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insightQuote’s 2021 Warehousing Cost Survey Reveals Expected Increases as Pandemic Fuels Fulfillment Industry Growth

2021 insightQuote Warehousing Costs and Pricing Survey

Each year, insightQuote conducts a warehousing cost and pricing survey, and we now have our results in from our survey concluded for 2021. Some incredible insights came out of this venture that we would like to share with the world. Before we get to that, we need to be clear about some of the assumptions that this survey makes so that people will understand how we tabulated the results that we received and what they mean in context.

Our Methodology for the 2021 Survey

The data that we collected was not connected back to the specific warehouse that answered the question. In other words, the answers were anonymous so that all participants felt that they could give their most truthful and honest answers. We were also careful to note any extreme answers that were far outside the bounds of the averages. This helps weed out the wildly high or low answers from the survey that might otherwise skew the data. Our goal in doing this was to try to find the most accurate averages in order to provide useful data to our readers.

There was no attempt made on our part to separate out the data based on geographic location for these summary results. Obviously, labor costs and warehouse lease rates will differ based upon location. However, we wanted to find the natural averages as they presented themselves through different areas, and thus we left in all data and did not attempt to segregate it based on geographic region.

Finally, we attempted to standardize answers as best as possible across the different questions. This means that if a survey taker gave more than one answer to a question, we attempted to figure out which answer fit in best with the standard answers given across the board for other questions.

Summary of the 2021 Results

We are so exciting to share some of the results that we obtained from our survey and would like to break it down into a few parts to make it more digestible and useful to everyone. The areas covered include:

  • Performance Metrics of Warehouses
  • Agreement Terms of Warehouses
  • Warehousing Costs for the 3PL Warehouse
  • Pricing And Discounts to Customers

Each of these pieces is important to the overall operation of a warehouse, and this is why it was so important to look at these criteria individually and see how various warehouse operators or owners were doing with their operations.

The last few years have seen consistent growth in the Fulfillment Industry, as more and more retailers move to online sales channels and away from traditional brick-and-mortar operations. But the Coronavirus pandemic seems to have accelerated the growth in online and e-commerce sales, in what seems to be additional movement in consumer behavior. As consumers transition to even more online ordering, the fulfillment industry has been the beneficiary of growth, providing businesses with the means to store and ship online orders.

This shift over the last year, as a result of Covid-19, has put fulfillment and warehouse operators in the driver’s seat in terms of commanding higher prices for their services, which is reflected in our survey results. But the growth of the industry is also continuing to put pressure on warehouse operators’ cost structures – particularly labor rates and warehouse lease costs. As warehousing and fulfillment providers expand and utilize more warehouse space, leasing costs are rising due to limited supply. Furthermore, finding and keeping full-time staff is increasingly difficult, putting an upward pressure on overall warehouse wages.

Below is a summary of the results of our 2021 survey, followed by a compete breakdown of all of the results.

2021 insightQuote Warehouse Cost and Pricing Survey

Performance Metrics of Warehouses

How many warehouse owners/operators are actively measuring the performance of their warehouse? This and other performance related metrics were surveyed in our annual poll. Below are the specific questions we posed related to performance metrics:

  1. If you own multiple warehouses, do you charge the same for each location?
  2. What percentage of customers do you retain each year?
  3. Do you measure performance?
  4. What is your picking accuracy?
  5. What is your inventory shrinkage rate?

Our survey showed that a very high percentage are actively measuring various metrics. Eighty-six percent of those surveyed answered in the affirmative when asked if they were measuring performance. We also found that order picking accuracy came in at 99.21% and inventory shrinkage measured at 1.85%. The order picking accuracy number is both high and not entirely surprising. Warehouses must maintain these incredibly high levels of accuracy if they are to remain competitive in the current landscape.

These accuracy figures and other high efficiency standards have made it possible for warehouses to retain 95.67% of their customers year-over-year on average according to our surveys. Lastly, 46% of companies surveyed that had multiple locations indicated that they charged the same rates to clients across all locations, whereas 54% of multiple-location warehousing companies varied their rate structures depending upon the location.

Agreement Terms of Warehouses

Agreements are an important part of outsourced warehousing – they dictate the terms and arrangements between the warehousing company and the user of the outsourced service. Fulfillment centers use varying strategies related to agreement terms, including the time horizon of the agreement, the amount and timing of price increases, and even who covers errors and inventory losses. Below are the questions that we asked in our annual survey related to agreement terms:

  1. What terms do you offer on your agreements (e.g., month-to-month, annually, multi-year, no-term, etc.)?
  2. Do you increase your pricing on a regular basis?
  3. If you do increase your pricing, what percentage do you increase pricing?

This year, our warehouses indicated that the annual agreement was the most popular. 57% of respondents indicated that they offer annual terms. This was followed by multi-year terms at 48%, and month-to-month terms at 46%. Only 9% indicated that they offer no term as an option, which was a significant drop from the previous survey (16%). This goes to show that there are still plenty of different ways to do business in this industry.

The percentage of warehouses that increase pricing dropped to 61% this year (down from 69% last year). Furthermore, the average yearly increase jumped to 5.59% per year (up from 3.3% last year). The jump represented a 70% increase.

Warehousing Costs for 3PL Warehouses

Warehousing costs are on the rise, with demand for warehouse space and warehouse labor continuing to increase. On the other hand, due to the popularity of outsourced fulfillment services, corporate profits rose from last year. The following are the questions we asked our warehouses in our survey related to their internal cost structures:

  1. What is your yearly cost per square foot of your warehouse space?
  2. What is your starting hourly rate of your warehouse staff?
  3. What is your annual pay for a warehouse management employee?
  4. What is your corporate profit?

The average wage for a standard warehouse employee in our survey was about $14 per hour. Yearly management salaries came in at an average of $55,854.92 in our survey. Both of these were increases from our 2020 survey ($13.47 per hour for warehouse staff and $52,675 for warehouse management).

Despite these impressive wage offerings, the warehouses have been able to maintain steady profits. The average respondent stated that they had an 11% corporate profit percentage in the last year (a whopping 12% increase over last year’s average of 9.77%). Some are doing better than that number, and this is all true while offering consistently impressive wages to the rank and file and to management.

2021 insightQuote Annual Survey

Pricing And Discounts to Customers

Some of the most fascinating and most useful data to come from our survey had to be in the realm of the warehousing and fulfillment pricing and discounts offered to customers. These are the rates that fulfillment centers offer customers.

For Order Fulfillment Pricing, We Asked:

  1. What is your average pick and pack price for a single item direct to consumer order?
  2. What is your average pick and pack price for a business to business order?
  3. Do you offer discounted pick and pack rates?
  4. How much do you charge for cartons, inserts, and promotional materials?
  5. If you do offer discounted pick and pack rates, what is the break with which you provide the discount and how much of a discount do you offer?
  6. How much do you charge for Amazon FBA orders?
  7. How much do you charge for subscription box orders?

The average B2C pick and pack fee for single item orders was $3.13 (up from $2.96 a year ago) while the average B2B pick and pack fee for single item orders was $4.27 (unchanged from a year ago). This year, 72% of warehouses offered discounted pick and pack rates for high-volume shippers, which is up only slightly from last year. Discounts required monthly order volume ranges from 500-10,000, with an average of 2,500 order per month. The average discount was 6.94% and ranged from 2-10%, depending upon the specific warehouse.

Amazon has only continued to grow, and support of FBA and FBM orders is being offered by more and more fulfillment houses. 40% of the warehouses in our survey charged the same pricing for Amazon orders. For those that didn’t charge the same, the main difference was that some warehouses charged label fees of an average of $.35 per label for Amazon compliance, additional fees for compliance of $1-5 per order and per pallet fees of up to $15 per pallet. We also asked about subscription boxes. 88% charge the same as for normal orders. Those that charged something differently used labor time studies for the most part to determine bulk order processing synergies and any applicable rates.

