Four Ways to Reduce Rising Fulfillment Costs

December 17, 2019

Do you remember what your holiday decorations looked like in your first “grown-up” home? Chances are they’ve multiplied a lot since then, growing from an easily stored collection of tchotchkes to a full-fledged horde of holiday cheer that probably needs its own zip code.

A similar thing has happened to eCommerce fulfillment costs. Each year they’ve gotten just a little bit bigger, absorbing more of your company’s logistics budget – and eroding a greater percentage of its profit margin.

How Fulfillment Costs Continue to Rise:

In fact, according to a 2018 study issued by Armstrong & Associates, they’ve experienced an annual compounded growth rate of 15% since 2018 and are expected to increase another 18.8% by this time next year.

Given all of the developments in recent years, it’s not hard to see why. Among other things, the country’s main parcel carriers have routinely raised their rates – and added a whole new, expensive wrinkle with dimensional pricing. Plus, studies frequently show that even though consumers want increasingly faster delivery times they’re not willing to pay for 100% of the expedited delivery expense. 

In light of this, what’s a shipper like you to do? 

Four Ways to Cut Rising Fulfillment Costs

Thankfully Verst has a few ideas for ways you can effectively offset these increasing expenses, and no, it doesn’t involve winning the lottery.

For example:

  • Have you considered trying to negotiate a lower dim weight divisor with your parcel shipping carriers? Believe it or not there is some wiggle room with this divisor, and getting it pared down by even a little bit could save your company big.
  • Are you routinely comparing net costs per package between Fed Ex, UPS and DHL? This suggestion was one of the key takeaways at this year’s PARCEL magazine form – and it’s a good one, because sometimes the real cost of transporting packages can get lost amid all of the impressive talk about discounts and incentives.
  • When was the last time you analyzed and addressed the number of split shipments that your company sent – especially the ones that originate from the same distribution center? This inefficient but necessary practice can quickly erode even the strongest of profit margins, because your company usually has to absorb the cost of the additional packages’ freight and materials. But there is a lot that the right systems and processes can do to curtail it.
  • Finally, do you have checks and balances in place to nip poor product-box alignment in the bud? Bear in mind that your fulfillment professionals are under tremendous pressure to get orders filled and shipped out ASAP, and if that means occasionally putting a pair of earrings in a huge carton simply because it’s the closest box at hand, they’ll probably be tempted to do it – unless you put some processes in place to prevent them from doing so. Even something as simple as having personnel take smartphone photos of some packed boxes before they’re sealed so that a supervisor or manager can periodically them to ensure the proper box sizes (and taking prompt corrective action if that’s not happening) will enable your company to avoid sending too many overpriced shipments out the door. 

We could go on. But you’ve got holiday orders to fill – and we’ve got a lot of peak season shipments to get out the door. So let’s call this particular story a wrap.

Best of luck as your deck your own halls this season!

P.S. Don’t let your spouse shop on Etsy or EBay, unless you want to have one or two additional boxes of holiday decorations to put away.

Read other blog posts from this 12-part series entitled "The 12 Days of Peak Season":

Day 1 of 12: Some Shoppers Who Wanted Shipping Free (The Problem Of Low-Cost Shipping)

Day 2 of 12: Two Urgent Moves (The Challenge Of Fast Holiday Shipping)

Day 3 of 12: Three Missed Bins (The Problem Of Inaccurately Filled Orders)

Day 4 of 12: Four Appalling Words (The Challenge Of Late Or Delayed Shipments)

Day 5 of 12: Five Broken Things (The Problem Of Damaged Shipments)

Day 6 of 12: Six Trucks Delaying (Shipping Delays & Dock Congestion)

Day 7 of 12: Seven Systems Slowing - IT's Role in Inventory Management



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