Transportation Costs to Retailers
For many retail companies, transportation is the highest cost that they incur outside of the actual product. Not only do they have the carrier cost and general logistics costs, but they have costs to freight forwarders and customs brokers as well. Unfortunately companies do not always see these costs as part of the manufacturing process until they have reached such high levels that they cannot ignore it. Many times, it may only take a small switch for them to realize just how much the transportation costs play a role in the overall manufacturing bill. Maybe you were always buying your products FOB, but you have found a new supplier who is looking to sell ex-factory or ex-works. This is an additional cost that may seem minimal, but over the course of the year it will be an extended amount of money going into the landed costs. Your freight forwarding company will usually be able to give you a good rate, especially if you have built a relationship already, but it is still additional costs.
On the other side, transportation here in the U.S. will also add to the product costs. One of the biggest concerns for retailers right now is that trucking costs have not gotten much cheaper in the recession. This may be despite having been forced to lower their product prices and accept a lower margin for these products. Unfortunately trucking companies are already at a comparatively low margin and would not be able to lower their rates with the increased fuel costs and other related costs. While they may seem insignificant, transportation can be a huge part of a retail company’s expenditures.