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Best Practices to Minimize Shipping & Logistics Costs in 2020

At the beginning of 2020, you might have looked at your budget and thought about finding new ways to lower shipping costs. Months later,  social distancing protocols have influenced many local and independent businesses to ship more than ever, making it a good time to review your shipping best practices (and for members: to activate your shipping benefits).


How Shipping Costs are Calculated

Shipping costs are determined for most small packages using three factors: 

  • Package Weight

  • Package Dimensions

  • Destination Zone

The heavier your package, the more expensive to ship. But that’s not all, shipping companies now also consider dimensional weight. Based on either weight or dimensional weight – they will charge for the higher of the two. As a reminder, dimensional weight (or DIM) is simply length x width x height.


Did you know?

In March of 2020, 57% of consumers have altered their day-to-day activities to be as ‘contactless’ as possible (source), leading to some businesses experiencing shipping volumes as high as Black Friday.

In previous years, an already rising shipping volume required shipping companies to constantly adapt. Many of them responded by incentivizing customers to use space efficient boxes to maximize truck capacity. Carriers also charge more based on zone. Something that may cost $12 to ship within the Midwest could cost as much as $30 or more to ship to the West Coast. 

For reasons like these, it’s more important than ever for small businesses to use the advantages they have and follow some simple best practices to keep shipping costs low – especially when shipping remains a vital lifeline to your customers. 

If you ship product: here’s how to keep costs as low as possible

Get a brief overview of how to maximize profits on shipped products – follow the steps detailed below.  

  1. Pursue space-efficient and cost-effective packaging solutions

  2. If you’re part of an industry group, association, cooperative, or franchise – inquire about shipping discounts

  3. Strive for inventory accuracy

  4. Utilize your shipping options

  5. Bill customers accurately

  6. Focus on consolidating, using a 3PL, and avoiding air freight

1. Pursue Space Efficient & Cost Effective Packaging Solutions

The largest companies in the world aren’t just reducing packaging because it’s good for the environment. It’s also much cheaper to ship.

Perform a full assessment of your shipping materials. Consider using mailer envelopes instead of boxes, especially if you are shipping softer goods. Padded envelopes may be a good option for any flat items you have. If you’ve ever thought “why are we sending this in such a huge box?”  you can most definitely save on shipping.

With the shift to dimensional weight, the main thing is finding space-efficient packaging. You don’t want to pay extra to ship air! If there’s a combination of two or three products you often ship together, determine the smallest box these would fit in and purchase it.

At a bare minimum, make sure you have the perfect sized box or mailer for your most frequently shipped single item. 

2. Take advantage of group discount programs

By banding together in industry groups, associations, cooperatives, or by being a member of a franchise – small businesses can easily get access to much better pricing on things like shipping and freight. 

Additionally, if you have packages shipped from a product or supply vendor, ask them to ship using your UPS or FedEx account number. It is possible for them to use third party billing to ensure you get your low rate.  

Cut shipping costs with your member benefits

Easily claim your discounted shipping benefits. New & Existing accounts qualify!  

Access

Access your member benefits dashboard at myS4M.com with nothing but your email address

Activate

Select the discounts you’d like to activate – like new and improved flat-rate pricing from UPS (+ FREE Smart Pickup® Service)

Save

Over-time, watch your expenses shrink with your newly activated discounts. The average member saves $15,000 a year!

Sign up at your member savings dashboard, simply sort by ‘shipping

Access Your Member Savings Dashboard

3. Utilize Your Shipping Options

Companies like UPS (SurePost) developed low-cost options using the destination’s local post office for final delivery. Use these for significant savings if your product allows.

Many companies also use third party software to determine the best rate based on package measurements and weight. Once approved, the program then spits out the shipping label. This can  save time and money.

4. Bill Customers Accurately

If you don’t offer free shipping, you need to make sure you’re accurately calculating the cost of shipping for the customer. Many small businesses lose lots of money by undercharging.

5. Strive for Inventory Accuracy

It may seem like your inventory has nothing to do with shipping costs, but it does. 

The truth is, inventory accuracy makes everything better. If your inventory is inaccurate, you might spend extra money expediting shipments of product to stores or customers as a result of reporting errors. 

Learn more in:  Best Practices for Inventory Accuracy

6. Focus on Consolidating, Using a 3PL, and Avoiding Air Freight

If you often ship freight in truckloads or containers, there are a few main things to consider. 

Always try to consolidate shipments where you can. This means filling up a truck/container vs. sending a shipment LTL (less-than-truckload) or LCL (less-than-container-load) 

Consider using a Third Party Logistics company (3PL) to house your freight, process any shipments, distribute any product, and count your inventory. Not only will it save time, it’s more efficient, allows for a smaller workforce, avoids risk, and requires lower capital costs. Learn more in: Should you work with a third-party logistics (3PL) company?

Lastly, never ship inventory using air freight if you can help it. Air freight is often 15 times more expensive than ocean freight.


By implementing some of these recommendations, you’ll be sure to save money on shipping and logistics for your small business in 2020.


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