Freight, The Other "F" Word
Freight management is one of the most critical aspects in the furniture industry and rarely thought about by consumers. Shipping is the next step after goods are manufactured and before the furniture reaches its final destination, which could be your home, an office space, a restaurant, or a hotel.
Online retailers have trained consumers into believing that freight is free when they place an order. How many times have you placed an order online where if you reach a certain purchase amount, the shipping is “free”? It’s not really “free”. Those charges are buried in the cost of the merchandise. They use consumer psychology to get you to purchase more to get something “free”.
I’m here to give you a little inside baseball on freight and freight management. Freight management and supply chain logistics is a very complex, minutely detailed series of events. I won’t get too far into the minutiae of supply chain, but just enough so that you can understand it’s complexities.
As you may already know, most of our furnishings (residential and commercial) are now produced overseas. Most of this furniture production takes place in China and other parts of Southeast Asia such as Vietnam, Malaysia, and the Philippines. According to 2018 statistics, China is the largest producer of furniture in the world and handles about 35% of the overall furniture export worldwide.
There are primary furniture “industrial zones” in China:
The Pearl River Delta
The Yangtze River Delta
The Bohai Rim
These industrial zones are strategically placed for ease of transportation in addition to accessibility to skilled labor workforce.
During 2018, the US imposed tariffs on Chinese imported furniture. In effort to circumvent these tariffs, many US based furniture companies relocated their manufacturing facilities to Vietnam and other parts of Southeast Asia. These locations are still in proximity of major shipping ports throughout the South China Sea and other major bodies of water.
My thoughts on the manufacture of goods in Asia and other geo-political issues are a topic for another blog, but this gives you a little bit of background to understand the point of origin.
After goods leave the factory, they are loaded onto shipping containers and prepared for an overseas voyage. These containers are filled completely and do not sail until they are full. Let’s say for instance, Holly Dennis Interiors has placed an order for 5 barstools, these stools will not set sail from Asia until that container is 100% full of other merchandise from the factory. I will use this order of 5 barstools as an example throughout this blog.
In the pre-COVID-19 pandemic era, transit time via container ship transport was 30 days on the water from Asia to the USA. At greater than 52’ draft and an unlimited air draft (vertical clearance), the nearest US Port for receiving these ships is the Port of Los Angeles near Long Beach, CA. This is America’s busiest port.
The containers must be cleared by U.S. Customs & Border Patrol before they are unloaded at the port. Customs clearance is necessary for all packages entering the U.S. from other countries. Typically, customs clearance takes less than 24 hours, but, especially now during COVID, it can take several days or weeks for the containers to be inspected.
After the shipping containers are unloaded, the furnishings are then hauled by truck or rail cars to their distribution centers and warehouses. This is when transit times can vary and become even more complex.
Once the furniture arrives at the manufacturer’s distribution center, my order of 5 barstools, will tagged and pulled at the warehouse, palletized, designated, and shipped via LTL (less than truck load) carrier, which is a common carrier (semi-truck), with a mixed assortment of items, all having different points of destinations. After it goes on this furniture carrier truck, it reaches a central hub where then the barstools are off-loaded and placed on another truck headed to another destination point hub.
If my order is shipping from a distribution center in Southern California, it could make several stops at hubs, off-loaded and reloaded several times before it reaches my local warehouse. If my supplier’s LTL shipment of these stools starts in Los Angeles, CA with a destination of Sarasota, FL, the logistics could look like this:
These types of shipments only go from loading dock to loading dock, which means the receiver must have a loading dock or forklift to unload the pallet. These trucks are too large for residential neighborhoods and the drivers only drive, they do not unload.
At the receiver’s loading dock, they unload the truck containing the barstools, check it in, and send a receiving notification to me. After I receive the notification, I then arrange for delivery to my client. The barstools are then loaded onto a smaller residential delivery truck to my client’s location. I meet the delivery truck at my client’s location and ensure that the merchandise is in its proper location.
All furniture shipments are like this, believe it or not! Most people don't realize all the steps that are involved in freight management. It is extremely complex and there is simply no such thing as free freight. If the freight charges are not itemized on the bill, then the shipping costs have been built-in the cost of the merchandise.
At Holly Dennis Interiors, we have direct accounts with 100’s of furniture suppliers. We do not shop at retailers; we only go manufacturer direct. Therefore, we are always dealing with freight management and logistics which are billed.
One of the benefits to the consumer doing it this way is because there may be a savings on the sales tax. In Florida, freight and transportation charges are taxable when they're included in the sales price of taxable tangible goods (i.e., not separately stated on an invoice or bill of sale). Transportation charges that cannot be avoided are also taxable, even if separately stated. For this reason, I always clearly indicate the freight charges on my clients’ invoices saving them additional sales tax charges. I also do this to so there is no subterfuge when it comes to all the costs associated with the purchase, they are all itemized.
Alas, this can be a point of contention with nearly every client when they see the freight charges on their billings (no good deed goes unpunished). They think they are being “nickeled and dimed”. I think they’d rather not see these “F word” charges because they’ve become so accustomed to assuming that this aspect of their purchase is somehow free.
I hope that this blog lends some awareness of what's involved in this very necessary part of the supply chain and gives you a greater understanding and appreciation of this very complex reality.