The warehouses we surveyed continued the trend of last year and applied, on average, a cost plus a 10 – 15% add-on fee for cartons. Only 38% of fulfillment warehouses surveyed roll the carton fees into their pick and pack charges – the remaining 62% charge a separate carton fee per order. Average cost per carton was $1.17 and ranged from $.1-$.5 per carton to $1-2 depending upon the size of the carton. When it comes to adding inserts or other promotional materials, 18% of warehouses didn’t charge any additional fees (up slightly from 17% last year), while the majority of warehouses charged an average of $0.15 per insert (unchanged from last year).

For Storage Pricing, We Asked:

  1. How do you charge your customers for storage?
  2. What is your average price for storage?
  3. How much do you charge for climate controlled, cold storage, or frozen storage?
  4. Do you offer discounted storage fees?
  5. If you offer discounted storage fees, at what breaks do you offer discounts and what discount is offered?

Not surprisingly, storage fees per ‘pallet’ was the most common way to charge customers for warehousing space, just as it was during last year’s survey. A full 93% of respondents charge per pallet (95% in 2020). This was followed by 30% who charge per bin, 27% who charge per cubic foot, 15% who charge per square foot, and 5% that offer other warehousing storage charge methodologies.

Both per pallet storage fees and per bin storage fees increased year-over-year in our survey. In 2021, respondents indicated that they charged an average of $14.79 per pallet (up from $14.58 per pallet), and $4.07 per bin (up from $3.30 per bin).  Both square footage and cubic footage pricing remained flat at $.75 per square foot, and $.45 per cubic foot. Some warehouses indicated that they are beginning to use storage fees per shelf to accommodate their customer’s needs. The average fee per shelf in 2021 was $5.11. As is usually the case, climate-controlled or cold storage fees are higher, and came in at $17.99 per pallet on average for those who did offer it. It was an average of $0.64 per cubic foot for climate controls.

Warehouses seemed to pull back a bit on their warehouse discounts offered to clients. Almost exactly half (49%) of respondents said that they offered discounted storage rates for customers who had over a certain number of pallets to put into long-term storage, which was down significantly from 62% in 2020. The most common discount was a pallet discount and it was offered out at between 50-100 pallets, on average. The average discount was between 5-10% and as little as 2.5% discount. You can see from these numbers that not every warehouse agrees on how or if to offer discounts to certain customers.

For Shipping Pricing and Discounts, We Asked:

  1. How do you charge for shipping?
  2. If you offer shipping discounts? If so, what discount do you give for ground, express, international, and LTL shipping?
  3. Do you let customers use their own freight accounts?
  4. Do you have Commercial Plus Pricing with the USPS?

Warehouses continue to use a variety of ways to charge for shipping services. 37% of our survey respondents indicated that they offer a discount off of published rates, and 64% offer a cost plus model – by far the most popular method. Surprisingly, 39% allow customers to use their own rates. This is a bit of a shock, considering that many warehouses earn a margin on freight that helps pays the bills – and when customers use their own rate structures that is lost revenue. However, some warehouses may be opting for less headaches managing the freight billing process, which usually happens more frequently due to the carriers requiring payment more quickly. Only 9% of warehouses in our survey offered no discount, which was up slightly from 7% last year. Lastly, 7% indicated that they offer another structure altogether.

For warehouses that do use shipping discounts, the average ground shipping service discount was 19.28% off published rates (with 15.5% markup over cost). For express shipping services, the average discount was 25.06% (with 15.62% markup over cost). For international shipping services, the average discount was 24.18% (with 16.25% markup over cost). For LTL shipping services, the average discount was 56.40% (with 15.62% markup over cost). These discounts offer warehousing customers a tangible cost savings by outsourcing in most cases.

We also asked warehouses whether they allowed customers to use their own freight account. Only 75% of warehouses surveyed allow customers to use their own accounts, down from 91% last year. For those that allow customer freight accounts, the average fee was an additional $1.54 for those that did charge additional, and it ranged from $.50 to $5.00 additional per order, or $10-$25 per pallet for LTL shipments. Also, we found that the majority (71%) of warehouses have Commercial Plus Pricing with USPS, which helps outsourced warehousing customers achieve better USPS rates.

For Set Up, Account Management, Receiving, and Returns Fees, We Asked:

While these ancillary fees won’t make up a large part of an outsourced fulfillment services monthly invoice, they are important to note. The following were the questions we asked related to set up fees, account management fees, receiving fees, and returns fees:

  • Do you charge a routine account management fee, and if so, how much and how frequently?
  • If you charge a set up fee for a new client, how much do you charge on average?
  • How much do you charge for call center services?
  • Do you charge receiving fees, and if so, how much?
  • Do you charge returns fees, and if so, how much?
  • How much do you charge for kitting services?
  • How much do you charge for shopping cart integrations?

A slight majority of all respondents answered that they do, in fact, charge set up fees (53%). Of those that charged setup fees, the average price was $548.52 and responses ranged from $120 to $1500, depending upon the complexity. A large part of the setup fee is apportioned for integrating with any shopping carts or other online systems with clients. Of the nearly $550 average set up fee, a full $447.14, on average, was devoted to shopping cart of online system integration. Exactly half of our survey respondents charge a routine account management fee, for customer service related to managing the account. The average monthly rate was $160.10, and the ranges were from $75 to $500 per month, depending upon the service level promised.

Returns fees are charged by nearly all of our warehouses in the survey – a full 95%, with the average return fee per order of $5.28. This represents a sharp increase from 2020’s survey result of $4.05. Exactly the same percentage of warehouses (95%) charge a receiving fee. This comes as no surprise, as receiving is one of the most critical parts of the warehouse process. In fact, even those that don’t charge a receiving fee are likely to bake the cost into another aspect of their fee schedule. The average receiving fee charge varied by type. The average hourly charge was $36.09, almost identical to last year’s result. The average charge for a 40-foot container was $441. The receiving fee was charged at $2.58 per SKU on average (range of $2.5 to $10), and the average charge for receiving cartons was up sharply to $2.91, which was up from $1.50 last year (range of $0.5 to $5). In addition, the average per pallet receiving charge was $10.10.

The last fees that we surveyed were kitting services and inbound call center services. For kitting services, most companies use an hourly rate, since each project is unique in the amount of time it takes to perform. The average hourly rate for kitting came in at $35.47; and the average kitting cost per unit was $.30-$.63 for simple projects. Finally, our survey found that call center fees have dropped slightly. This year, they came in at an average of $.85 per minute, down from $1.05 a year ago.

As you can see, there is a lot of variety in how warehouse operations work, but the averages tell the general story of these warehouses. We would love to hear from you and see what additional data may be of interest to you. If you have an interest in warehouse processes and procedures, please contact us for more information.

To view the results of the previous surveys from the last couple of years, please see below:

2020:

Sizeable Increases in Warehousing and Fulfillment Costs According to insightQuote’s 2020 Poll

 

2018-2019:

Warehousing and Fulfillment Fees Rise According to Latest insightQuote Survey

2017:

Warehousing and Fulfillment 2017 Warehouse Costs and Pricing Survey

How Warehouses are Reducing Costs by Using a Lumper Service

What is a Lumper Service?What Is A Lumper Service?

A lumper service is a group of workers hired by a shipper or carrier to help with the loading or unloading freight from trucks or trailers at a dock. Many shippers and carriers hire lumper services, but they are most common in food warehouses.

Lumper services are provided by third parties hired by shippers and receivers to work in their docks. The third parties are companies that specialize in lumper services. These companies employ professionals who understand the nuances of loading and unloading trucks and trailers.

Lumper services regularly work in the docks and either charge the shipper or the carrier for their service. Typically, the carrier informs the driver of the presence of a lumper service upon arrival at a dock so they may hand over the truck or trailer on arrival. Truck drivers pay for the lumper service but are reimbursed by the carrier or shipper.

Why Hire A Lumper Service?

