Minimum Quantity Rates Can Save You Money!
What's this? My trucker charged me for 1,000 pounds when I only shipped 820 pounds.
Relax. Your carrier applied the Minimum Quantity Rule which actually saved you money. What's more, it provides you a way to make more money.
Minimum Quantity Rates apply when it is cheaper to rate a shipment at a greater weight but lower rate. Tariff jargon goes something like: The total freight charges assessed against a shipment may not exceed the total charges computed for a larger quantity.
It's easier to explain by example.
We're shipping 820 pounds of widgets by truck.
The widget rate for 500 pounds is $10.00/cwt (per hundred pounds)
820 pounds X $10.00/cwt = $82.00
For 1,000 pound shipments the widget rate drops to $7.50/cwt.
1,000 pounds X 7.50/cwt = $75.00
The motor carrier rate clerk bills the shipment "as 1,000" and charges you $75.00 instead of $82.00. (Incidentally, you will probably find that many large truck shipments, say those over 12,000 pounds, go cheaper "as truckload.")
Minimum Quantity Rates are an opportunity
Minimum Quantity Rates provide an opportunity to offer discounts to our customers and make more money ourselves. Keeping the math simple, let's say our widgets cost us $0.50 each, weigh exactly one pound each and we sell them for $1.00 per widget. In the above scenario, we would have an invoice value of $820.00 for 820 widgets. Shipping cost is $75.00 or approximately $0.091 per widget.
The Minimum Quantity Rate alerts us that we could ship an additional 180 widgets with no increase in freight charges (820 widgets plus 180 equals 1,000 widgets—exactly a 1,000 pound shipment). Our shipping cost is now $0.075 per widget. We offer a reduced price to our customer for a larger order while making more money for ourselves.
Original Shipment
820 widgets sold at $1.00 each, cost $0.50 each
$820.00 invoice value less $410.00 cost less $75.00 trucking equals $335.00 profit
Discount Shipment to Customer
1,000 widgets discounted to $0.97 each, cost $0.50 each
$970.00 invoice value less $500.00 cost less $75.00 trucking equals $395.00 profit
The freight savings more than makes up the $30.00 manufacturing discount we absorbed.
Minimum Quantity Rates are common with truckers, frequent with airfreight and almost unheard of with sea freight, which generally doesn't see much in the way of tiered rates. So there you have it!
About the Author
http://HowToShipAnything.com is an online shipping information resource. W.E. Reinka, an international shipping consultant can be reached at http://www.howtoshipanything.com/w-e-reinka/
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