A business’s profit depends on more than just how much it sells —shipping costs and delivery efficiency also impact the bottom line. With the e-commerce industry continuing to grow, it’s essential to stay competitive, offer a top-notch service, and keep loyal customers satisfied, all while avoiding fluctuating shipping rates.
In this article, discover offer 11 tips to slash shipping costs, grow margins, and speed up delivery.
Leverage negotiation power
The power of negotiation factors into most business deals, and shipping is no exception. While a business may have an agreement with one carrier, it can be worth branching out to see what others offer—either to jump ship or use as a bargaining chip to lock in a more competitive rate.
Tip: Since carriers tend to increase their rates frequently, it's important to stay on top of current tariffs to avoid overpaying unnecessarily.
Rely on a Delivery Management Platform
One of the best ways to save money, not only on shipping but on other aspects of a business, like staffing and fleet management, is by leveraging a Delivery Management Platform (DMP).
DMPs offer automation, real-time updates, and tracking, streamlining the entire process from checkout to delivery. Plus, data analytics features provide insight into opportunities to optimize your shipping processes and costs.
Invest in route optimization software
A surefire way to decrease shipping costs is to optimize the delivery route itself. Many DMPs include route optimization software to find the most efficient path and avoid congestion. This cuts costs by saving money on fuel and drive time and enables your workforce to focus on other tasks.
Be smart about tracking inventory
Inventory management systems keep track of exactly what's in stock and where. This information prevents financial losses from accidental overstocking, as well as stockouts, which can lead to rush shipping fees to fulfill orders, which creates the risk of missing on-time delivery windows.
DMPs can integrate with an inventory management system, which keeps everything streamlined and ensures every system has accurate information.
Alternatively, use a “just in time” inventory process. This means placing an order with a supplier only when goods are required, which removes warehouse and inventory costs.
However, just in time delivery requires a business to be on top of demand forecasting, as it’s important to know exactly what inventory you need and when.
Maximize warehouse space
While it’s likely you’ll need to store inventory most of the time, you can do it smartly. Organize your warehouse to get the most out of the space available and avoid the need for additional storage facilities. This helps reduce shipping costs since you’ll send everything from one location instead of dealing with variable costs from multiple places.
For example, assess how your space is used currently. See if you can reorganize by storing items based on size and get rid of any old inventory you won't sell. You can even reduce the width of aisles or other empty spaces to create more room for stock.
Optimize packaging
Efficient packaging can reduce the cost of materials and shipping. Smaller, lower-weight packages also cost less to ship, allowing carriers to transport more at once.
Such packaging improvements are attractive to sustainability-minded customers who appreciate environmentally friendly shipping.
According to a case study by McKinsey, one supplier eliminated customized packaging and replaced it with collapsible packages that were transferred to and from local locations by a third-party vendor, thus reducing costs and packaging emissions by 50%.
Get bulk discounts by consolidating shipments
Many carriers charge by volume, meaning the more they ship, the less it costs per shipment. It’s important to note that carriers often provide discounts for bulk shipments.
Combining multiple shipments into fewer packages may qualify for a bulk discount that helps a buiness pay less in shipping costs per item.
Provide flexible delivery options
Customers appreciate having the ability to choose what’s most cost-effective for their needs—for example, a choice of standard or expedited shipping. If customers frequently choose the lower-cost option, it’ll help reduce shipping expenses.
Plus, putting the power in customers’ hands makes it more likely they’ll have a great experience and return again, which is key in last mile delivery.
Offer pickup or delivery to locals
To provide an on-demand delivery experience, a quick option is to offer local customers the ability to pick up their goods directly or deliver them to a nearby specified drop-off.
Offering local delivery lets retailers avoid paying a carrier. If customers pick up directly, the business won’t even incur shipping costs.
Conclusion
Cutting shipping costs can increase profits, and there are plenty of ways to do it—whether the focus is on negotiating discounts or better rates, leveraging DMPs for route optimization and inventory management, or changing how a business stores and packages its goods.
