If you’re reading this shortly before your annual Thanksgiving feast, keep your antacids handy, because the country’s largest package carriers have begun rolling out their annual parcel shipping increases, and boy are they cause for heartburn.
Fed Ex announced its new charges, which reflect an average uptick of 4.9%, on November 5. The USPS shared its proposed rate hikes – the biggest in its history – in mid-October. And the final member of the club, UPS, is expected to share its latest pricing news any day now.
These not-so-glad tidings wouldn’t be a major problem if parcel shipping costs represented a small portion of your company’s fulfillment and delivery expense; however, in most cases, parcel shipping accounts for about two-thirds of the cost of your order fulfillment operations. As a result, any way you look at it, they’re always big news, especially if you like turning a profit.
Thankfully, Amware’s got your back, which is why we’ve stuffed this week’s blog full of practical tips for how you can reduce parcel shipping costs.
Some of them could be a relatively quick fix. Others may take a bit longer to put into action. But all of them could protect your company from having to take a major financial hit or substantially raise your prices when 2019 rolls around.
1. Don’t Be Afraid to Think Out of The Box (And Inside It)
At the end of the day you, as a direct selling, subscription or eTailing company, have a wide number of exterior packaging and fill materials to choose from for your parcel shipping. And the ones you select could be impacting your bottom line more than you think.
For example, have you been as picky as you should be about the size of boxes you’re using? A few years ago, parcel carriers recognized that they were losing money on larger, lighter-weight packages that ate up truck space, so they instituted dimensional weight, or dim weight pricing – essentially what carriers think the package should weigh given its size at minimum density. As a result, if your box sizes are larger than needed, you’re basically paying more to ship air. In fact, a little focus here could possibly save you hundreds of thousands of dollars in the long run. No lie.
Additionally, have you ever considered whether your merchandise really needs to be sent out in a box at all? If your product is small and somewhat sturdy, the use of alternative forms of packaging such as polybags might be a better bet. They usually allow your company to reduce the weight of each package by a few ounces, and that could help you substantially reduce shipping costs.
2. Use A Magnifying Glass
When it comes to parcel carrier agreements, the devil really is in the details.
Carriers are pros at finding ways to charge you more than the base rate in the form of accessorial fees such as dimensional weight, residential delivery, and peak season surcharges. And many of these charges are often cleverly hidden within the fine print of their pricing sheets. Some of these additional expenses are also disguised in the form of bundled service packages that look like amazing deals – until you start to drill down and realize that they’ll end up costing you more if you’d purchased each service a la carte.
So even though it’s about as exciting as hearing about Uncle Fred’s latest surgery, take the time to read all of the terms and conditions of your carrier agreements carefully. It will help you do a far better job of weighing the pros and cons of each delivery option – and avoid cleverly disguised billing surprises.
3. Move Up the Negotiating Food Chain
Consider the tale of these two identical shipments. Same product. Same packaging. Same ship-to address.
One was shipped from an eTailer’s in-house fulfillment operation, the other from a large third-party fulfillment company (3PL).
Theoretically they should cost the same. But they don’t, because we all know that’s not how the business world works.
Because 3PLs handle large volumes of shipments, they have a higher aggregate shipping spend they use to negotiate better parcel shipping rates. As a result, some of these fulfillment providers can pass along shipping discounts in the 10-40% range for heavier packages – and lower, but still significant, discounts for lighter packages.
So, if you’re feeling like a little fish in a big pond, think about aligning with a 3PL like Amware that manages parcel transportation for many other companies. It could help you secure rates that are much more comparable to your larger competitors.
4. Put Product Closer to Your Customers
On final note (and because it’s almost Thanksgiving) let’s talk turkey about where you’re shipping your packages from. Simply put, the farther your packages travel within the parcel carrier’s network, and the more zones they need to cross, the more it will cost. Minimizing this distance can help. Examine your current warehouse network. Would either of these strategies make sense?
- Moving to a more central location. If you’ve decided that a one-facility strategy is currently what’s best for your company, consider locating that facility at a point that creates the most efficient outbound transportation network. For companies with national marketing, that could be in the middle of the country. If you have a one-DC approach and are located near the East or West Coast, this approach will help eliminate many expensive, high-zone moves.
- Expanding your warehousing network. Each time you add a fulfillment center (unless it’s located right next door to the one you have), you lower shipping costs and speed delivery time. Granted, there will be additional costs associated with carrying inventory in more than one facility. But those costs may be more than offset by your potential shipping savings, which could run approximately 10% if you’re expanding from one shipping location to two, and as much as 30% if you’re going from one shipping location to three.
P.S. Happy Thanksgiving
There’s more we could say here about parcel shipping cost increases, but we’ve got an eBook for that. Download our primer on reducing fulfillment costs through smarter parcel shipping.
When parcel shipping costs become too much, these insights might come in handy. But they won’t help you on Thursday after your third serving. For that, keep the Tums handy.
Happy Thanksgiving to all.