Shippers and carriers hire lumpers to give their drivers time to rest and recuperate after a long journey. They relax while the third-party workers load or unload the trucks and trailers. The thinking is that since the driver has been on the road for many hours, there is no need to strain them on the various loading and unloading stops.

Hiring lumpers also reduces the risk of injuries to drivers that can disrupt work and increase the workman compensation costs for the carrier. Lumpers are experienced in handling different types of goods and load or unload faster than a driver would do. They also know the dock and warehouse very well, meaning that they can complete the job in a few minutes.

  • By hiring a third-party to handle the job, the logistics company benefits in three ways:
  • Drivers get time to recuperate and also benefit from reduced risk of drive injuries
  • The fast loading and unloading saves driver’s valuable time

Warehouse staff time is minimized, allowing them to focus on other tasks

The Cost Differences Between Unloading Inhouse And Hiring A Lumper Service

The average hourly wage of a dock worker is $16.32 and includes tips, bonuses, and overtime. The cost of using lumper services varies widely, depending on the amount of work and the number of labor hours required to complete a job. The cost can range from $50 to unload a truck to $250 to unload a full trailer.

For instance, Walmart charges a flat fee of $50 for most loads while other receivers charge according to the size of the load. The cost may be higher if the lumpers need to restack the freight. Typically, carrier companies include lumper fees in the freight charges so that this doesn’t become an extra cost they have to foot. This page provides a template for calculating the cost of using lumper services.

Even though it is hard to give exact figures, lumper services are cheaper than inhouse dock workers because they do not qualify for as many benefits as inhouse workers. Lumpers charge a lump sum for their services, unlike inhouse workers who require hourly compensation in addition to health insurance, safety gear, workman compensation, and leave allowances.

Lumpers are independent contractors responsible for insurance, injuries, and other costs they incur during their course of work. Using lumpers helps docks reduce liabilities, such as worker compensation and disability insurance premiums. Indeed, the reason docks insist on the carriers to pay lumpers is because it shifts the liability to the third-party agency that hires them.

Flat Rate Lumper Service vs Hourly Workers

Many of the costs associated with operating a warehouse are fixed costs that really can’t be lowered or changed. But one cost many warehouses are realizing that they can cut are on employee costs associated with container unloading and loading.

Normally a warehouse will have hourly workers slowly unload shipping containers which can vary costs depending on how fast the employee wants to work that day. On the other hand, a warehouse can hire a flat rate company to unload or load their containers for them for a flat rate. So instead of playing several workers an hourly rate and having to pay an unknown amount for each container, a warehouse can just pay a flat rate and let the Lumper company deal with it.

Example of the Cost Saving with using a Flat Rate Lumper Service

The savings associated with using a flat rate lumper service will vary but let’s look at this scenario. The Warehouse has a shipping container that needs to be unloaded, they can use two options:

  1. The warehouse uses 3 hourly workers to unload the container which takes 4 hours for a total of 12 hours. With current warehouse laborer wages the warehouse would be paying between $15-$18/ hour for their own employees or $21-$25/ hour for temp agency workers. So, for the 12 work hours required to unload the container the warehouse would pay anywhere from $180 at the lowest up to $300.
  2. Option 2 is where the warehouse uses a flat rate service and pays a pre negotiated rate to unload the container which starts at only $195 per container.

Other Advantages of Using Lumper Services

A common complaint among customers in the food industry is that their deliveries were not handled properly. There may be instances of cargo falling during transit or getting damaged. Lumper service companies help reduce these losses by loading and unloading food packages safely to minimize damage. Lumper services are popular with big grocery chains because they save them millions in labor and staff costs.

Some companies have in-house dock workers who handle the loading and unloading of freight. However, such workers often have other responsibilities apart from packing trailers. They can rush the loading and unloading or make other mistakes so that they can continue with other tasks. This makes them less effective than third party lumping services whose only focus is on loading and unloading trucks and trailers effectively.

Lumpers have worked at the dock for a long time and know the way around the warehouse. This increases the loading and unloading efficiency while reducing the risks of damaged goods and injury to the workers.

On average, lumpers make loading and unloading trailers quicker than it would be if it were done by drivers. Industry experts estimate that drivers unload at 25% of the rate of specialized lumping services. Lumpers are the helping hand that keeps freight rolling.

Lumpers reduce the costs that carriers incur in delivering freight. For instance, the carriers or freight brokers do not have to cover the cost of injuries incurred by the lumpers because they are independent contractors. They also save on training and equipment costs because the lumpers will bring their own equipment or hire from the dock owners.

For carriers, lumpers enhance relationships with receivers because they help restack or unload the freight without much hassle. Lumpers understand the customer or receiver’s demands and handle the cargo according to the requirements. For instance, lumpers understand how the client wants different goods arranged in the warehouse for easy retrieval and stack them accordingly.

Lumpers also help warehouses meet peak period unloading demands.  They help deliver goods on tight schedules by reducing the time it takes to load or unload goods and send them to customers. This reduces lead times, leading to improved customer satisfaction.

Lumpers enable warehouses to handle complex cargo more easily than they would without specialized cargo handlers. For instance, most warehouses involve third party lumpers when handling non-unitized cargo than when dealing with unitized cargo. It is also common for warehouses to use lumper services for unloading unitized loads of agricultural commodities and refrigerated goods.

Using lumpers reduces tax liabilities for shippers, carriers, and receivers because they are independent contractors responsible for filing their tax returns. In other cases, the third party hiring the lumpers shoulder the responsibility for filing their tax returns.

Understanding the Difference Between LTL and FTL to Maximize Your Fulfillment Strategy

Difference Between LTL and FTL ShippingSellers spend an average of 70-75% of their fulfillment costs on shipping. But it’s not that easy to know if you’re spending in the right places. There are a lot of variables to take into account. When it comes to freight (goods transported in bulk) you have two main choices, LTL (less-than-truckload) and FTL (full-truckload). Choosing between these two methods depends on several things: the size and weight of your shipment, freight classification, and delivery timelines. If you want help from an expert, it’s often best to outsource your freight to a third-party logistics provider (3PL) to help optimize your freight strategy.

LTL and FTL Explained

LTL refers to less-than-truckload. LTL is when multiple shippers’ freight is on the same trailer rather than having a single company’s freight exclusively on an individual trailer. Several LTL shipments are combined one a truckload to maximize space and fill it to capacity. This is a great option for shipments that are between two and eight pallets or any shipment that is less than 14 linear feet because it makes the most out of the available shipping space on a given truck. LTL is a great option for small businesses.

FTL refers to full truckload freight. FTL shipping is commonly used for large shipments that take up the entire truck, or most of it. With FTL, your freight is the only freight moving on an individual truck so you have exclusivity to the entire truck and theoretically are filling the truckload. You can reserve the truck with its full capacity even if you don’t require filling up the entire available space. Doing so would ensure that you won’t have to worry about your goods changing hands at any time or your goods being misplaced with other products.

Differences Between LTL and FTL

The biggest difference between LTL and FTL is that LTL gives you higher cost savings when you ship only a few pallets at a time. This is cheaper because you are only paying for the space you are using, rather than paying for a full truck that isn’t filled to capacity.

LTL and FTL also have a key difference in transit times. If you have a full truckload your carrier will pick up whatever you are shipping and drive it straight to the receiver—this makes transit very predictable. FTL carriers will arrange a firm delivery time since they are only picking up one shipment. However, the transit for LTL does not go directly to the end destination because of the different stops they have to make. With LTL the actual delivery date may be very different from the estimated delivery date, requiring more flexibility on your end.

There is also a greater chance of damage or missing items with LTL. Because your product will be alongside other products that need to be dropped off at different locations, your items will be loaded and unloaded in and out of trailers and warehouses several times before reaching the final destination. This increased amount of handling and exposure means a greater chance that your products could incur damages, especially if they are sensitive or fragile. On the other hand, a full truckload will load your products at the point of origin, seal the trailer, and take it straight to its delivery destination.

