We always advocate that 3PLs should “know their numbers.” There are many ways to analyze them, but knowing what levers you can pull to improve those numbers. To save on fulfillment costs, we recommend these five approaches:
Implementing a Cubic Pricing model to save on Fulfillment Costs
Cubic pricing is a fulfillment pricing model. You can obtain the cost of fulfilling an order by multiplying the volume of the product by the cubic space used.
For example, you may have an eCommerce business that sells shoes and ships them. You can use traditional or dimensional weight pricing models to accomplish this process. So, each shipment will have different rates based on how many packages are shipped. This makes it challenging to try and optimize shipping costs across all products. There is no easy way to compare two shipments with different characteristics.
Cubic pricing solves this problem by factoring in both dimensionality and volumetrics. So, each shipment has consistent pricing regardless of what products they contain.
Use a Single Material Handling Charge to Save on Fulfillment Costs.
If you’re running a business with a high volume of shipments, you might be paying a lot in shipping costs. To make matters worse, one may not realize how much money they’re spending on fulfillment.
One way to save on fulfillment costs is using a single material handling charge. What is this charge? Well, it’s just the cost of storing materials until you ship them out. It doesn’t include any other fees or commissions associated with shipping goods.
Most businesses don’t realize that they’re paying for more. They also pay for storage and other fees for holding onto those goods until they’re ready to be sold. This means that companies have been paying more for their fulfillment services. That means they’ve been losing money!
Single material handling charges come in. They allow businesses to read how much they’re spending accurately.
Implement Season-based variable storage charges to Save On FulFillment Costs.
Storage costs are generally lower in the summer than in the winter. Therefore, there is an opportunity to negotiate pricing with your vendor. For example, a 3PL that ships products to its vendors during the summer months could deal with them to give them a better price on storage if they agree to use that 3PL for shipments during the winter. This can help reduce overall fulfillment costs and make it more cost-effective.
There’s no doubt that digital purchasing has changed how we shop. However, it has also created new challenges for retailers who want to keep up with rising demand. One of these challenges is the cost of fulfilling orders.
For example, you may have an order you want to ship in January. But your warehouse might not be prepared for the winter months. So, it will cost more money than usual because you’ll need to pay for heating and power bills during this time of year. On top of these extra expenses, there are also additional storage costs.
To help manage these issues, many companies use season-based variable storage charges. This helps them save money by anticipating what types of products will sell well during certain times of the year.
Combine vendor drop shipments with outbound orders to save on fulfillment costs.
Suppose you’re looking to save on fulfillment costs while still maintaining a high level of customer service. In that case, think about combining your vendor drop shipments with your outbound orders.
Drop shipments are the product shipped directly from one vendor to your customer. This is often used when there is not enough demand for an item at one location. However, it may be more cost-effective for the manufacturer or distributor to ship to your customer.
This can also be done when a specific type of product is more prevalent in certain areas than others. For example, you may be selling clothing and shoes in different regions. But, there may be more demand for shoes in one part than another. In that case, it would make sense to ship all the shoes from one region to customers.
In most cases, vendor drop shipments are less expensive than outbound shipments. They’re often less costly than inbound shipments as well. This is because the shipment route is shorter and more direct, so there’s less time spent traveling on the road and fewer miles traveled by truck. This means there’s a lower chance of damage to your goods during transit or theft along the way.
The only issue with combining the two items is that it could mean you’ll be sending some units back again. Thus, you will spend more money on shipping costs overall.
Negotiate Your Carrier Rates
Carriers charge 3PLs based on the weight of the package and its destination. If you’re paying a lot, you can negotiate better rates with your carrier by negotiating for a better service, contract, or both.
If you’re a business owner, you understand that shipping your products can be a big part of your expenses. You’ve probably heard the expression “time is money.” but it’s more like “Time is money, space and time are all money when it comes to fulfillment costs.”
When you negotiate carrier rates with your shipper, you can save on fulfillment costs. But there are some things you need to know before doing so. Here are some things to keep in mind as you negotiate:
- Know Your Costs. The first thing you should do is figure out your shipping costs and how much they’ve been in the past. You’ll also want to figure out how long it takes for shipments from each carrier to reach their destination.
- Know Your Shippers. Next, know who will deliver your shipments precisely and their rates for different services.
- By comparing your current rates with other carriers, ensure you’re getting the best rate possible.
- Learn about the different types of shipments available. When you negotiate with carriers, they know the value of their offering and can work with you on pricing accordingly.
- Ask if any special discounts or incentives have been offered recently. Seek to know if the discounts could be applied to your account.
There are many ways to reduce your fulfillment costs. By implementing the suggestions mentioned above, you can reduce your fulfillment costs. Besides, you can increase your bottom line. Ultimately, 3PLs and their customers will realize the benefits of these cost savings. Contact sales support for more details on ways to save on fulfillment costs.