This holiday season blog is our gift to budget-conscious B2C shippers who need to control fulfillment expenses.
The subject: reducing parcel shipping costs.
How do you do it? Think P – A – R – C – E – L.
Package your products with parcel shipping costs in mind
Ever since dimensional weight or dim weight pricing became the industry norm, fulfilling orders in boxes that are bigger than necessary has become a recipe for waste – which is why it’s always good to right-size your shipping boxes. Or, you may be able to change to a different packaging type to reduce shipping charges even more. For instance, let’s say you’re shipping a box that weighs 2 pounds and 4 ounces. This will get charged at a 3-pound rate. If the product is small enough, you can easily reduce the weight below 2 pounds by shifting from boxes to polybags or jiffy bubble mailers, cutting costs 5-10% on these shipments. A little extra focus on packaging could potentially save you hundreds of thousands of dollars.
Avoid express shipments on inner zone moves
An anxious online customer may pay extra for express shipping at checkout. What they don’t know is that you have a warehouse quite near their home that allows you to meet the 2-day delivery requirement with more economical ground home delivery. This cost-saving strategy applies to shipments within zones 1, 2 and 3. For instance, if your fulfillment center is in Dallas and your ship-to address is in Waco, TX, that’s a good candidate for downgrading the service (and cost) while keeping the customer happy. Customers don’t care how you get it there, only that it’s on time.
What can you save by shifting inner-zone shipments to a ground service? About $7–$20 per package. Side note: You can either optimize the shipment on the back-end and keep the money or program your website to present the customer with cheaper options that meet a rapid delivery goal.
Re-evaluate carrier contracts
If you’ve been working with one of the top parcel carriers for the last few years, don’t be afraid to put your contract out on the open market and shop around for a better deal. There are many options out there. Carriers are not volunteering discounts; you’ll need to ask. If you are working with a 3PL, re-bidding becomes less of a concern since 3PLs tend to be aggressive negotiators and have more buying leverage with carriers. They’re also savvy to all the accessorial charges that drive up parcel shipping costs and can suggest strategies to sidestep or lower many of these charges.
Currently, most carriers are not fighting for market share but looking to increase their margins on eCommerce shipments. Regardless, instilling competition with carriers can be an effective strategy and can reduce your delivery expense as much as 3–5%.
Choose the right parcel product for your desired service
Don’t get locked into using a single parcel carrier or a single service. There are a wide variety of services available across parcel carriers, each with characteristics that may make it a more cost-effective option for some of your shipments. One Etailer was shipping a high volume of lightweight packages nationally from two warehouses and paying significant surcharges for fuel, residential delivery and rural delivery. A shift to DHL eCommerce avoided the delivery surcharges, except fuel, and saved as much as $8 per package. DHL would not have worked for larger, heavier packages, but was the right choice for this set of products and distribution requirements. In other cases, a product from UPS, FedEx or USPS could be the optimal choice.
If you are partnered with a 3PL that manages parcel shipping, they should have an excellent knowledge of the available shipping options and be able to identify the cost-saving advantages of matching your shipping requirements (for different products and customer sets) with the right carrier and service. Doing so could save as much as 5–10% of your parcel shipping costs.
Eliminate or minimize residential delivery surcharges by using USPS for final-mile delivery
If you ship to homes using one of the large parcel carriers, you’re most likely paying residential delivery surcharges (currently $3.80 per shipment) on top of your regular shipping costs. To avoid this surcharge, you can use the U.S. Postal Service (USPS) for more economical final-mile delivery. This strategy is most appropriate when shipping items under 15 pounds. Using USPS doesn’t necessarily mean bypassing the big parcel shippers. UPS (SurePost), FedEx (SmartPost) and DHL eCommerce have programs that ship across the country but use USPS for the final mile. In fact, all of DHL’s final-mile deliveries are done by USPS. The savings potential: 20–40% of the total delivery expense.
Leverage the freight buying power of a 3PL
One of the fastest paths to cutting parcel shipping costs is to align with a 3PL that manages parcel transportation for many other companies. Using their buying leverage with carriers, they can negotiate much better shipping rates than most small- to medium-sized businesses can typically get on their own – from 10%-40% for heavier packages and lower, but still significant, discounts for lighter parcels.
To learn more about strategies to reduce fulfillment and parcel shipping costs check out Amware Fulfillment.