How to Optimize Your Options: FTL vs. LTL

There are no hard and fast rules by which you must abide by, however, there are certain situations where FTL might be more appropriate than LTL.

Choosing FTL

  • If you are shipping more than 12 pallets at a time, then the full truckload option is going to be best for you.
  • If your product is fragile and you need to avoid excessive loading and unloading by multiple carriers, the full truckload option is going to be best for you because you know that your fragile products are the only items within that truck.
  • If you need firm delivery and pick-up dates the full truckload option is going to be better because you can reserve a single carrier to transport your items. For time-sensitive delivery dates, you absolutely want the full truckload option.

Choose LTL

  • If you have a smaller shipment that is anything less than 12 pallets you will experience higher cost savings using the LTL method.
  • If you have some flexibility on the delivery or shipping date the LTL option is going to be much better suited for you as well. By giving you a pickup and delivery range at either end, as opposed to requiring a more specific time schedule, you can benefit from the savings of combining your shipment with another shipment.

Pro tip: It is important to be aware of how likely your products could incur damage during shipment. You want to make sure that they are sturdy enough for regular handling at various points throughout the shipping process or that they’ve been properly packaged so that being handled regularly is unlikely to cause any damage.

How to Work with a 3PL for LTL and FTL Shipments

As you have read, understanding and deciding which of these two freight options is best for your business can be a very complicated undertaking. Because of that, partnering with a third-party logistics provider (3PL) can often be the best option when it comes to shipping LTL or FTL freight, especially when shipments have special requirements or time sensitive deadlines. 3PL companies provide an advantage for businesses looking to find the most competitive rates in the market, along with service that they can count on. Here are a few benefits of outsourcing freight support to a 3PL.

Expertise

Freight shipping is often a core competency of many 3PL providers, both LTL and FTL included. They have the experience to be able to determine the best way to handle your freight since they provide that service every day for multiple companies. A competent 3PL will help you evaluate your shipping and choose the most efficient option. They will also be able to anticipate potential risks or higher costs, and continue to analyze your freight optimization for the best results to grow.

Cost Savings

Your company might only ship a few pallets each month to a small area, while a 3PL is shipping a significantly higher volume across the whole country or internationally on a daily basis. Their volume and buying power gives a 3PL leverage when negotiating rates with freight carriers. By partnering up with a 3PL, you get access to these cost-effective rates.

Visibility

It’s crucial for any business to know what is happening with their freight at any point in time. Many companies are afraid of the loss of control when using a 3PL for LTL or FTL. The reality is you gain more visibility and tracking capabilities than you might have had trying to manage the process yourself. A team of professionals will focus on providing the highest level of service to your company, including detailed updates from your shipment’s inception to when it reaches its endpoint.

The final decision between FTL and LTL shipping will depend on costs, timing and handling requirements for your freight shipment. In many cases, LTL will provide a cheaper option for smaller loads, but if your load is heavy for its size, irregular in shape or takes up more than half of a truckload, it makes sense to get pricing for both options. Sometimes, full truckload is the way to go even if your load leaves empty space on the truck.

Article written by Brian Tu, Chief Revenue Officer, DCL Logistics

Using Fulfillment Centers to Expand eCommerce Businesses to Canada

Using Fulfillment Centers to Expand eCommerce Businesses to CanadaShould You Expand Fulfillment Operations into Canada?

Knowing when to expand your warehouse and fulfillment footprint to Canada is a choice that must be weighed carefully. While fulfillment centers throughout the United States offer convenience and affordable rates and can ship internationally, sometimes expansion into other countries such as Canada make more sense for your business. But how do you know if you should expand to Canada? There are many factors that must be weighed into your decision. Here, we break down just a few considerations you should make when making your choice.

At the end of the day, it boils down to shipping costs and shipping times. Shipping orders one-by-one from the US to Canada will potentially cost more per shipment and could take more transit time per order. But your monthly order volume will impact the point at which it makes sense to carry additional inventory in Canada rather than continue to ship orders from a US based fulfillment center.

International Shipping Costs

The first thing you’ll want to consider when it comes to expanding into Canada are international shipping costs. Remember that Canada uses a different currency than the United States, so make sure you have the proper conversion rates when making your budget.

Furthermore, you’ll have to account for the differences in shipping costs in Canada versus the US. There are a number of different Canadian shipping carriers and options, so familiarizing yourself with those options and obtaining sample price quotes will help with your analysis. Many websites offer Canadian shipping calculators so you can see the pricing for shipping of orders.

Also, keep in mind that you may incur other fees such as customs fees, clearance fees, and import/export duties. These must be calculated on a per order basis when shipping orders from a US based fulfillment center, and they can be compared to the costs of shipping a bulk order of inventory to Canada for fulfillment of orders by a Canadian fulfillment center.

Customs Fees

According to the Canada Border Services Agency, “any item mailed to Canada may be subject to the Goods and Services Tax (GST) and/or duty.”  This tax of five-percent pertains to goods imported into Canada and is based on the value of the goods in Canadian currency.  These fees may be subject to change depending on the goods you are importing and the country of origin. Items mailed into Canada are exempt from these fees if they are worth CAN $20 or less, or if they are considered gifts from friends or family and worth less than CAN $60.

Some provinces collect an HST (harmonized sales tax) of 13 percent, so check with the local municipality where you plan to host your fulfillment to see if this will apply to you.

Clearance Fees

Customs clearance fees cover the process of preparing and submitting the customs paperwork. Clearance fees are not included in shipments sent to Canada with shippers such as UPS Ground or FedEx. If you are considered a higher volume shipper, you can negotiate a discounted fee, however, some ground shipments accrue a customs entry preparation fee which is assessed upon the shipment’s “value for duty.” This fee begins at around seven dollars and increases up to 20 percent of the shipment’s total value.

Import / Export Duties

According to Canada.ca, most goods that are imported to Canada will accrue the federal GST. This is “five-percent of the duty paid value of the shipment.” The fee must be collected at the border at the time of entry unless the goods are being shipped to a bonded warehouse. If the planned destination is a bonded warehouse, the GST is due when the goods leave the warehouse and are able to be sold in Canada.

For export duties, any goods which are eligible for the GST/HST may be untaxed if being exported from Canada. These are considered “zero-rated” goods. There are many criteria that must be met to qualify for this exemption, so check with a reputable source such as Canada.ca to see if your merchandise qualifies.

The good news is depending on where in Canada you host your fulfillment services, these fees may not make much of an impact on your overall cost.

International Delivery Times

Another consideration when deciding to expand your fulfillment center to Canada is delivery times. Because goods to Canada must go through customs, there could be delays in delivery times crossing the border. This significantly impacts individual orders that are sent from the US and can cause intense friction with customers as their orders are delayed during this process. There can also be delays as shipped goods switch postal services from Canada Post to the United States Postal Service or vice versa so take that into consideration as well. On the other hand, if you ship a bulk inventory of goods into a Canadian warehouse, outbound orders to individual customers won’t have to clear customs, and therefore will arrive much quicker, increasing customer satisfaction.

The Best Fulfillment Centers in Canada

The next question you must ask yourself when considering hosting your fulfillment center in Canada is, ‘where are the best fulfillment centers in Canada for me, and how do you find them?’

The answer is not so simple, as you must do your homework here. Canada is a vast country with multiple population centers spread throughout a large area. Where your product is produced and where it will enter Canada will also dictate any preferred warehouse locations. Furthermore, the location of your customers will have a large impact on this decision as well. Using any sales data that you have from previous sales will help narrow down the largest markets for your products.

