For any product based company, shipping can be one of the most challenging and costly aspects. In the never ending search for greater profit margins, shipping is often overlooked as an area where costs can be reduced, and profits boosted. Below are nine methods to reduce overall shipping costs, some are simple and some more complex. If you work with a 3PL (third-party logistics provider) they should be able to help you implement some of these, or at least be a sounding board to help you make the best decisions for your business.
Flat Rate Shipping
Some carriers offer flat rate shipping options that can standardize the overall shipping process. With flat rate shipping you aren’t charged for the size, weight, or distance that a package must travel—as long as it fits in the designated box or envelope that the carrier provides. If you sell products that are heavy, but smaller in size this can be a great option as weight is not a factor in flat rate shipping. The two major carriers with flat rate options are:
Carrier Provided Packaging
If you use your own packaging, you might face additional charges if your box exceeds the size regulations set by the carrier. A great way to avoid these extra charges is to use the packaging provided by your carrier. Because most carrier provided packaging is free, this can also save you money because you don’t have to purchase your own boxes or envelopes. It might not seem significant but it adds up.
Compare Shipping Rates
If you are unable to use flat rate packaging, or have your own branded packaging, it is critical to measure and weigh your products so that you can compare what the shipping costs will be across carriers before you send them off. This involves measuring and weighing them after they are packaged and prepared to ship. By using each carrier’s shipping calculator, you will be able to track and see which carrier will offer the best rates for your products, based on the zoning, dimensions and weight of each shipment. Each carrier has a shipping rate calculator, listed below to help you compare. It is also important to periodically check the rates, as they can change, to ensure that your business is getting the best deal available.
Negotiate a Discounted Rate
You are not limited to using a single provider for all of your shipping services. This can be advantageous if you are looking to negotiate a lower rate for shipping your products. Carriers will often compete for your business and might decrease their rates in order to prevent you from moving to another option. As the adage goes, it is easier to retain an existing customer than create a new one.
A second method is the fact that a carrier might offer lower rates depending on your order volume. If you are shipping a significant volume of products you could qualify for discounts based on the number of products that you are shipping and the amount you are spending with your carrier. It’s worth it to ask about this.
Another option is working with a 3PL. An experienced third-party logistics provider will leverage the size and volume of their shipping, and be able to get you a lower shipping rate as a result. Since they are shipping products not just for a single company, but often hundreds, they have the volume to bring shipping costs down quite a bit. If they are well established, they will likely also leverage historically good relationships with shipping carriers as well.
Establish a Minimum Purchase Amount for Free Shipping
If you want to offer your customers free shipping, make sure to set a minimum purchase amount as a threshold for that bonus. You’ll want to set it at a rate where you are only paying for shipping on higher purchase orders—ones that are your most profitable. Any order that does not meet that free-shipping threshold would mean the purchaser will pay for shipping. The main way this can increase profits is by incentivizing your customers to add additional purchases to their order so that they qualify for free shipping.
The big carriers USPS, FedEx, and UPS are not your only choices. There are smaller regional carriers who might be willing to offer discounted rates, or throw in value-added services such as insurance or tracking for free. The drawback is that they often have limited delivery networks.Look to see if they fit a specific region where your customers are located; it can be a worthwhile option to explore, even if it’s just for a portion of your packages.
Insurance is often necessary to protect your business from any loss or damage that might occur during the shipping process. Most shipping carriers offer their own insurance either as a stand-alone charge, or included as part of a product offering such as flat rate shipping or priority mail. There are third-party companies who provide insurance that can often be cheaper than what the the major providers quote. Shop around to see if you can lower that cost.
Buy Shipping Supplies in Bulk
Shipping involves so many supplies:boxes and envelopes of all sizes, padded envelopes, bubble wrap, tape, labels, and much more. When you put all of those together it can take a sizeable chunk out of your bottom line. Consider buying them in bulk—most companies offer discounts based on volume orders.
Partnering with a 3PL to outsource your order fulfillment can offer significant cost savings in the long run. It might seem more costly upfront, but the savings will add up because of satisfied customers, smooth transitions, and there’s nothing like having an expert handle your business. It will likely save you time and effort that you can put into other aspects of your business, like marketing, fundraising, or innovation. If you choose to outsource, you won’t need to put money into warehouse rent, staffing the warehouse, utilities, specialize software and technology, and more. A 3PL is a whole company of experts who know shipping best and have well established relationships with most carriers that can provide further cost reductions.
Reducing shipping costs may seem like a big challenge, but the reality is there are many methods available that can help bring them down. From small savings to volume discounts, they all add up and can wind up boosting your profit margin significantly.
If you are seeking shipping related support we’d love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.
Tags: Fulfillment Articles, Industry Tips from Experts, What is a 3PL?