What it costs to serve a market you’re not in yet.
A refrigerated food manufacturer in Halifax, North Carolina wanted to sell into the Northeast. Before anyone signed a lease, we priced the freight to every likely account.
- Who
- Refrigerated food manufacturer
- Market
- 260 locations, 10 states
- Hub modeled
- Allentown, Pennsylvania
- Resupply
- About 2.6¢ a pound
What was going on
The client had no sales history in the region to model from, so we started with ours. NT had delivered to 700 foodservice and grocery locations in the Northeast over the previous five years. We narrowed that to 260 likely accounts across ten states.
What we did
- Placed a regional distribution center at Allentown, Pennsylvania, central to the I-95 population centers and within 100 miles of New York City
- Supplied it by truckload from the plant in Halifax, North Carolina
- Priced LTL delivery to all 260 locations at one, two, three and four pallets a week, at 1,500 pounds a pallet
- Built a second model from population: about 57 million people within 50 miles of the 260 locations, at three-quarters of a pound of product per person a year, or roughly 822,000 pounds a week
What the freight costs per pound
| Weekly order per location | Resupply + delivery | vs. one pallet |
|---|---|---|
| One pallet | $0.315 | — |
| Two pallets | $0.210 | −33% |
| Three pallets | $0.209 | −34% |
| Four pallets | $0.191 | −39% |
| Modeled on population | $0.256 | −19% |
Figures cover the truckload resupply from North Carolina and the LTL delivery from Allentown. Warehousing is not included.
What it told them
The manufacturer could see a landed freight cost per pound before committing to a building, and could see what moved it. The biggest lever was order size. An account taking two pallets a week instead of one cost a third less to serve per pound. That’s worth building into pricing before the first order ships.
The same question at five warehouses instead of one: Five warehouses, priced on total landed cost →