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Reducing Your Carrier Costs in the ‘Gotta Have It Now’ Era

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Call it the Amazon effect: Being able to ship goods in a timely matter is now a requirement for anyone doing online business, no matter their size.

Indeed, a customer’s impression of a business depends in part on the delivery of goods: Was delivery timely? Was I able to track the package? Was I home at the time, or was the item left outside? The impression formed, for good or ill, also determines customer service calls, online reviews, and social media reactions.

Here, then, is the paradox this creates for online merchants. According to one survey by Dotcom Distribution, roughly two-thirds of shoppers said they would pay for faster delivery…but nearly 80% saidthey would expect to pay $10 or less to get their items in a single day.

In other words, customers want fast shipping, and they are willing to pay for fast shipping, but they are not willing to pay all that much.

This means that businesses need to find ways to bring their shipping costs down so they can maintain customer expectations without chipping away at their profit margins. One way of doing this is by finding ways to reduce carrier costs.

How exactly can a small or medium-sized business reduce carrier costs without the leverage that large organizations have when renegotiating rates? There are several things that can be done, if you have the right tools:

Shop Carriers Efficiently

No carrier can provide the lowest rates and best service for every location and every product. Smaller businesses need to shop carriers to find the best fit for each shipment.

It used to be that shopping carriers took a lot of legwork: A single person would be tasked with calling individual carriers and trying to find the lowest rates, negotiating deals with multiple carriers. It took time, and even then results were rarely guaranteed. Nowadays, smart software solutions can upload data on rates and services directly from carriers, then choose the optimal one for each shipment.

Determine Service Needed

Shopping carriers is only part of the game. Knowing what service is needed is also important. For example, an item being shipped to a local address can probably go Ground shipment and arrive in two days’ time, at minimal cost. But for shipments going farther, there might be a trade-off between Ground and Air…a trade-off that will vary with the size and weight of the item as well.  

Again, having the right software can help. Modern programs allow shippers to specify a “need on” date or a “deliver by” date instead of specifying a carrier and service. Algorithms then determine the optimal packaging, carrier, and service to minimize costs while delivering when promised.

Take Advantage of Carton Types

A carton type provides a name and the dimensions for a carton you plan to use for shipping. While some companies define carton types in terms of common sizes (for example, Small Gift Box or Standard 18" x 18"), there is nothing that says carton types could not be associated with preferred parcel types of various carriers—for example, USPS Small Flat Rate Box or Flat Rate Envelope.

Selecting predefined package types can sometimes save money. For example, using flat rate shipping with USPS lets you package your shipment regardless of weight. Thus, if you can identify orders that can go flat rate (and that would be more expensive when shipped by other means), you can realize substantial savings.

Letting Technology Find The Savings

A common thread running through the above points is that the right software solution can find these incremental savings for a business on an order-by-order basis.

Activities like packing and shipping really are a numbers game. There are many variables, the space of choices is huge, and there are benefits and drawbacks to every choice. These are exactly the kinds of complex problems computers excel at, so it makes sense to have them find those efficiencies when possible. The end-goal is to deliver items intact and in a timeframe that matches customer expectations, all while keeping costs at a minimum.

Because, let’s face it, the days of charging just any old amount for shipping are over. Yes, consumers want two-day and same-day delivery, but they are also actively shopping for the best prices with shipping and handling included. And they don’t want to pay outrageous amounts.

That’s a recipe for disappearing margins, and efficiency in shipping is one of the few ways to combat it. Thus, being able to find the right carrier, service, and carton for each shipment will become a huge competitive advantage.

If you would like to see a demonstration of how our software efficiently finds such solutions, contact us. Most people are surprised at how easy it is to reduce carrier costs and realize these incremental savings.

Topics: Strategic Moves, Warehouse Technology, Shipping

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