How to Reduce Your Online Store’s Fulfillment and Shipping Costs
With rising costs in storage, packaging, and shipping, maintaining your online business can become challenging. In fact, managing your store’s warehousing and fulfillment operation has never been more expensive. According to recent warehousing costs surveys, warehouse lease rates have increased 22% over the last five year and warehouse hourly staff rates have increased a whopping 31% over that same period! Finding ways to decrease costs of fulfillment and shipping have been even more critical, considering the high rate of inflation and overall burdensome economic environment the world faces today.
However, there are many initiatives your business can implement to reduce fulfillment costs and increase supply chain efficiencies. Examining your warehouse operations, inventory, and packaging materials can create many opportunities for cutting and preventing unnecessary costs. Making much needed changes across all fulfillment operations can save you enough time and money to continue running your business as smoothly as possible and survive these challenging economic times.
Below are a few of the most impactful changes that can be implemented right away to make a positive impact on your company’s bottom line.
Optimize Your Warehouse Layout
Inventory location within the warehouse is essential for efficiency. Through SKU evaluation, you can distinguish which products are performing best and place them in a better location within the warehouse. Placing popular products in more accessible areas in your warehouse creates easier access for picking and packing. This increases efficiency and the number of products being distributed. With 30-40% of warehouse labor associated with the pick operation, a decrease in average time to pick orders for the distribution of products means more revenue for your business.
Popular products being stored in an organized and accessible location also allows for keeping an accurate inventory. Having an accurate inventory will prevent you from purchasing items that do not need restocking. Products that are not doing well can be identified and phased out to prevent unnecessary purchases of items that will not bring in revenue. If you are working with perishable items, an accurate inventory prevents spoilage and the waste of product that may be forgotten. Overall, maintaining a precise inventory prevents unnecessary spending and waste that will spike storage and product costs.
Make an Upgrade in Digital Operations
Digital operations provide instant information that would typically be calculated and documented manually using spreadsheets or other methods. By making the digital transition, logistics costs can be cut significantly. Technology can provide optimal shipping routes, rates, and arrangements that will save both time and money. Orders being sent to the same geographical location can be identified to consolidate shipping loads. Freight costs can also be lowered by using SKU evaluation to pinpoint priority shipments of products that do well.
Digital operations also speed up the fulfillment process. Receiving real-time reports from a remote location helps maintain an accurate account of orders and products within a fulfillment center. Employee efficiency and accuracy is further improved by using up-to-date technology. All manual procedures—such as keeping inventory and tracking orders—are made much quicker by scanning information into a digital system. Digital operations also prevent and catch any employee errors that would often be difficult to identify. By spotting employee errors quickly, the time and money spent to reverse any mishaps is greatly reduced.
In summary, the following represent some of the most widely used technology enhancements to improve warehouse operations:
- Automated picking tools
- Warehouse management systems
- Collaborative robots
Switch Your Packaging Materials
The wrong packaging can increase your shipping costs significantly. The wrong box can increase the dimensional or actual weight of your items, causing you to pay more than what is necessary. Switching to a box or bag that best fits the items you are shipping will decrease your shipping rates per item. Typically, bags are lighter than boxes, so transitioning to packaging with bags might be beneficial to your business. Poly bags can save up to $.65 per package, according to pricing studies.
If bags and boxes are not working well for your products, exploring other packaging materials is also something to consider. There are packaging options out there that are meant to protect your products, so trial and error may be needed to find the best fit for your orders. Having clients customize their shipping experience to fit their expectations can also reduce costs and increase customer satisfaction. Some customers’ preferred packaging or shipping methods may cost less than what a business is typically providing. Involved and happy customers can increase sales by boosting the possibility of future purchases.
Consider Outsourcing Fulfillment
If implementing new strategies to help reduce costs is not creating the outcome you desire, and you are looking for addition assistance, consider outsourcing your fulfillment. 3PLs and fulfillment companies specialize in streamlining the supply chain and handling logistics to promote efficiency and cut down costs. These companies can help your business identify the best carrier rates, packaging, and procedures to reduce rates across all areas of fulfillment.
3PL warehouses make storage leasing costs variable and help you save money on labor and shipping, all while potentially:
- Gaining valuable industry expertise
- Increasing delivery speeds
- Enhancing warehouse coverage
Reducing Fulfillment and Shipping Costs is Possible
Whether you examine and alter your operations or bring in outside assistance, it is possible to lower fees to a manageable level. By optimizing your warehouse layout and switching your packaging or technology, shipping and fulfillment fees can be significantly reduced. Dealing with rising costs is essential to keeping your online store afloat, and using these tactics, along with positioning your company to be able to deal with higher fees, will increase the probability of your business’ success.