As eCommerce continues to grow, the demand for smaller, more frequent last-mile deliveries is also expanding. Parcel rates are now more than twice the rate of inflation as a result. To compound this, the Amazon Effect is creating a higher customer demand for free shipping with diverse delivery options. In 2015, almost 60% of all online transactions included free shipping. So, how can a company compete and stay profitable?
Shippers of every size need to protect their profit margins by paying close attention to transportation costs. That’s why more companies are switching to enterprise parcel shipping platforms to capture and store shipping data in a single data warehouse and match it against carrier invoice data. By harnessing these analytics, companies can mine for opportunities to reduce shipping costs while still providing exceptional service. Here are three way to protect profit margins from the cost of “free shipping.”
Strategy #1: Rate Negotiation
Have you looked at your contracts lately? Could you be getting better bulk discounts? Periodically take a look at shipping rate calculators from several providers to ensure you’re getting the best rate. If your international sector has grown recently, go back to your shipper with representative data, and ask them to improve the rate.
Companies can also use hybrid services to get more significant discounts. This is where a shipper such as UPS or FedEx picks up the parcels to ship but then takes them to the USPS. This method can save some companies up to 50% off on shipping rates. Companies can also hire a 3PL who ships for multiple companies and therefore, can acquire a generous shipping discount based on bulk and volume.
Strategy #2: Quality Control
The enterprise parcel shipping platforms provide a lot of detailed information which was previously unreconciled. By performing quality control audits on invoices, companies can save big money on shipping. For instance, look for guaranteed deliveries that weren’t shipped on time and recover those losses. Look for other issues like damaged parcels, lost shipments, and manifested but not shipped transactions as all entitle you to a refund.
Also, be sure your invoice is correct! You wouldn’t believe how many invoices have the wrong rate applied. Not only will this strategy help you find lost money, it will also show you how the shipper is doing and areas that need improvement.
Strategy #3: Better Processes
Efficiency and savings go hand-in-hand and it’s no different for shipping. As you are reviewing your processes, consider if you could be using shipping materials that weigh less and still offer the same protection as those you’re currently using. If you ship bulk liquids, consider intermediate bulk containers which are 33% lighter. Ensure that your product dimensions and weights are as accurate as possible, so the carrier doesn’t charge more than needed. Look at diverse shipping options that best fit your products.
If the cost of free shipping is eating into your margins, it’s time to make some changes. Implement parcel shipping analytics to expose opportunities to reduce costs, improve quality control and refine practices. If you’re looking for an experienced partner to help you reduce shipping costs, among other things, contact us at JIT Services to see how we can help you reduce costs while increasing efficiency.