The Beacon Group utilizes real load cost data and the 4SYTE ™ Centroid Transportation Modelling tool to meticulously track transportation costs. The analysis focuses exclusively on transportation expenditure, excluding additional supply chain costs like real estate, taxes, and utilities. It is essential to consider all factors, including these overheads, when making well-informed decisions on site selection.
This week let us delve into full truckload shipping from every Western US state to every other Western state. If your company shipped a full truckload from a West-based distribution center to all other states within the Western region, which state would result in the lowest cost to serve?
The answer is Nevada! Did you know that the average full truckload cost from Nevada to all other Western states is about $1,049.81? Utah comes in as a distant second lowest state at $1,371.64, approximately 23.5% higher than Nevada. However, Utah comes in at the lowest cost mile at $1.95. Utah is further away from the population centers causing total cost to be higher.
In a not too surprising twist, California ranks LAST in average cost per load at $2,003.62 and also LAST in cost per mile at $3.30, which is 41.1% higher than Utah and 22% higher than Nevada. Companies, particularly smaller companies that do not move a lot of sea containers have found Nevada to be attractive from a total cost to service location in recent years. As compared to California, almost every area of cost is lower in Nevada verses California. Business taxes, real and personal property taxes, real estate and even labor costs favor Nevada. And the fact that you can service most of the Western population within a one-day drive time at HALF THE COST per full truckload, further confirms why companies are relocating to Nevada for their West Coast distribution and fulfillment needs.
There are several factors that drive California’s truckload costs significantly higher than almost any other state. Demand for trucks leaving the state from the major ports to further points inland, higher fuel prices, higher labor costs and more regulations placed on truckers in the state will ensure California will stay high in the foreseeable future.
Some companies have been looking to Arizona to escape those high California costs as well, however, from strictly a full truckload perspective, Arizona’s cost per load is significantly higher than Nevada but it does inch out Nevada on a cost per mile by $.14 or roughly 4%. Shipping north out of Arizona can get expensive as you ship longer distances to larger markets like the bay area and Reno from Arizona.
Keep in mind this analysis is focused on full truckload costs only and assumes intra-regional service locations, nothing outside of the Western region. Obviously, if your service region is different, then this analysis would have to be re-computed to determine your ultimate low-cost solution.
Once again, this scenario challenges traditional logistics analysis and highlights the importance of a data-driven approach in designing distribution networks. 4SYTE ™ analyses and AI algorithms reveal unique distribution regions, emphasizing the need to consider various factors like customer locations, inventory carrying costs, supplier and sourcing locations, transit times, taxes, real estate costs and many more factors. Taking a holistic and analytical approach can lead to surprising results and significant savings!
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