Major Markets in Canada

The most significant markets in Canada include major cities like Vancouver, British Columbia, Alberta, Montreal, Quebec, Mississauga, and Toronto, Ontario. Depending on how close your fulfillment center is to a major city may affect your warehousing rates, so if you are budget conscious, consider hosting a bit outside the major markets. Furthermore, weighing the costs and benefits of bringing product into a larger population area such at Toronto (which may cost more in terms of inbound freight) versus bringing product into a closer port such as Vancouver (but potentially incurring higher outbound shipping costs per order to other areas of Canada) is critical in this analysis.

Best Fulfillment Centers in Toronto and the Greater Toronto Area (GTA)

Many businesses have found great savings and success expanding their fulfillment into Toronto, Ontario, or the Greater Toronto area.  The GTA offers cost savings, as well as streamlined customs processes at the United States / Ontario Border. Furthermore, the population base is higher in this area, and it is close in proximity to other major Canadian markets such as Quebec and Ottawa. And on top of this, there are an abundance of high quality Toronto area fulfillment centers.

The major metropolitan areas in the GTA include the following:

Mississauga Canada

Mississauga is a suburb of Toronto situated along Lake Ontario. The city offers the benefits of being close to Toronto but may offer lower costs on warehousing and fulfillment due to its location.

Hamilton Canada

Under an hour’s drive to Toronto is the city of Hamilton, Ontario. Like Mississauga, Hamilton benefits from its proximity to Toronto without the big city overhead.

Toronto Canada

Toronto is the largest city in Ontario and the largest in the entire country of Canada, so fulfillment centers are not only abundant in Toronto and the GTA, they offer the benefit of strategic location with access to roads, air, and the Port of Toronto, a gateway to the St. Lawrence Seaway and the rest of the world.

In Conclusion

Expanding your fulfillment services to Canada can be a financially rewarding move for your business. If you are considering expanding your fulfillment services to Canada, remember to consider all fees and duties on your merchandise, and remember to select a location that will allow your merchandise to reach its intended destination without significant delay.

5 Tips for Shifting From Brick-and-Mortar to E-Commerce Sales

Brick And Mortar Offline Store To Online Commerce ShoppingWhile a number of brick-and-mortar stores are facing closure, Amazon and other e-commerce sites have experienced record sales. Rick Stein of the Urban Decision Group notes 30,000 store closures in the past five years. In the first few months of 2020, 2,000 have closed with an additional 15,000 more expected by the end of the year. At the start of 2020, department stores occupied 30% of all mall space. Fifty percent of those stores anticipate closures by the end of 2021.

Can Brick-and-Mortar Stores Survive?

Although some stores have reopened, many retailers aren’t able to survive business disruptions for extended periods of time. When asked about the possibility of closing permanently, there are varying tolerances for how long businesses can survive interruptions:

  • 5.63% will survive less than one month
  • 26.28% will survive 1-2 months
  • 34.07% will survive 3-5 months
  • 17.62% will survive more than 5 months
  • 16.39% are not concerned

From mid-March to mid-April, Stein surveyed 500 retailers. According to his research, 40% of apparel retail may never re-open as well as one in five restaurants. Through this time of social distancing, consumer behavior and shopping methods have taken a drastic shift towards online purchases. People who never before made a purchase online have now become familiar with researching products before making a purchase, checking reviews, and enjoying the convenience of home delivery.

Retail Sales by Category

As retail stores began to re-open in May, the Wall Street Journal reports sales rose by 18%. While this number is encouraging, YOY sales for May were still down 63%. YOY sales for April were down 85%, showing a slight improvement for May.

E-commerce Trends

In 2019, e-commerce transactions accounted for 12% of all sales during the last quarter of the year. 8% of all grocery sales are online. There was a 65% growth in online grocery sales between March and May 2020, however, retailers continue to work through operational complications and costs to improve efficiencies for these services. Beginning in March 2020, many small retail stores turned to Shopify and other ecommerce sites to facilitate online sales. Shopify alone saw an increase of 62% in new online stores between March and April.

Even as businesses began to re-open, retail outlets struggled to fill store shelves with inventory, especially the most desired items. Apparel and electronics categories have traditionally fared well with online purchasing. With closures and out-of-stock conditions, one in four people reported shifting to online purchases for restaurant meals, hygiene products, health products, and cleaning products. Mastercard reported 22% of all retail purchases in April and May were e-commerce transactions.

Prior to March 2020, the concepts of “social distancing,” “contactless delivery,” or “safer at home” were foreign. In a relatively brief period of time, these terms became part of everyday vocabulary. Many businesses were forced to close while others drastically changed operations to remain open using new methods of conducting business. The new normal includes face masks, enhanced cleaning practices, and adjustments to sales processes and procedures.

Changes to Shopping Patterns

PPIQ (Path to Purchase IQ) cites a few reasons why some continue to make in-person purchases. These include: 33% making purchases based on needs for immediate consumption; 29% resorting to old habits and aversion to new methods of buying; and 26% preferring to view products prior to making a purchase.

Those who continue to shop in person are taking more time to carefully plan trips. Shoppers stock-up on purchases and take time to make lists to limit their total number of trips. Fifty percent of people are trying to make quicker trips to get in and out of retail stores as quickly as possible when only 13% had this goal prior to the pandemic. The crisis also expedited online grocery shopping to levels that otherwise wouldn’t have been achieved for another three to five years. The shift to online purchases for grocery has spread to other retail businesses and will likely continue post-COVID.

There is a greater need for businesses to find new and multiple ways to operate and sell their goods to address the varying needs and preferences consumers share. Omni-channel retailers offering both e-commerce and brick-and-mortar sales are likely to be the real winners in the future.

Opening an Online Store

There are a number of decisions and steps to take to begin selling products online. Here are a few things to consider when selling your goods directly to consumers:

  1. Find a reliable technology platform to power transactions. These systems will help with inventory management as well as facilitating online ordering.
  2. Integrate ordering with your website, but also consider selling through social media accounts and online sales sites like eBay.
  3. Determine what policies, practices, and services you want to include. What is your return policy? Will you include any guarantees on satisfaction? What type of shipping or delivery services do you want to offer?
  4. Develop a marketing and advertising plan to promote your products. Create posts for social media, consider boosting your content through ads, incorporate email marketing, and develop a strong SEO program.
  5. Determine who and how you will pack and ship your orders. Plan for growth and consider outsourcing your fulfillment to a third party. Product Fulfillment Companies can take the hassles out of inventory management and processing your orders for delivery. This will allow you to focus more on building your brand and your business.

With changing times and much uncertainty in today’s business world, it’s more important than ever to be open to changes in your organization and operations. “We all must adapt and adjust to the current and frequently-changing environment in order to be successful. E-commerce fulfillment firms like PFS are making a number of adjustments to workflow and staffing as a result of the shift towards e-commerce orders,” said Jason Martin, Co-Founder of Product Fulfillment Solutions.

B2B vs B2C eCommerce: Same but Different

Everyone is shopping online these days. Even before the pandemic of 2020, business buyers were making the move to buying more and more online. Statista puts global B2B eCommerce over $12 trillion in 2019. That’s over four times the size of the B2C eCommerce market, which was a little over $3 trillion. While everyone may be doing it; they don’t all do it the same. There are clear differences between B2B and B2C buyers. Both sets of buyers may have some of the same expectations, but their shopping habits and behavior are quite different. That’s why their customer experience needs to be different and tailored to their wants and needs. 

What Both B2C and B2B Buyers Want

Before we delve into differences, let’s look at what both B2B and B2C buyers want in their eCommerce experience. Because they do have some commonality. 

Mobile Ready. Both B2C and B2B buyers are not tethered to desktops. So, they want a great experience whether they are on their smartphone or laptop. Your website should perform flawlessly on any device with any browser. Mobile searches exceed desktop ones and 51% of people 16-64 purchased a product using their mobile phone in April 2020.

Rich Content. B2C and B2B buyers are looking for solutions and searching for answers to their problems. They want in-depth product information. A pretty picture and 50-word product description just won’t cut it anymore. Both types of shoppers want access to user and product manuals, how-to videos, live or AI-enabled chat, use and case studies, FAQs, user forums, and as much information as you can provide about your product or service. 

