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The Hidden Costs Of Underloading Containers

Bison Group

7 Sep

Weighing


HIDDEN COSTS OF UNDERLOADING CONTAINERS

If you're exporting commodities in shipping containers, you'll know all about high one-off costs and penalties that apply if you ship the container overweight. For this reason, it’s a natural tendency for shippers to under load.

However underloading, even by a small amount, can be costly too. Read on to learn more about the hidden costs of underloading containers and how you can avoid them.

WHAT IS UNDER LOADING COSTING YOU?

Putting it simply, under loading a container means you are under utilising the container space and paying more in shipping costs than you need to.

When you think of each individual container load, the cost may not seem high, however the aggregate cost over the course of a year can be staggering.

Think, if you could safely increase the payload of each container by 10%, you would ship 10% less containers per year.

If you ship 200 containers in a year, at an average shipping cost of $2,000 per container, underloading by 10% will cost your business $40,000 per year.

Here’s an example:

Commodity Output 3,600 tonne

Average Payload 18 tonne

Optimised Payload 20 tonne

Shipping Cost $2,000 per container

Commodity Price $1,000 per tonne

Another, less obvious cost of under loading containers is the negative impact on revenue and cash flow. Under loading delays sales and cash receipts and increases the cost of funding your business. Or to put this another way, if you optimise each container load, you can realise more in sales receipts sooner and free up capital for other things.

This cost ultimately turns on the time value of money in your business. But taking the example above, with a commodity worth $1,000 per tonne and a cost of capital of 12%, optimising your container loads by 10% could be worth another $6,120 to your business each year.

Average Optimised Difference

Shipping Costs $400,000 $360,000 $40,000

Cost of Capital $6,120 - $6,120

Total Savings $46,120