Special to Harvester Online
- by James Holloway, C. H.
Robinson
This article is not really about truck drivers school, but rather it is
about “driving the truck” by taking charge of the
transportation component of your sales process and converting FOB sales
to delivered. Although the customary terms of sale in the produce
industry have been FOB origin, in recent years there has been a growing
trend to delivered sales. Shippers are changing to delivered terms
of sale because of the advantages it creates for their business,
including:
Customer satisfaction - If you can provide one-stop
shopping to your customers (product, transportation, marketing support,
etc.) you can become a vital link in their supply chain. Consider
your buying habits – do you prefer to do business with container
and pallet companies that deliver their products to you, or do you do
business with suppliers that require that you pick up the product?
Convenience and time savings count for a great deal in today’s
business world.
New sales opportunities – Relying on the
buyer’s transportation arrangements by selling FOB can tie you
down to a single growing region. If something happens to the crop
in that growing region and your customer cannot secure trucks from your
alternate source of supply, you may find yourself in danger of losing
this account. By selling delivered and controlling transportation
arrangements, you provide yourself with the flexibility to quickly shift
to the new growing region(s). This capability also may allow you
to expand your product line and to capture business from suppliers that
do not have reliable sources of transportation.
Operational efficiencies – When you handle
transportation arrangements, you will know when the carrier is going to
pick up the load and when it will be delivered. In addition, you
will be able to coordinate the availability of the product and the time
of loading rather than dealing with the cost and uncertainty surrounding
when many buyer-arranged trucks show up at your facility. Control
over the loading process will ultimately result in reduced labor and
energy costs.
Manage your costs – After the cost of the
product, transportation is the second highest expense in the supply
chain. Shippers that can control or reduce transportation costs
have a competitive advantage. By partnering directly with carriers
or 3PLs, you can negotiate rates that accrue to your benefit.
Go green – Retailers with multiple
distribution centers and numerous stores have to audit and process huge
numbers of invoices for products and transportation services.
Delivered sales mean single invoices combining product and
transportation charges that simplify this task and reduce customer
expenses. Delivered sales also facilitate consolidation of
shipments, meaning fewer trucks on the road.
Stronger prices – This is one of the most
important benefits of delivered sales. When a buyer is quoted a
delivered price, he probably does not care what part of the price is
product cost and what part is freight. It thus follows that if a
shipper can quote a lower delivered cost than the buyer can create
through separate purchases of product and transportation, then absent
any other considerations, the sale will occur. The advantage to
the shipper is that if he buys transportation efficiently, he is
creating a discount to the buyer in the freight portion of the delivered
quote as opposed to lowering the price of his product. A secondary
advantage to the shipper is that when it sells delivered, its
competition does not know what its FOB quotes are, making the shipper
less vulnerable to discounting pressures. The advantage to buyers
is that they are lowering their landed product cost and placing the
management time and transit risk on the shipper.
“Driving the truck” with delivered sales is a highly
effective business tool that can increase your profits through improved
customer service and cost control.
The second part of this article, to be posted soon, will discuss
how to initiate delivered transportation programs and how to select
transportation partners.