of imported goods. When the dollar is in demand, international transport costs will be offset by a stronger dollar. For example, overseas oil suppliers and product suppliers will be paid fewer dollars. However, if the dollar weakens, the consumer is must pay more for the same goods. These costs can be offset by buying forward cover, the purchase of another transport cost.
It’s one thing to be selling a product that is recession-proof. However, it’s another thing getting it to market at a price the consumer is willing to pay. Ideally, you will want to be selling high-value, small, square-packaged items, with an all but unlimited shelf life. It is also important to focus on items that are consumable and demand-driven in large quantities, regardless of the economy.
Additional Reading: How to Reduce Shipping Costs for Small Businesses: 6 Helpful Ways
The Junction LLC | Truckload Shipping
As a leader in the transportation industry, we demand excellence from our entire team. Our team at The Junction LLC strives to deliver the best possible customer service and by a desire to solve our customer’s toughest transportation and supply chain needs.
Our team is dedicated to serving our customers and will take the necessary action to deliver our customers’ products safely, efficiently, and on time. In fact, this is our promise to you!
Nationwide Services include:
- FTL (Full Truck Load) Shipping
- LTL (Less Than Truck Load) Shipping
- Transportation of refrigerated, dry, and bulk shipments
- 3PL Warehousing and Logistics
- Contract Warehousing
- Trucking Freight Brokerage
Trucking & Freight Shipping Services:
- Time-sensitive shipments
- LTL (Less-Than-Truckload)
- FTL (Full Truckload)
- Flatbed LTLRGN (removable gooseneck lowboy)
- RGN (removable gooseneck lowboy)
- Maxi’s / A-Train / B-Train
- Heavy Haul
- Over Dimensional
- Dry Van
- Dry Van LTL
- Refrigerated LTL
- Power Only
- Our sister companies can also provide warehousing in our food-grade facilities, cross-docking, and contract warehousing.