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May 28, 2024

10 Ways to Reduce Your Retail Shipping Costs

reduce shipping costs

As your business grows, shipping and related fulfillment costs can add up quickly. Plus, seemingly minor missteps can incur hidden fees or even slow down your fulfillment process.

You may feel bound by your current carrier or complex retailer handling requirements, but that doesn't mean you can't improve shipping efficiency and effectiveness behind the scenes.

To help you get ahead of shipping expenses, we've put together our top ten tips on how to reduce shipping costs and streamline your fulfillment processes in and out of the warehouse.

1. Stay ahead of inventory needs

Before you can think about how you pack and ship orders, you need to ensure you have the right products on hand when orders come through. Without a reliable inventory management system in place, you'll likely run into backorders – frustrating your customers and leaving you to pay rush fees for inbound supplies and even more rush fees to expedite deliveries.

Evaluate your current inventory management processes and keep in mind how well they account for predictable demand and unexpected influxes in orders. Your inventory ultimately sets the tone for all of your fulfillment workflows, so optimal management is critical to your overall success.

2. Consolidate inbound orders

It's important to consider not only what happens to products once they arrive at your warehouse but how they get there in the first place. If you're placing ad-hoc requests to your vendors as new orders come through your eCommerce site, you're likely paying inflated shipping and processing costs — or even rush fees — to keep up with promised delivery dates.

Use your Warehouse Management System (WMS) to evaluate past trends in demand, product popularity, and even seasonality and forecast which products you'll need when. Then consolidate your orders and place them well in advance to take advantage of bulk discounts and streamlined receiving.

3. Keep DIM weight in mind

Most major postal carriers price shipments based on dimensional weight, also known as DIMS, in which the physical size of each package can significantly impact the cost to ship it. The package's dimensions are multiplied, then divided based on the carrier and shipping class to produce a DIM weight. Finally, the package is weighed and the higher of the two numbers determines the actual shipping charge.

The math is complex, but the resulting costs for eCommerce suppliers can add up quickly since they'll always be charged for the greater of the two. For example, if you ship a 1lb tee shirt in a 12x12x12 cardboard box, you'll pay for the higher 7lb DIM weight calculation rather than the 1lb shipping cost of the shirt itself.

Get ahead of DIMs by weighing all items on the inbound and estimating shipping weight for each order as it's processed. You can also work with your logistics or fulfillment partner to include weight checks in your quality control process before orders are handed off to your shipping carrier.

4. Use appropriate packing materials

Efficient packaging helps you reduce shipping costs and steer clear of excessive charges for high DIM weight.

Decide whether you need poly bags, mailers, or boxes for each product, and stay away from a one-size-fits-all approach, like sticking everything in a cardboard box because that's the only packaging on hand.

Instead, review the estimated demand for each product and then align your supply orders to match: purchase poly bags for light items and durable boxes for heavy or breakable items.

This is also a great time to consider the additional materials – like packing peanuts or bubble wrap – that go inside each container. Are these items light enough to avoid tipping the scale but sturdy enough to keep products secure?

5. Protect fragile or hazardous items

As a consumer, there's nothing more frustrating than receiving a much-anticipated package, only to open it up and find broken products or leaky containers. Plus, eCommerce suppliers have to absorb the cost of replacing and re-shipping products back to the customer or retailer.

As you define packing processes and order materials, account for fragile, spillable, or potentially hazardous products. Create a system that adheres to required safety protocols, and pack with care to avoid damage during transit.

6. Ship from a central location

Thanks to expectations set by Amazon and other big-box brands, customers and retailers expect every order to arrive in a day or two, no matter how far they are from your business.

Instead of paying extra for expedited shipments from your local headquarters to a recipient on the other side of the country, consider establishing a warehouse or fulfillment center in a central location, like the Midwest. Look for a location that allows major carriers to reach domestic customers in two days or less with ground shipping.

7. Take advantage of partner discounts

Speaking of your warehouse, you may qualify for a shared shipping discount if you work with a fulfillment partner that serves multiple clients from a single location.

Most carriers offer discounts based on order volume, which means enterprise brands are the most likely to qualify. However, partner discounts are calculated by your provider's total shipments across clients, which means you don't need a high order volume to take advantage of the savings.

8. Choose the right carriers

The best-fit carrier depends on more than their service areas or advertised base rate. First, research major carriers and industry best practices, then consider how you'll prioritize shipping capabilities based on your location, order volume, product type, and more. You may even decide to work with multiple carriers in tandem; shipping certain products or product types through one channel, and funneling the rest of your orders through another.

For example, non-urgent freight shipments can likely go through USPS, but if you ship to retailers, you'll probably need to partner with FedEx or DHL to ensure reliable, consistent shipping and delivery timelines with detailed tracking features.

9. Consolidate outbound shipments

It's easy to fall into an as-needed shipping strategy, especially if you're transitioning from small, in-house operations to full-scale fulfillment. However, you're likely missing out on cost-saving opportunities by shipping orders one at a time.

Just as you should aim to streamline receiving, refine your approach to outbound shipments. Plan ahead and consolidate shipments through the same carrier. Scheduling bulk shipments will help lower ship rates and ensure time-sensitive orders get out the door quickly.

10. Invest in accurate tracking services

You can take many proactive steps before a product leaves your warehouse to ensure affordable, efficient delivery. However, you need more than the word of your carrier or service partner to reassure recipients that their orders will arrive on time.

Invest in tracking services that follow each order from initial confirmation to final delivery. This visibility helps you keep carriers accountable for promised delivery dates. Plus, next time you receive a call about a missing or delayed order, you can pull up the details in your online tracking system instead of playing phone tag with carrier representatives or the local post office.

You can also integrate and surface this information to your customers or retail partners, so they call follow along throughout the fulfillment and delivery process.

A third-party logistics (3PL) partner can help you implement each of the strategies above, along with process improvements that will keep costs down and ensure customers receive accurate, well-packed orders every time.

At Materialogic, we help make complex fulfillment processes simple by taking a deep dive into your business and curating custom-tailored solutions for your warehousing and fulfillment needs.

Fulfillment Operations

Tag(s): Blog , Fulfillment , Shipping

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