Self-Serve Model. It’s important to provide all of this rich content because what buyers of both stripes really want is a completely self-serve model. They don’t want to pick up the phone or send an email. Customers demand speed and they want answers now! And 70% of customers expect your website to include a self-service application. So, provide order tracking, order history, return authorization, and other common customer service tasks directly from your website.

Frictionless Experience. What do the items above have in common? They all work together to create a frictionless experience. Now that’s what customers really want. So, give them one-page checkout, multiple payment options, easy reordering, and chatbots for inquiries. Consider your menu structure and make sure your design allows someone to purchase in as few clicks as possible. Every form they must fill out and every click they must make creates friction. If you provide site search (and you should) be sure to include an autofill function.

The Different Shopping Habits of B2C and B2B

So, while B2C and B2B may have some expectations for customer experience in common, they have quite different shopping habits.

Shopping Habits of B2C Buyers

B2C buyers may not even set out to make a purchase. They may see an ad on social media, receive an email offer, or just be simply surfing the net.

They tend to make purchases based on emotion. That makes them more receptive to advertising and marketing efforts. They might see a new product and think “that’s something that I might enjoy”.

B2C buyers tend to make more one-off purchases than B2B buyers. They aren’t looking to establish a relationship; they just want a product that they might not even know existed an hour ago. And they don’t usually buy in large quantities.

When it comes to cost, the B2C buyer doesn’t negotiate cost but price may be a major factor in their purchase decision.  And when it comes to making the purchase decision, this shopper generally isn’t obtaining the approval of others to make the purchase. They simply pull out their credit card or enter their PayPal information and complete the purchase.  

Shopping Habits of B2B Buyers

B2B buyers usually start their purchase journey with a search for product information. They take their time gathering information because they usually have defined product specifications in mind. Potential products must be measured against these specifications. They may be looking for items that must be customized to their needs

There’s little to no emotion in a B2B purchase. Advertising and marketing efforts revolve around resolving pain points. This buyer is making a well-researched rational buying decision and from start to finish, the sales cycle is long.

That’s because B2B buyers tend to purchase the same product again and again. They are evaluating the vendor as much as the product. The relationship is important and they are generally looking at post-purchase support as well. To this buyer, the purchase experience is even more important than the price.

And, when it comes to price, the B2B buyer is accustomed to negotiating a price based on volume and frequency of purchase. This buyer expects their prices as well as freight and payment options to be customized to their needs. They generally evaluate multiple suppliers at one time. Then when it comes time to make the purchase, a B2B buyer usually must obtain approval from others. 

How eCommerce Meets the Needs of B2C and B2B Buyers and Sellers

eCommerce must adapt to meet the different needs of B2C and B2B buyers and one size doesn’t fit all situations. 

eCommerce for B2C

B2C buyers are just as happy shopping on a marketplace like Amazon as they are on a company’s website. B2C sellers need to offer multiple channels for eCommerce. If you have brick and mortar stores, your eCommerce strategy should align. Options like buying online and pick-up in-store and location services that can send push notifications when shoppers come inside provide the type of personalized attention retail shoppers love.

Eye-catching graphics and design are a must to catch and hold the attention of B2C shoppers. Remember these are impulse buyers and eCommerce allows you to convert interest to a sale right away. 

If they don’t convert, the eCommerce solution should provide ways to capture abandoned carts and turn them into completed sales. 

For consumable items, a subscription model combined with eCommerce keeps repeat orders coming in and makes cash flow even more predictable. 

Don’t underestimate the power of social media to fuel B2C eCommerce. Whether you operate separate storefronts on Facebook or Pinterest or use social to keep the sales funnel full, your eCommerce strategy must include a social component. 

A B2B eCommerce platform must integrate well with your social channels, have a robust CMS, offer multiple payment options (credit/debit and PayPal) with a secure checkout, be easy to get up and running quickly. Some software as a service (SaaS) options like BigCommerce or Shopify are easy to implement but lack the ability to customize workflows.

eCommerce for B2B

B2B buyers are looking for a different type of personalization. They want custom catalogs and price lists that are tailored for their account so be sure to show this buyer their pre-negotiated prices when they log-in. You may need to create different storefronts for different verticals. 

For visitors that aren’t yet customers, an automated RFQ workflow will allow shoppers to get accurate quotes quickly.

Because most business purchases involve more than one buyer, it’s important to allow your users to define the roles and permissions that align with their internal practices. 

Because most purchases are repeat sales, by providing quick order forms, accepting CSV file uploads, and order from sales history functions, buyers can place their orders quickly and accurately without the need to speak to a sales rep. 

The secure checkout for B2B eCommerce should support multiple workflows. Most business purchases aren’t paid for with a credit card at the time of purchase. So, options for establishing a line of credit and paying on terms must be provided. Your eCommerce solution will need to integrate with partners that factor your receivables, check credit, or perform other financing services.

Speaking of integration, in B2B eCommerce, the ability to work and play well with other solutions is essential. B2B buyers may want to use EDI or punchout catalogs and you’ll need to integrate. Your eCommerce solution should seamlessly slide into action with your ERP, WMS, PIM, CMS, and other business software. 

B2C and B2B eCommerce are Different – So Are Their Solutions

As you can see, while B2C and B2B buyers have some common expectations, their actual transactional needs are very different. B2B is much more complex than B2C.

B2B eCommerce solutions need to be built from the ground up for how companies do business with each other. B2C platforms repurposed for B2B just aren’t up to the job. So, when you look for a B2B eCommerce solution be sure to look for:

  • Support for multiple business models – B2B, B2B2B, B2G, and B2C – as your business strategy changes, your eCommerce solution should change with you.
  • Ability to handle unlimited SKUs is imperative – with multiple warehouses or stock locations, so don’t be limited by the number of SKUs your solution can process.
  • CRM integration or inclusion – your solution must either include or integrate with a CRM to increase the productivity of your sales and marketing assets.
  • User-defined roles and permissions – make like Amazon Business and let your users set limits on their authority to purchase.
  • Robust workflow engine – your solution should conform to your business, not the other way around. Make sure you can define workflows.

There are many eCommerce solutions on the market today. If your digital strategy includes B2B eCommerce, make sure your solution is B2B ready and not repurposed B2C.

 

Warehousing and LTL Shipping – Key Factors in Selecting a 3PL Partner

LTL Freight WarehousingChoosing the right 3PL partner is critical to saving your company time, money, and potential headache. Whether you are a B2B or B2C oriented company, be sure to understand what to look for when selecting a partner for your warehousing, supply chain and logistics needs. Have a clear definition of what you are looking for, your product details, and what to check off in terms of the service offering that will help you save time and money. Below we dive into a few factors to consider when you are shopping for 3PL services – especially in cases where you ship larger, LTL orders.

Product Needs Must Match 3PL Service Offering

Before even shopping for an outsourced 3PL service provider, define your wants and needs for your product, the specifications, and what is working and not working in your current fulfillment process. Identifying friction points helps your 3PL provider understand where they can help and what services they can provide to alleviate the challenges you have faced in the past.

Furthermore, knowing your product dimensions, pallet size, turns, shipping destinations, average order size, and more provides you and the 3PL companies you are looking at more detail into how they can serve you. This will provide proper alignment for you and the outsourced 3PL service provider and save you a lot of time and opportunity cost going forward.

