Procurement strategy
Broker vs. direct: a cost model for multi-site pallet procurement
The line-item cost is rarely the whole cost. We model what running five regional vendors actually costs once you add procurement hours, quality variance, and missed dock windows.
Most procurement teams scope pallet sourcing decisions on per-unit cost. That's the wrong scope. Once you account for the labor of vendor management, quality variance across yards, and the operational cost of missed dock windows, the per-unit number stops being the relevant metric.
The line items procurement usually counts
A standard pallet RFQ comes back with three numbers:
- Per-unit delivered cost
- Lead time
- Minimum order quantity
These are necessary but insufficient. Every regional yard quotes some version of these, and most procurement comparison spreadsheets stack ranks bids on price first, lead time second, MOQ third.
The line items procurement usually misses
Consider what you spend internally to run that RFQ process:
Sourcing hours per RFQ. A multi-yard bid, even for a routine spec, takes 4–8 hours of procurement time for the buyer running it. Times the number of RFQs you run per year, times the loaded hourly cost of that buyer, and you have a real number — usually $25,000–$80,000 a year for a multi-site operation.
Quality variance cost. When yard A ships Grade A pallets and yard B ships something closer to Grade B at the same price, the cost shows up on your dock — in handling time, in receiving QC, occasionally in a chargeback when one of your retail customers receives a sub-spec load. Quality variance is invisible in the RFQ math but real in operations.
Dock-window misses. Production schedules and pallet supply have to align. When a regional yard slips delivery by a day, the cost is whatever the line stoppage or production reshuffle costs you — orders of magnitude larger than the pallet itself.
AP overhead. Five vendors × twelve months × invoice-to-pay processing time is its own number. For multi-site operations running 8–15 regional yards across all DCs, AP overhead alone can run $40,000–$120,000 annually.
The actual cost comparison
Put the line items together and the comparison looks different than the RFQ spreadsheet suggests. For a representative mid-cap CPG operating four plants and consuming roughly 800,000 pallets per year:
| Line item | Direct (multi-vendor) | Brokered (single contract) |
|---|---|---|
| Per-unit delivered cost | $0.00 baseline | -12 to -15% |
| Annual sourcing hours | 320–560 | 30–60 |
| Quality variance allowance | 1–2% of spend | <0.3% of spend |
| AP overhead (invoice processing) | 12 vendors × monthly | 1 vendor × monthly |
| Dock-window miss frequency | 2–4 / quarter | <1 / quarter |
Sum the deltas and the savings per year on an $800K annual pallet spend lands in the $140K–$210K range — well beyond the 12–15% headline number.
When direct still wins
The cost comparison favors brokered sourcing in most multi-site cases — but not all. A single-site operation with a strong incumbent supplier relationship and predictable spec is often best served by holding that relationship. The model breaks down at scale: more sites, more SKU variance, more compliance requirements, more risk of vendor inconsistency.
What to do with this analysis
Run the math on your actual operation. The savings calculator on this site is a starting point — give it your annual spend and current sourcing hours and it returns the band. If the band looks meaningful for your operation, the next conversation is about how to structure the program.