The Shipment Slasher: how to reduce shipping costs and cut your warehouse costs for a more efficient and profitable wholesale distribution business

It may sound like a horror film, but the only terrifying concept here is how small businesses are being battered down with shipping costs and slow customer delivery times.

Delivery rates and speed are a major factor in customers’ purchasing decisions. In this blog we share expert advice on how to reduce your shipping costs and get orders to your customers cheaper and faster.

Start with reporting

Do you have products which tend to ship out together fairly consistently? For example, if your customer orders a keyboard, do they also tend to order a mouse at the same time? Are there products you can receive in the one, combined shipment?

By running reports on your product movements and trends, you can get great insights into where you can reduce shipping costs. Spend some time doing a little reporting recognisance and see what you can uncover.

The business intelligence from your reports will also show you which products sell more often so you can order larger shipments less frequently from your suppliers.

This all helps you reduce overall shipping costs – and lets you serve your customers faster.

Automate your re-ordering

Are you using a system which allows you to automatically re-order stock? This can be a big time saver and significantly reduce your administration costs, especially if you’re importing. It can also eliminate the chances of manual processing errors.

If you’ve done your reporting recon and have data showing how quickly your products turn around and how long it takes to ship in more stock, you can comfortably set up automated reordering points.

Consolidate your supplier shipments

Ask your supplier about options for shipping consolidation or part shipment options. This is particularly effective for importing. Some suppliers offer full consolidation, meaning your shipment won’t leave their warehouse until every item on your order is in stock. This results in only one shipment charge but can mean longer lead times.

Other consolidation methods include an initial part shipment option, to allow all in-stock products at the time of order to ship immediately, with a secondary consolidated shipment for any out of stock items. This subsequent shipment waits for all back ordered items to become available before sending the second shipment.

Keep it together

Based on your reporting, look for opportunities to build kits or assemblies for items which commonly go out together. Instead of selling each product individually, you could start selling multiple components as a single product. If you have the resources and the system to support this process, assembly of multiple parts can be done in-house and sold as one complete product.

This can help save you labour costs, as you’re picking only one item to send out to your customer each time.

Even if you still need to sell each part individually, you could simply keep the related items in the same area within your warehouse, to cut down the time it takes to locate and pick each item. These changes will give you surprising improvements in your overall warehouse efficiency.

Move them closer

Place your fastest moving products closest to where your packing and/or shipping takes place. This speeds your pick and pack process and helps you get deliveries out to your customers. You might be surprised with just how much time you can save by applying simple process improvements.

Expedite or economise?

Weigh up the benefits of a quicker delivery versus lower costs. For example, you may want to offer ground shipping as your standard option at a reduced cost, even though it’s generally slower, while also offering an urgent shipment option via air or express courier at a higher rate.

Is it an option for your business to offer a collection service, where your customers can avoid shipping costs all together by picking up directly from your warehouse? Having flexible shipping options can help separate you from the competition.

Error-proof your receipting

A good receipting process can really help reduce issues when you receive incorrect orders from your suppliers. Make sure your warehouse staff know to check the incoming stock against the related purchase orders, rather than just assuming it’s all correct on arrival. The quicker you can identify errors, the quicker you can correct them and get those products out to your customers, giving you optimum warehouse efficiency.

Have a clear returns policy

Is your company prepared to incur the cost of a customer returning items due to change of mind? Clearly communicate your returns policy to your customers to set the right expectations up front. Returns and exchanges all cost you money in processing time, administration and potentially unsalable stock. Good policies can reduce shipping costs and allow you to keep your customer prices competitive.

Drop it

Drop shipment can be another way to reduce shipping costs and your delivery time to customers.

Rather than having products shipped from your supplier to your warehouse, receipting the stock, then generating sales orders, picking and packing slips and invoices before shipping back out to your customer, drop shipment lets your supplier deliver directly to your customer.

Ideally the supplier should have your name and address as the “sent from” on parcels going directly to your customer, and use unmarked boxes free of any company logos.

Drop shipping can help free up more of your own warehouse space or even eliminate the need for a warehouse, as well as decreasing the total delivery time to customers. It can, however, mean less control over the quality of the delivery process.

Incentivise to increase sale volume

Are you giving your customers incentives to order their products in larger quantities? If you have a system which allows you to set up quantity pricing, it can be a quick win to offer your customers a great deal. You could even consider setting up further discounts specific to your most loyal customers.

These are just some of the ideas you can think about to help keep your reduce your shipping costs and your warehouse costs.

To start a conversation about growing your business even further using JCurve’s award-winning small business software, contact us at info@jcurvesolutions.com