LTL Shipping and Impact on Supply Chain

LTL shipping is typically a must for companies that ship larger orders. While shopping for warehouse logistics services, ensure that your 3PL provider offers tightly controlled LTL shipping services, as it has multiple benefits:

  • LTL Shipping Reduces Cost – If your shipment does not need FTL (full truckload) freight shipments, ensure you utilize LTL. “LTL enables shipments from multiple companies on one truck, which benefits your company as the shipment is divided amongst each company based on their own respective cargo weight. Additionally, this reduces the amount of handling vs. parcel shipping,” noted Brandt Jensen, CEO of Interwest Transportation, an asset-based 3PL that specializes in FTL and LTL freight warehousing.
  • Freight or Cargo is More Secure – LTL freight is loaded onto pallets most of the time. Additionally, a pallet typically is wrapped – reducing the amount of wear and tear, rubbing, etc. from contact with other freight within the trailer.
  • More Options for Service – within LTL shipping, options for service such as lift gates, inside pickup, special handling, freeze protection, and more are offered to ensure further security and ease of transport.
  • Tracking is Improved – Most carriers provide real time tracking for picking, stops, and delivery status. Having a palletized shipment is easier to track and simplifies the workflow process.
  • Reduces Emissions and Carbon Footprint – LTL shipping provides reduced emissions as it maximizes each truckload by combining multiple company’s shipments into one freight shipment. This reduces the amount of trucks on the road and helps reduce our carbon footprint, as well as your 3PL provider’s footprint overall.

The Importance of Warehousing, Freight Fleet, and Carrier Relationships

Warehousing, an in-house trucking fleet, and good carrier relationships are all pivotal to maximizing your relationship with your 3PL service provider. Each will save you time and money as there is less handling and the shipper can quote out various carrier options to choose the best value for you. While you can continue to manage your LTL freight carrier relationships, there are multiple benefits to finding a 3PL company that has its own LTL shipping division and/or has existing carrier relationships and ships high volumes of orders.

  • The importance of Warehousing – choosing a 3PL provider that has a powerful WMS (warehouse management system), the ability to rack or stack, as well as process returns is especially important to your entire supply chain. Ensure that you can track inventory, place inventory where needed, and that the warehouse has the processes in place to reduce handling and pick and pack fast for expedient delivery.
  • A 3PL That Owns Their Own Trucking Fleet – this cuts cost directly out of the shipping process. One less company means one less company to pay for handing and for their margin – which therefore increases your company’s margin. Common LTL discounts can reach 45-50% off published rates for 3PL companies that have preferred rates with carriers, and discounts can be significantly greater if the 3PL has its own fleet. Choose a 3PL that has its own fleet for freight delivery, and your P&L will thank you.
  • A 3PL with Carrier Relationships – multiple carrier relationships mean more options for a shipment to choose from, so you can get the best value from your 3PL provider as well as each shipment. If you have varied product and varied order quantities, this helps get the best value and cost on a per shipment basis. Once again, your P&L will thank you.

The Impact on Your Operating Expenses & Bottom Line

Knowing your product and order details, while ensuring your 3PL provider has a full service offering including LTL shipping, full warehousing capabilities with a powerful WMS, various relationships with carriers, and their own trucking fleet will help you save a large sum of money on your shipments, operating expenses, and therefore improve your bottom line. Before shopping for 3PL services, ensure you know your product, your current fulfillment process, and what you are needing across your supply chain.

7 Reasons Your Brand Needs Value-Engineered Packaging

Packaging supplies play an essential role in every business that sells a physical product.

Keeping your products safe and appealingly presenting them are the two core functions of custom packaging – be it primary or secondary packaging.

But all too often, finding the best packaging solution is left to the last minute and an ‘adequate’ packaging solution is implemented in the form of off the shelf packaging. While these standard packaging products get the job done, it’s costly to scale and ends up burning a lot of your cash.

That’s where value-engineered packaging comes in.

In this article, you’ll see what exactly value engineering in packaging is, as well as 7 reasons that your brand should consider using it.

But first, let’s outline the basics:

What is value-engineered packaging?

Value engineered packaging is packaging that’s made from the ground up specifically for your product.

Materials, size, shapes and assembly processes are all individually assessed with your product, your fulfilment process and your brand’s values in mind.

The overall goal of value-engineered packaging is, believe it or not, to provide value in the form of optimised packaging by reducing your packaging costs.

Value engineered packaging lowest costs by assessing the way your packaging solution performs a number of roles, such as security, branding, and space optimisation.

Here’s how value-engineered packaging can help your business save money and perform better:

Reason 1: It lowers your unit costs

A simple packaging audit takes into consideration the existing materials, logistics and construction processes around your packaging. Cost savings are found by assessing the performance of your current packaging solution in these fields and then improving upon them.

For example, your product may be using both primary and secondary packaging when of a more robust form of packaging primary packaging may suffice.

This more robust material may fit more pieces onto a single pallet, thus keeping costs down even more.

As you can see from the two examples above, value engineering has both direct and indirect cost savings for your business.

Reason 2: It weaves sustainability into your DNA

Your brand may very well have sustainability and eco-friendliness at the core of what it does and therefore want to implement sustainable packaging.

If you’re delivering even the most carbon-negative product in single-use plastic packaging, you’ll do nothing other than disappoint your end consumer.

But using a packaging engineer, you’re able to work the cost-effective and environmentally friendly materials into your packaging.

Experienced packaging consultants stay on top of the latest materials technology and work with suppliers that can implement the ideal sustainable packaging solution into your brand, while also balancing costs.

The result of such a process is environmentally friendly packaging that helps your brand stand out and is marketable as complementary to your product and brand.

Reason 3: It improves your image

The effect your packaging has on your customer is best understood when you think of your packaging as another marketing channel.

When your customer has your product in their hand, they want reassurance that they made the right choice. And your packaging is the ideal place to remind your customers why they brought from you.

Take a brand that everyone is familiar with, Apple.

The brand’s image is one of sleek, modern sophistication that places emphasis on minimalism and cutting edge design.

And these sentiments are mirrored on the packaging of all their products.

iPhone packaging is understated, and either black, white or the same shade as the product. There’s little to no gimmicks on the external packaging, but rather the understated design is left to do the talking.

And this is the opportunity that tailor-made packaging can bring.

If your brand is overstated, loud, colourful and ‘in your face’, then these branding strategies can be worked into your packaging design.

Similarly, if your brand uses an understated design like Apple, higher-quality materials can be used to invoke the sense of touch into the buying process.

Reason 4: It saves you in shipping & logistics

Shipping and logistics are a two-time expense for your business.

Firstly, from the manufacturer to you, and secondly, from you to the end customer.

Passing on delivery costs to your customer is quite common, but studies show that customers now expect free shipping.

So by engineering your packaging so that it is as light as possible and uses space as best it can, you’ll minimise both these costs.

Custom sized packaging performs best when going from your warehouse to the end customer.

That’s because it takes up as little space as possible, be as lightweight and safe as possible – and all this by using the smallest area and volume as necessary.

Reason 5: It’s a good insurance policy

Keeping your products safe throughout the transportation process is essential, as returns for damaged goods can be costly.

Using a variety of software, experience and engineering principles, packaging engineers can analyse the existing structural weaknesses of your packaging.

From there, materials can be added or swapped or internal structures redesigned.

But if you’d prefer to keep your existing packaging, an experienced packaging engineer can make that work for you, too.

Void fillers, in the form of custom tissue paper or kraft paper, are a viable option, but they are an extra expense and create more work to implement.

To make the most of your current packaging solution, consider using a custom insert.

Custom inserts designed to hug your product and prevent any movement are an effective way to make your existing packaging safer.

Reason 6: It saves space in your warehouse

Whether you use your warehouse or a 3rd party fulfilment centre, space comes at a premium. Packaging that doesn’t store well lessens the amount of space you have for other merchandise, thus negatively affecting your fulfilment processes and cashflow.

By value engineering your packaging, your storage restrictions influence the design of your packing.

Saving space may come in the sense of shortening one edge so that more pieces fit on one pallet, or even go as far as replacing a corrugated cardboard box with a custom mailing bag.

Reason 7: It speeds up your fulfilment process

Value engineered packaging can have another positive effect on your warehouse operations. By working with your existing machinery or manual assembly possibilities, your packaging engineers can build an efficient assembly process into your packaging.

