Selecting where to conduct business, or possibly even where vendors are located, can have a dramatic impact on a business. Businesses typically consider such things as availability and amount of tax incentives, labor rates, availability of an educated and trained workforce, and proximity to customers or potential for new customers. One factor that is sometimes overlooked, or not considered relevant to its full impact, is the impact on transportation expenses. Let’s look at a few considerations in relation to how location impacts transportation costs.
The origin location plays a factor in determining the applicable destination zone for parcel shipments, which is used to determine both cost and transit time. Distance between the shipping location and the destination will determine cost for LTL and truckload shipments, as well as transit time.
Carrier availability and resources, and the carrier cut-off times, are key factors as well. Are there enough carriers to partner with in the vicinity? Do they provide all the services necessary and have the appropriate equipment available? What are the daily cut-off times to tender the shipments?
Inbound freight, whether domestic or international, should also be considered. Location of vendors plays a key role for various reasons. Let’s say you are a manufacturing facility and the entire system could be down if a critical part fails. What if the vendor of the part is in a remote location that adds a day of transit; thus, increasing your cost because you have to pay beyond or inland fees, which can be quite substantial? This has now not only impacted your transportation cost, but this could shut down the operation. What is the lack of productivity or sales costing the organization?
In addition to the freight charge, there are various accessorial fees that can be incurred. The beyond fee previously mentioned is but one. A few others include delivery area surcharges on parcel shipments and high cost delivery region charges on LTL shipments.
When importing from other countries, the location of the shipper or manufacturer could add transit days and costs as well due to being in a remote location. Not only should distance, from a time and cost perspective, be considered, but the infrastructure within the country and availability of necessary equipment and resources as well. For example, if the product needs temperature control, what is the availability and cost of temperature controlled trailers? Do there tend to be Customs delays? What is the duty rate for the given commodity to/from a specific country?
Environmental factors and climate can also have an impact. Some may recall the Iceland volcanic eruption in 2010 which grounded much of Europe’s air traffic for a week. Well, this is a possibility again, as Iceland just issued a red alert a few days ago regarding a possible eruption.
Determining where to conduct business, as well as evaluating the location of vendors and manufacturers, can play a critical role in the ability to service customers and in the management of transportation expenditures.