Shippers selling FOB origin lose sales in distant areas compared to local vendors since customers have a longer replenishment cycle entailing large inventories. Customers must pay inbound freight charges and money is tied up for longer periods of time.
Changing to a sales policy of airfreight shipment with transportation costs absorbed by the shipper wipes out these disadvantages and permits market penetration comparable to that in shippers' home area. Contribution to fixed costs and profit on additional sales is often 35 percent or more which may exceed the airfreight cost providing a powerful tool for increasing exports and profits.
