In e-commerce, where every dollar counts and efficiency is king, lies a battleground of logistics. The art of moving goods from warehouse to doorstep is the story of survival, told in the margins of profit and loss. The strategy to navigate this terrain is simple: reduce costs, increase sales. The execution, however, is complex. Below are some tips to streamline your shipping and fulfillment.
The Multi-Carrier Method
Life is variety – so too should be your shipping. Relying on a single carrier for all shipping needs can limit your flexibility and bargaining power. A multiple carrier strategy allows you to compare rates, delivery speeds, and service quality across providers, enabling you to choose the most cost-effective option for each shipment. This approach aids in cost reduction and improves resilience against delays and service disruptions.
Action Steps:
1. Analyze shipping destinations and package sizes (don’t forget dimensional weights).
2. Get quotes from multiple carriers.
3. Use software tools for real-time rate comparison.
The Weight of Air
Consider the package, not just for its content, but for the space it commands. Carriers charge for the air around your goods. Trim the fat. Use boxes that hug your products. By reducing packaging size and utilizing space-efficient packing methods, you’ll lower the dimensional weight of shipments, leading to significant savings. Conduct a review of your packaging practices and consider investing in custom packaging solutions that fit your products more snugly.
Action Steps:
1. Review and minimize the size of your shipping boxes.
2. Use air pillows or paper for lightweight padding.
3. Design custom packaging for your best-selling items.
To Outsource or Not
Many e-commerce businesses attempt to fulfill on their own, resulting in warehouse teeming with goods. Yet, not all businesses need to be self-fulfilled. Third-party logistics (3PL) providers allow you to offload operationally complex activities so you can focus on growth. 3PL services offer economies of scale, reducing per-unit shipping costs via extensive networks of facilities that can position inventory closer to your customers. Outsourcing doesn’t mean you can take your eye off performance metrics. You should negotiate service levels and hold your 3PL accountable for meeting and exceeding those requirements. This will ensure your customers are delighted with the delivery process.
Action Steps:
1. Research and select a 3PL that aligns with your business needs and size.
2. Consider 3PLs with multiple fulfillment centers to reduce last-mile delivery costs.
3. Monitor performance and adjust based on customer feedback and cost effectiveness.
The Route Less Traveled
Efficiency in shipping is crucial. Optimize your routes for speed and economy. And deliver above the expectations of your customers, not simply being first, but most cost-effective. Advanced logistics software can help identify the most efficient shipping routes, considering factors such as distance, carrier performance, and cost. By optimizing routes, businesses can minimize transportation expenses and improve delivery times, enhancing customer satisfaction and loyalty.
Action Steps:
1. Implement route optimization software.
2. Regularly analyze shipping data to identify potential improvements.
3. Adjust routes based on real-time traffic and weather conditions.
The Last Mile
The "last mile" of delivery is usually the most expensive part of the shipping process. By utilizing multiple, strategically located warehouses, businesses can decrease the distance to the final delivery destination, which will reduce delivery costs. This strategy not only cuts expenses but also speeds up delivery times, offering a significant competitive advantage. Proximity reduces cost, and speed delights the customer. Both are victories.
Action Steps:
1. Use data to identify geographic concentrations of customers.
2. Choose a 3PL with fulfillment centers located near your customers.
3. Consider a local courier service for urban deliveries to reduce costs and improve delivery times.
The Gift of Packaging
Carriers often offer free packaging. It’s a gift that benefits you and the carrier. Their boxes are lightweight and durable, designed to survive the journey and move as efficiently as possible through their networks. This can be a simple yet effective way to reduce material costs. And since it’s got their logo on it, it’s easy for their employees to sort and move along to the final destination.
Action Steps:
1. Request packaging supplies from your carriers.
2. Design your product packaging to fit within these free materials when possible.
3. Train your team on how to efficiently pack using these materials to reduce dimensional weight.
The Shipping Investment
Invest in shipping software that allows you to compare shipping rates across carriers in real time. Such software often comes with built-in discounts negotiated by the software providers with various carriers, which can lead to substantial cost savings. Additionally, these tools can automate the shipping process, reducing manual labor costs and errors.
Action Steps:
1. Choose shipping software that integrates with your e-commerce platform.
2. Set up automation rules for choosing the lowest cost carrier based on package size, weight, and destination.
3. Utilize batch processing for high-volume shipping days.
The Negotiated Passage
Never accept the first price. Carriers expect negotiations. Your shipping volume is leverage to reduce your costs. Even small e-commerce businesses can negotiate better rates with carriers, especially if they can demonstrate consistent shipping volumes or commit to certain volume thresholds. It’s important to regularly review your shipping needs and discuss them with your carriers, as rates can fluctuate based on market conditions and your shipping profile.
Action Steps:
1. Gather your shipping volume data to leverage in negotiations.
2. Contact carrier representatives to discuss your business and potential discounts.
3. Regularly review your shipping volume to confirm discounts are being applied and renegotiate as your business grows.
What Gets Measured
The shipping and fulfillment landscape is dynamic, with rates and services constantly changing. Regular analysis of your shipping data can reveal trends and areas for improvement. Adjust your strategies based on performance metrics, seasonal fluctuations, and changes in carrier rates and services.
Action Steps:
1. Schedule monthly reviews of your shipping costs, carrier performance, and customer feedback.
2. Experiment with different strategies to see what works best for your business and customers.
3. Stay informed on industry trends and new technologies that can improve efficiency and reduce costs.
Educate Your Customers
Offer choices. Speed for cost, or economy for patience. Transparent communication about shipping costs and delivery times can help manage customer expectations and satisfaction. Consider offering multiple shipping options, including slower but more affordable choices, and clearly explain the costs and benefits of each. This approach can enhance the customer experience and encourage repeat business. Transparency builds trust, and trust builds loyalty.
Action Steps:
1. Include a shipping cost calculator on your e-commerce site.
2. Offer multiple shipping options at checkout.
3. Educate customers on the impact of their shipping choices on costs and delivery times.
For small e-commerce business owners, the path to increased sales and profitability often involves optimizing shipping and fulfillment processes. Continuous analysis, adjustment, and effective communication with both carriers and customers are essential to maximizing the benefits of the strategies mentioned above. With a proactive and strategic approach to shipping and fulfillment, e-commerce businesses can enhance their operational efficiency, improve customer satisfaction, and secure a competitive edge in the marketplace.
Eric S. Youngstrom is Founder and CEO of Austin-based Onramp Funds, an innovative funding provider that supports the growth of e-commerce businesses. Eric leads a team steeped in e-commerce, providing financing and other resources to empower online merchants to scale their businesses and achieve their dreams.
This article originally appeared in the May/June, 2024 issue of PARCEL.
