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Bulk Bag Economics 101 - The Big Four Factors

Posted by Marty Dilworth on Fri, Mar 7, 2014 @ 05:03 AM

When searching for the best bulk bag solution, price is always one of the key factors in making a final decision.

Let's have a look at what costs are associated with importing bulk bags and how these factors affect your price per bag. Pricing can change month to month, and here's why.

bulk bags transportation

We have all been there. From buying a new vehicle to the cup of joe that gets you going in the morning, money exchanges hands for goods or services. Are you confident that what you are paying is fair?

Are you getting a smokin' deal, or are you getting hosed? Not exactly technical terms, but none of us want to get taken advantage of or experience buyer's remorse.

Today we are going to look at the 4 major price contributors that make your bulk bags cost what they cost.

1. Resin

Before the sewing, before the shipping, before the bags even hit the factory floor, the raw material needs to be acquired by our overseas partners. That main ingredient, the "meat and potatoes" of a bulk bag is polypropylene. Polypropylene is called a thermoplastic. That is, it can be melted to a pliable state and then it will return to a solid state once cooled.

Polypropylene is essentially a by product of the oil refining process and it has only been around since the 1950s. However, it has really taken off as a manufacturing material since then, with global usage of over 50 million tonnes per year and growing.

Our factories buy this resin by the tonne and have it extruded into workable fibers. This material is then processed into thread like material can be woven into the super-strong fabric your bulk bags are made from. Resins prices can vary over the course of a year and are usually tied into the price of oil. Swings in the global market will cause resin prices to fluctuate.

2. Labour

In today's highly automated world, you might be surprised to learn that every single bulk bag landing on your doorstep was sewn by hand. Yes, the majority of the stitching you see was done by nimble fingers across the ocean.

Once your custom design has been established and approved, large swathes of fabric are made with machines to cut the rough outline and get the building blocks together. But at the end of the day, it takes a person with skilled hands and a trained eye to fit the pieces together in a proper manner.

India and China are two major forces in the bulk bag industry, producing millions of bags every year. The growing middle-class in these countries can only be achieved through growing wages.

A bag made today is more expensive than the same bag made only a few years ago. In response to this, many companies are looking to other developing countries for cheaper labour. However, the current and continually improving infrastructure of the major players is a tremendous asset, even with the rising costs.

3. Freight

Your custom bulk bags would qualify for some serious travel points. Not only do the bags have to cross an ocean or two, they also have to be delivered to where you need them. From ocean, to rail, to truck, there is no such thing as a free ride!

Ocean freight can be an unruly beast. Only a handful of companies have the ability to transport massive quantities of goods around the globe, and they are well aware of this. Ocean rates can increase with click of a mouse, with additional charges tacked on during slow times, good times, bad times, anytime. These companies do provide a tremendous service to North American markets, but the lack of competition leaves very little room for price negotiation.

Once the bags have made their way to port, the next step is usually a train ride to a major center. Again, the quotes we get for rail transportation is not up for debate. Finally, the bags have landed in a major hub and they are ready to take the final journey home.

Inland freight is something we do have some control over. There are many carriers out there and we try to stick with trusted partners to ensure your bags are delivered on-time. We do negotiate freight rates constantly and we strive to get our customers the best deals on 18 wheels.

4. Foreign Exchange

The preferred currency of international business is the United States Dollar. If you have ever been on a vacation, you know that can go either way. For example, last year around this time, our buying power was very high. For every American Dollar we had to buy, we would get about $1.06. Pretty sweet deal for importers, not so much for exporters. Fast forward a year and we getting only $0.91 per Canadian Dollar we spend on bringing product to North America. Great deal for exporters, not so much for importers. Ce la vie. 

To summarize, you can clearly see there are many uncontrollable factors that come into play when getting pricing on an order of bulk bags. As a company, we are always looking for ways to save you money, and we are quite good at managing these costs.

However, next time you get a quote from your favorite bulk bag supplier, really take a look at the final number. Along the way, we all have to pay a lot of people to produce and transport your order.

If the price you are quoted today is a higher than the last time you ordered bulk bags, make sure you have the conversation with your rep.

Chances are, you are not getting hosed, but your bulk bag supplier is doing the very best they can to get you a smokin' deal.

Read the rest of the series! The Economics of Bulk Bags:Part 2Part 3 and Part 4

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Topics: bulk bag quote, supply chain, bulk bags, minibulk, distribution, product packaging, custom FIBC, bulk bag pricing