Buying in Bulk can save producers a great deal, and is a great opportunity for them to play the “economies of scale” game. As a business owner myself, I am always looking for ways to cut costs and make my operation more efficient. And in today’s economy where margins are tighter, keeping your operation efficient is crucial.
Buying an Overhead Bulk bin is a significant investment. I always want to know the ROI of a purchase I am going to make, so let’s take a minute to look at the numbers of an Overhead Bulk Bin.
Running the Numbers
A 16 ton Overhead Bulk Bin with standard options, delivered and setup is going to cost around $6500.
Depending on the commodity, buying in bulk will give savings of 10-50% over bagged feed. We will stay with a conservative number of 20%. So if a producer spends around $6,000 on bagged feed a year, they will save $1,200 a year.
At savings of $1,200 per year and the bin costing $6500, then in 5 years and 4 months, the savings in feed cost will pay for the bin. This gives you an 18% Return on Investment.
That is a pretty quick overview of the numbers, and it doesn’t take into account the gas and the time that you will save from not having to drive to the feed store as often. For a more detailed break-down you can go to Noble.org and check out the calculator they have made. It is very detailed and very simple to use. Just click Overhead Bulk Bin Calculator to use it on your operation.
Buying Bulk can also help save when it comes to Fertilizer. Again, looking at the numbers helps us see clearly what our ROI can be.
A 40 ton Round, Smoothwall Fertilizer bin is going to cost approximately $10,500 delivered and setup.
There is 500 acres of ground that Urea is spread over at 150 lbs. per acre. That is 75,000 lbs. or 37.5 tons of Urea. At $350 a ton, it equals $13,125. Purchasing Urea in Bulk is going to save around 25% (my figures tell me more like 30% but I like to be conservative). That saves $3,281. Figure in delivery of the Bulk Fertilizer via semi at $500, you still come out saving $2,781.
At that savings rate of $2,781 the bin is paid for in 3 year and 8 months which gives you over a 25% ROI. Really great! And for the rest of the year, you can use it to store other commodities.
As we can see, the numbers speak for themselves. The more you are spending on feed, the more you stand to benefit from buying in bulk. If you’re only spending a $1,000 a year on feed then a Overhead Bulk Bin won’t save you a lot money. As we wrap up, I encourage you to run the numbers on your operation. Fall will be here shortly!
How has buying in bulk benefited you? Be sure to comment below.