Logistics strategy: a critical consideration for adding a new product line
Expanding your product range can be a good business tactic — allowing you to maximize the potential of your existing customers and capture the attention of new ones. If you're in the planning and budgeting stages of rolling out a new product, one of the primary considerations should be your shipping strategy, including understanding the factors that can influence rates. Even if the plan is for your new product line to ship to similar locations as your current products, you could see changes to your transportation costs.
Factors that can influence shipping costs
Whenever you're considering launching a new product, it's good practice to connect with your logistics provider to complete a supply chain analysis and determine its impact on your shipping costs and, ultimately, your bottom line. Some of the critical factors to consider include:
Product characteristics (size, weight, fragility and packaging)
Shipping costs may be affected if the new product has different dimensions or packaging requirements than current products. For example, bulkier packaging or packaging that requires special handling may occupy more space, which adds costs. Lighter and more fragile freight could also increase the price.
Shipment volume
Adding a product line often means increasing the overall volume of shipped goods. This can enable you to negotiate better freight rates due to increased bargaining power, and spreading fixed transportation costs over more freight can lead to reduced transportation costs per unit. On the flip side, shipping more volume that necessitates using more equipment or space inside equipment can increase transportation costs.
Note: Increased shipment volume can also impact a carrier's ability to handle the loads — it's essential to work with a provider, like ArcBest, with extensive capacity options.
Location and distance
A new product often expands your company's reach, enabling you to enter new markets. This can increase costs if the new locations are further away or in less popular shipping lanes. Shipping to international markets may also introduce additional charges such as customs duties, tariffs and international regulatory compliance.
Warehousing and storage
If adding the new product requires adjustments to warehousing and storage facilities, you may recognize an impact on shipping costs. Products with specific storage requirements, such as temperature control or specialized handling, may require you to re-evaluate and modify your current warehousing strategy. If facilities need to be relocated, resulting in a change in distance or routes, you'll typically see a cost impact.
Seasonal demand and peak times A new product line's demand pattern and seasonality can influence transportation costs. Fluctuations in demand throughout the year with seasonal peaks may require adjusting your transportation strategy. This could involve using different shipping modes, planning for increased capacity during peak periods or managing inventory strategically.
Transportation mode
If the new product changes things like distance, urgency and product requirements, you may need to reassess your current transportation mode and shift to more efficient ways to move your new product line. Depending on the product characteristics, it may be more efficient and cost-effective to ship via road, rail, air or ocean — and each mode has its own cost structure.
- Less-than-truckload: the factors that go into LTL shipping include weight, freight density, freight class, distance, packaging and handling requirements, pickup and delivery requirements, accessorial charges and liability coverage requirements.
- Full truckload (FTL): several factors can influence truckload rates, including distance/lane, weight and volume, equipment type, fuel costs, seasonal demand, pickup and delivery requirements, accessorial charges, declared value and market conditions. Because you use the entire truck with an FTL shipment, costs may be similar to previously launched products if nothing else changes.
Read more about how full truckload rates are calculated - Expedite: shipping expedite rather than standard transit adds costs, though sometimes the tradeoffs are a definite benefit. The factors influencing expedite prices include distance, time sensitivity, transportation mode, weight and volume, service level, special handling requirements, carrier selection, fuel costs, seasonal demands and accessorial services.
Read more about the reasons companies choose expedite transportation - Rail: shipping rail can be a cost-saving strategy that can benefit environmental impact. The factors impacting rail shipping costs include distance and route, weight and volume, fuel efficiency, accessorial charges, equipment types, access to rail lines and seasonal demands.
- Air: because of the added speed, efficiency and safety, this type of transportation generally comes with a higher cost than other modes. Factors influencing price include speed, transit time, distance, weight and volume, handling and packaging requirements, capacity and demand, and specialized cargo regulations.
- Ocean: If your new product is shipped internationally and requires transport by ship, the key factors that influence costs include things like distance, container type and size, port charges, trade routes and transit times, seasonal factors, market conditions and fuel costs
Ship your new product line with ArcBest®
When it comes to launching a new product line and determining how your shipping costs will be impacted, it's important to partner with a trusted, experienced logistics company that understands your product and your goals, can analyze your current supply chain and create strategic solutions that build efficiencies and control costs.
That's what you get with ArcBest.
We're an integrated logistics company with our own assets and an extensive brokerage network. This enables us to optimize, connect and deliver across various modes of transportation. We listen to your needs, evaluate your supply chain, and create optimized load plans designed around your project's requirements. This includes shipper capacity, carrier capacity and delivery date requirements — and we optimize it for cost. You also get a single point of contact, daily reporting to keep you up to speed on the project's status and seamless integration between our multiple service options, including LTL, truckload, expedite and warehousing.
Learn more about ArcBest’s Product Launch solutions and contact us today to discuss your next project.
