The Beacon Group constantly tracks transportation cost and uses actual load cost data from real shipments and our powerful 4SYTE ™ Centroid Transportation Modelling tool to compute the results you are about to see. Furthermore, the costs in this analysis are for TRANSPORTATION ONLY. No cost for real estate, taxes, labor, utilities or any other supply chain related costs are included in this study. Although, our customer projects factor in ALL COSTS before decisions are made on site selection.
So, let's start with Full truckloads shipping from every Northeastern US state to every Northeastern state. In other words, if your company shipped only full truckloads from a NE based distribution center to all other states within the NE region (based on demand/population census 2023), what state in the NE would result in the lowest full truckload cost to serve?
The answer is RHODE ISLAND!! The average full truckload cost to all states from RI would cost about $919.57. The second lowest state was Massachusetts! At $987.65 or about 6.9% higher than Rhode Island. However, Massachusetts had the lowest average cost per mile in the region at $3.17 per mile. The real shocker on the NE Regional FTL OB analysis was the fact that Pennsylvania was second to last in average cost per load at $1,741.15 and last in cost per mile at $5.42 per mile or 41.4% higher than first place MA! As many of us know, PA is a major center of gravity for distribution in the NE region. This is mainly due to lower cost industrial real estate and availability of skilled warehouse labor. But you also need to keep in mind that this also drives a high demand for trucks, which is having an impact on cost per mile rates today. While real estate is a cheaper in PA, transportation costs to serve the rest of the NE region are not! Not in LTL either, but that will be discussed in another summary later. NJ ranked #5 in lowest FTL average cost per load at $1,075.27 or about 14.5% higher than #1 RI. However, in comparing NJ to PA, NJ has a 25% lower average cost per load verses PA. NJ is closer to the NE population and enjoys the I-95 NJ Turnpike corridor connecting many of the NE states. However, buildings in NJ are more expensive than the Lehigh Valley PA area. So, each company would have to accurately evaluate volumes and total cost to serve to determine the lowest cost and highest service location.
There are several key points to take away from an analysis like this. First, the laws of price elasticity as well as the laws of basic supply and demand really matter when it comes to all supply chain related costs. Most companies want to follow others to geographic locations that may have ample building choices and labor pools. However, this increases the demand for trucks, labor and other resources that it takes to operate a well-run distribution center. Companies also want to get closer to their customers to reduce days to service; however, our study is clearly proving that in many cases, closer means anything but the lowest cost from a transportation perspective! And many of you might be surprised to learn that closest in many cases will not be the overall lowest total cost to serve either once all costs are considered. In fact, consolidating inventory in fewer distribution centers located in very smart locations could prove to cut supply chain costs by as much as 50%. Not to mention how much a potential consolidation could simplify your business operations, inventory carrying costs and much more.
Obviously, transportation is one of the largest cost centers in the supply chain and it can have a big impact on a company's total cost to serve and profit margins. I will not get into some other extremely interesting findings in our studies quite yet, but I will say this... YOU MIGHT BE SURPRISED BY HOW MANY CHOICES YOU WILL HAVE TO LOCATE A NEW VERY EFFICIENT DISTRIBUTION CENTER AND YOU WILL ALSO BE SURPRISED WHERE IT MIGHT BE AND HOW MUCH COST YOU CAN TAKE OUT OF YOUR NETWORK. IT WOULD BE VERY SMART FOR A COMPANY TO LEVERAGE LOCATIONS THAT NOT MANY OTHERS ARE CONSIDERING IN THIER SITE SELECTION PROCESS. WOULDN'T THIS BE A GOOD MULTI-MARKET NEGOTIATIONS TECHNIQUE, DESPITE WHERE YOU MIGHT END UP? THE TRADITIONAL METHOD OF ZEROING IN ON AN INDUSTRIAL MARKET AND HIRING A LOCAL BROKER TO FIND A BUILDING FOR YOU, WILL ABSOLUTELY NOT RESULT IN THE BEST DECISION YOU CAN MAKE FOR YOUR BUSINESS. YOU NEED TO LEVERAGE MULTIPLE CHOICES AND MULTIPLE MARKETS AND CLOSELY COMPILE AND RANK ALL POSSIBLE SCENARIOS BEFORE MAKING A FINAL DECISION. THIS REQUIRES VERY PROFESSIONAL EXPERTISE AND EXPERIENCE. WITHOUT THIS KNOWLEDGE, DATA AND TECHNOLOGY IT IS NOT POSSIBLE TO WING THIS ANYMORE. IT’S JUST TOO COMPLEX.
So, here are the results of the NE Region Full Truckload Cost Analysis. Enjoy these stunning results and wait until you see our inbound, inbound and outbound combined, and LTL analyses for every region of the US coming soon!
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