Is your company using direct service to Hawaii?
As the winter months set in, many companies are hard at work planning their transportation budgets for the new year. While the driver and capacity shortage for over-the-road transport is bound to impact your business, there are easier ways to optimize your supply chain. A great way to boost next year’s bottom line is by optimizing your Hawaii freight solution with direct service to the neighbor islands.
Our team finds that introducing direct service saves companies up to 25% on Hawaii freight costs. Supply chains are only efficient if all parts are operating properly. So, assessing the health of your Hawaii supply chain provides the insight needed to meet and exceed your goals next year.
Let’s take a look at how direct sailing for ocean freight to Hawaii will improve your supply chain.
Hawaii is a High Cost and Often Overlooked Lane
Evaluating the effectiveness of a supply chain can be a daunting task. For large companies, the number of pieces, players, and touch points is overwhelming. However, if you start small, the more significant problems become easy to solve. Direct service to Hawaii is one of the slight changes which helps improve Hawaii supply chains in 3 impactful ways.
1. Fewer Taxes and Lower Costs
Shipping freight intrastate in Hawaii is unique. Ocean freight moving between islands is subject to more taxes than those sent from the mainland. This means that if your current solution routes goods through a central warehousing hub in Honolulu you are probably paying more than you should for Hawaii freight. The Hawaii State General Excise Tax varies depending on the island. However, you can expect to pay around 4.5% more for intrastate freight than you would for goods originating on the mainland. Take a look at this break down of the specific tax rates for each of the islands of Hawaii to see how much more you are paying.
In addition to this extra tax, you’ll be paying more on your ocean rates than you would for direct service. The Hawaii Public Utilities Commission (PUC) regulates the prices for the barge service between islands. These charges change depending on the destination island. By moving direct, you’ll pay the same flat ocean rate from your freight provider, no matter where your goods are going in Hawaii. If you ship and store on Honolulu, before delivering to Kauai, Maui, Hawai’i or others, you’ll be paying for an extra leg of transportation. Ultimately, your products are subject to three charges instead of one.
The savings you’ll have from lower taxes and rates can reduce your costs by 25 percent. The results may vary depending on your volume, but companies of every size will benefit from direct service to the neighbor islands of Hawaii.
2. Less Handling and More Security
Hawaii isn’t close to the mainland. That might be an obvious statement, but it’s easy to forget in an on-demand world. With everything from paper towels to gourmet ice cream makers available at the click of a button, it is easy to ignore the distance most goods must travel. Depending on the origin and final destination, your freight moves over at least 2,500 miles of ocean and road from the mainland to Hawaii. That’s thousands of ocean and road miles with bad weather, choppy seas, and potentially rough handling.
How does direct service reduce handling?
For many, Hawaii supply chain management is built around one central hub. Usually, freight ships from the mainland to the Port of Honolulu. Here, shipments are offloaded and brought to central warehousing terminals, before being moved on barges destined for the neighbor islands of Maui, Hawai’i, and Kauai. Direct service eliminates the handling performed in Honolulu and delivers freight straight to the neighbor island ports. By removing the extra touchpoints of drayage and warehousing, direct service makes Hawaii supply chains safer than those completely routed through Honolulu.
As you plan for the future, consider that each additional handler compounds the possibility of damage to your product. While most cargo arrives unscathed, cutting down on the touch points helps reduce the risk of loss. Fewer moments for potential damages means fewer claims and lost revenue. Even the best transportation service providers have off-days, which can mean money out of your pocket.
Have a provider who doesn’t offer direct service to the neighbor islands or uses agents to handle your freight? Talk to our experts today to discuss your options.
3. Supply Chain Simplified
Less handling from direct service also means fewer drivers needed. Instead of paying for drayage from your warehouse to the port, you’ll only pay for the delivery on the neighbor island. As the driver shortage becomes more prevalent, eliminating over-the-road miles is a major improvement over supply chains routed through Honolulu.
Why warehousing is more costly than direct service
Physical space in Hawaii is scarce and costly. The cost of warehousing on-island quickly becomes disadvantageous, with prices for space almost 4 times the mainland rate. For luxury brands and high-value products, this could work. However, as margins shrink from increased customer demands, every cent becomes more critical.
By cutting out warehousing in Honolulu for your neighbor islands shipments, your company dramatically reduces transit times. For direct sailings to the neighbor islands, transit is days shorter than traditional methods. On average, you’ll save 4 to 5 days of transit time by shipping directly; a real boon to your ability to delight your customers.
Don’t neglect your Hawaii Supply Chain.
When planning a supply chain, all of your lanes should be assessed. Formulating a strategy for an often overlooked lane can mean a considerable increase in efficiency and a nice bump in revenue. Focusing on these smaller wins provides a nice boost to an often neglected piece of business, and improves the overall health of your business.
The capacity and driver shortage for over-the-road transport isn’t going away. By fixing something small, you’ll generate more revenue to offset some of the steep prices of linehaul and drayage. Knowing your smaller parts are operating well will free you up to focus on fixing the other pain points in your supply chain.
If you’d like to discuss how direct service can improve your supply chain, contact our team today by clicking below!