Problems:
Outbound cost of shipping now averages 6% to 8% of the average order (often much higher for some
businesses), exceeding fulfillment labor costs. Carriers can also add over 90 accessorial charges, and there is no end in sight. Consumers take shipping & processing (S&P) rates into account in their purchasing decisions, with these charges among the top reasons for cart abandonment.
Solutions:
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Negotiate annually with multiple vendors in a competitive bidding process; an experienced transportation consultant conducting a freight rate and contract analysis can make sure you are getting the best possible negotiated rates and reduce your cost of shipping. Focus on accessorial costs.
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Implement best way shipping software in your order management system.
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Look to use a UPS or FedEx billing program that combines small package inbound and outbound volumes and discounts.
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Charge customers a reasonable S&P charge to off set a portion of your pick, pack, labor, packing supplies and shipping costs. If you offer “free shipping,” make sure you have enough margin built into the product to pay it.
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For larger companies, regional fulfillment centers closer to customers lower your cost of shipping and days in transit.
Benefits:
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Experienced consultants can often increase your savings from between 10% to 25%, and can work on either a gain-share or project basis.
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You can proactively reduce both the rate of increase in your cost of shipping per customer order, and loss on your profit & loss (P&L) statement.
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If you currently charge for S&P, more efficient shipping allows you to use “free shipping” as an incentive to purchase.
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