How to Reduce Shipping Costs with Technology
Since March, FedEx has been in a self-proclaimed “Shipathon.” As the holidays close in, we’re seeing a surge in eCommerce unlike any before. Between higher online sales, and consumers’ desire for expedited shipping, the result is even more competition and less truck space. With that in mind, it’s not surprising that shipping costs keep climbing. According to a Bloomberg report on the Drewery World Container Index, the cost of moving goods by ship increased 12% in 2020, the highest in 5 ½ years. Similarly, air freight costs, which peaked in May, are still significantly higher than last year—about 60% higher, in fact. And on land, a severe driver shortage has combined with ongoing economic recovery to drive up spot rates and surcharges going into the holiday season.
Keeping logistics costs low is essential for maintaining competitive pricing, while maximizing margins. To do so, many companies, from small and medium businesses (SMBs) to global enterprises, are turning to technology to help manage shipment accuracy, create efficiencies in packing and truck building, and getting the best commercial shipping rates. Looking to lower your own shipping costs? Here are 5 ways technology can help.
1. Pick the Right Box to Pack
If you’re already dealing with high costs for shipping, you want to make sure you’re getting the most bang for your buck. Shipping items in an oversized box is a recipe for higher costs, because of dimensional weight rating. Dimensional weights (DIM weights) are based on the dimensions of a box and can vary depending on the carrier you use. The worst part: most carriers will look at the actual weight of the package and the DIM weight and charge you for whichever is higher.
That means if you are using oversized boxes, you might be overpaying to ship empty air or worse yet unnecessarily paying to ship extra packaging material. In full truckload shipping, you also likely have less room per truckload, which means you’re paying for more trucks. Luckily, cartonization software can help eliminate these costs by helping your warehouse employees choose the perfect box for every order. Pack optimization software works by taking into account the dimensions of all the products that need to be packed, matching them with the right-sized box, and letting the packing employee know which box to use.
As an added bonus, choosing appropriate boxes can lower your packaging costs, including costs for filler like bubble wrap, and help you achieve greater supply chain sustainability!
2. Send More with Less
Shipping empty air not only increases your company’s carbon footprint; it can slash the already razor-thin margins on your orders. The more you can pack into a single truck or container, the more you save. This process, called freight consolidation, translates to significant savings, not only in fuel and driver costs, but also logistics costs like handling charges, documentation fees, terminal storage charges and more.
Packing optimization makes it easier to create full truckloads by sending more packages in each truck. Another step you can take to lower shipping costs is to consolidate orders and shipments. After all, shipping two products in one box will generally cost less than shipping them in separate boxes. With tight delivery timeframes, this isn’t always possible; however, many eCommerce merchants, including Amazon, are now offering consumer incentives for “no rush shipping,” which allows them to send orders in fewer packages.
Suppliers using vendor managed inventory solutions have another way to increase their vehicle fill rate (VFR). By using advanced algorithms to plan replenishment shipments, vendors can send more in a single shipment, instead of waiting for a stock-out and having to rush a costly less-than-truckload (LTL) shipment to the customer. The best VMI solutions also let suppliers create multi-stop truckloads, which enable them to consolidate multiple shipments to create a full truckload, while reducing shipment mileage by delivering to multiple stores or DCs along a single route.
3. Find the Best Rates
Not all carriers are equal, and that’s certainly true when it comes to shipping rates. Rates can vary significantly among carriers, depending on truck or container availability, delivery distance, shipment weight and/or dimensions, as well as carrier-specific surcharges, which change frequently based on capacity and demand. Keeping track of these rates and calculating them for each shipment is impossible to do with accuracy. Because of this lack of visibility, many companies end up overspending on freight time and again.
Automated multi-carrier shipping solutions offer a better way to find the best pack and ship rates. TrueCommerce Pack & Ship, for example, offers a feature called dynamic rate shopping. This feature allows a shipper to see real rates from a variety of carriers for each shipment and choose the most cost-effective option that also delivers within the brand’s promised window. The technology accounts for changing surcharges, DIM weight fees, and even takes into account any discounts you’ve negotiated into carrier contracts.
4. Or, Negotiate for Better Ones
If you can't find a better rate, make a better rate. By negotiating your carrier contracts, you can often push for deeper discounts on shipments than you get with simple commercial pricing. One of the best ways to negotiate is by leveraging data—and that’s where technology comes in.
When you use a multi-carrier shipping solution like Pack & Ship, you aren’t just creating efficiencies in your fulfillment process. You’re also capturing real-time data, which is then run through powerful analytics dashboards for use in stakeholder updates, ongoing fulfillment strategy, and of course, contract negotiations. By providing insights into historical spend data, Pack & Ship’s shipping analytics let you quickly isolate which carriers you spend the most with, and how much you spend per shipment or per pound. You can also compare your per-shipment and per-pound costs between carriers, giving you the upper hand in rate negotiations.
5. Reduce Returns with Better Shipping Accuracy
Returns are a huge burden on businesses of every size, whether they’re delivering direct-to-consumers, or shipping to stores or distributors. One of the top reasons orders are returned: the buyer got the wrong item(s). It may seem like an easy-to-avoid mistake, but when your warehouses are picking and packing thousands of products per week, including products that may only vary in color or size, the risk for human error is high.
Technologies like multi-carrier shipping software offer multiple ways to increase your shipping accuracy, thereby lowering your return rates. For example, barcode scanning has become increasingly utilized in warehouses to match picked products to the SKUs on an order pick list. Image-guided verification can also help, by showing employees what each product in a package should look like.
Other tools, like pack verification, help keep warehouse employees on alert. While barcode scanning makes sure you have the right item, quantity validation compares the number of products in an order, to the number placed in the box. With advanced packing software, you can even enable weight audits, which measure each package’s weight against the calculated weight it should be, if filled correctly.
Finding the Right Technology
The right technology partner can help accelerate your fulfillment processes, keep your B2B and B2C customers happy, and save you money on transportation and logistics. On the flip side, the wrong partner can require heavy investments without the long-term return you deserve.
TrueCommerce’s cloud-based, multi-carrier shipping solution integrates directly with your internal business systems for a smooth transition, while connecting you to more than 60 global carriers, so you can find the best rates, no matter where you deliver. Want to learn more about how we can help you save on shipping costs? Fill out this contact form to speak to one of our shipping experts today!
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About the Author: Lindsey McGee is a Marketing Content Writer specializing in supply chain strategy, thought leadership, and education. As part of the Marketing team at TrueCommerce, Lindsey strives to provide thoughtful, accessible information to help business owners grow and manage their operations. Lindsey lives in Pittsburgh with her husband, Cody, and rescue pets, Delta, Bahn, and Izzie.