As your packaging is being designed from the ground up, engineers can remove the need for glue or tape without sacrificing structure performance.

Over to you

Value engineered packaging looks at your current solutions and potential packaging solutions under a detailed microscope then finds the best possible solution and works it into your business operations.

These tailor solutions also present better branding opportunities in the sense of a more memorable unboxing experience.

The overall result is custom packaging that keeps your packaging expenses down without sacrificing performance.

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Bio:

Phil is a bearded Australian living in Warsaw, Poland. When he’s not marketing Packhelp’s sexy boxes, he can be found trying to kill his houseplants or writing for his blog Expatspoland.

Everything You Need to Know About Barcode Scanning Technologies

Barcode scanning is a critical part of the overall inventory management, fulfillment and shipping process that doesn’t seem to get as much attention as other warehouse functions. Without it, warehouse operations are subject to human error, leaving receiving, inventory, fulfillment and shipping errors with a chance to flourish. But when barcode scanning technologies are implemented and used properly, warehouse staff can operate with extremely low levels of errors – which is critical in our world of high-stakes e-commerce fulfillment and delivery.

The entire fulfillment process (receiving, inventory management, fulfillment, shipping and returns) can completely fall apart if all of these processes and procedures are subject to human error. In order to minimize errors to an acceptable level, bar code scanning technologies must be implemented. Bar code technology is vital because it allows you to automatically receive inventory, manage inventory, and pick and ship products with computer scanning rather than a set of human eyeballs (which are very prone to error!).

Barcode Scanning Technologies

Barcoding has gained mass adoption in warehousing because the cost of implementation is often very low and effective use of barcodes avoids errors and speeds up routine tasks.

While it is possible to encode all types of information in a barcode, in warehousing and retail the vast majority of barcodes are being used to quickly and accurately identify items. A string of numbers and or letters unique to each product is encoded in the barcode. When scanned, the scanner decodes this identifier which ensures the correct item is processed during receiving, counting, picking or packing. The barcodes themselves and the identifier encoded therein is not very useful on their own, but they become useful when coupled with a plan and a system that is often managed by the software you’re using.

Choosing Barcode Software

If you are planning to utilize barcodes you’ll want to choose software that has barcode support integrated directly or verify there is a suitable integration with an application (app) that can provide the scanning features you require.

Scanning functionality will ultimately come from one of three places. First, it may be part of an app that you’re currently using, like a receiving process in an inventory application that utilizes barcode scanning. An example of this would be receiving inventory in QuickBook’s SOS Inventory or Finale Inventory. Second, there are also warehouse management and shipping applications that become the central inventory hub or inventory “master” in addition to managing orders and creating shipping labels. They are likely to include multiple scanning functions including receiving, stocking and pick pack verification. An example would be SKU Vault’s inventory management software.  Third, there are applications that focus on specific scanning functions, like Pick and Pack verification and inventory receiving or cycle counts. These apps can add a number of scanning functions to your existing workflow. An example of this type of app would be GroovePacker.

If you are in the process of selecting apps for your workflow you can compare the cost of using a few integrated applications that include the scanning functions that are important to you and going with an all-in-one WMS that “has it all”.

Using an All-Inclusive Inventory Software Versus a Barcode App

Jumping into a larger application or suite that includes every possible scanning feature will be costly and may be unnecessary depending on your current needs. It’s also likely that while it meets all current requirements, there will be one or more areas where another solution would be preferable.  As with any business application or system it’s often wise to focus first on the items with the greatest potential return or cost savings now and in the foreseeable future. Since packing errors always result in a direct, tangible cost and poor customer experience, pick and pack verification is probably the first scanning feature you’ll want to incorporate. Eliminating shipping errors will immediately improve your inventory accuracy which will reduce out-of-stock scenarios and the customer service related to back-orders. Once errors are eliminated you can further increase inventory accuracy by using scanners for receiving and recounting tasks as well.

On the surface, it may seem less than optimal to have a number of apps working together to provide the functionality you need. Years ago, this was certainly the case because communication between systems was limited and often required custom development. Now, however, API’s make it much easier and more reliable to send the relevant data from app to app. This gives you the flexibility to use the best app for your needs in each of your business processes. When you outgrow one of the apps in your stack you can make a change without changing your entire system.

When integrating multiple apps there is a tendency to strive for a “complete” integration, and to integrate every data point possible. The opposite approach may serve you much better. Narrowing your focus to the data that will actually be needed by each app in your specific use case will greatly reduce the complexity of evaluating potential integrations.

The system as a whole should be carefully considered and the functions of each app understood. Only after the requirements and functions of each app are clear, is it possible to determine if the existing API’s will allow the data that each app requires to be sent and received as needed. On your own this would be a complicated task, which is why it is key to choose software providers that can provide knowledgeable support staff. Their suggestions and insight will be invaluable as you hammer out the workflow. Even when it’s clear that everything should work “in theory”, you’ll need an opportunity to test end-to-end and verify that everything is communicating as needed before making any commitments. A trial of 30 days should be sufficient. If you’ll be setting up multiple apps you should ask each provider when their app should be setup in relation to the other integrated apps. This can lead to a much smoother setup and give you more time to test with actual orders.

Let’s take a closer look at how barcode scanning works and can be utilized in these inventory and quality control operations.

Pick and Pack Verification

Barcodes are often used to verify items during the pick and pack process to ensure ordered items are all shipped accurately. Due to the high costs of mis-ships, this preventative scanning step is one that many shippers feel is critical. If your items are not already barcoded you’ll need to decide between barcoding individual items (more work upfront) and barcoding bins (more error prone).

There are a number of workflow options for implementing scanning in your fulfillment process. Initially, you’ll want to determine when in your workflow the verification should occur. This will impact the rest of the scanning process. The two main options are Scanning During the Pick or Scanning During Packing. Scanning can be done during both pick and pack, but if either of these are properly implemented, accuracy should be so high that the time required to add a second scanning step is not warranted. If you are planning to implement pick pack verification and you are looking to explore the various workflow and process options, see Pick Pack Barcode Verification Workflows for an in depth look at these considerations.

Receiving Inventory

Scanning items as they are received ensures that the correct item is being added to inventory. For example, three cases of one dozen units have arrived and the quantity is being recorded. In a manual process the items could easily be attributed to the wrong SKU. When using barcodes for receiving, the software is recording what was received and the SKU being updated is selected by scanning the barcode on the physical item. This ensures that inventory for the correct item will be updated. Your inventory or accounting system that generates purchase orders may include a receiving process that utilizes barcode scanning. If not, scanning can be done in any application that integrates scanner input in the receiving process and which can sync or export the updated inventory counts for your inventory system.

Stocking / Replacing Inventory

After inventory has been received and accounted for it will need to be stocked in your warehouse for easy picking later. Returns that can be resold will also need to be replaced in the correct location to complete the return process. Accurately stocking and replacing inventory is essential to your pick pack accuracy if you are scanning bins during picking rather than scanning individually barcoded items.

The process of scanning during stocking or replacing usually involves a scan of a product barcode which has been applied to the bin. If the items are not individually barcoded the process will likely involve keying in the SKU and then scanning a barcode on the bin to verify the stock location.

Recounts / Cycle Counts

As with the receiving process, the barcode scan in the counting process ensures the correct item is being updated when a count is conducted and entered. In a manual process, it’s far too easy to record an updated count for the wrong item leading to confusion and potential out-of-stocks.

Barcode software uses a scan to find and display the correct item so an accurate adjustment can be made every time. If item locations change often, each bin ID can also be encoded in a separate barcode. This bin barcode can be scanned to quickly enter a new location for a product that’s being moved. It’s also possible to have the scanner count each individual scan. In other words, each barcode scanned can be logged on the scanner itself and the total for each barcode can be output after the scanning is complete. This particular operation can be done by many scanners without additional software. The file generated by the scanner can be used to update the software being used to track inventory.

Generating and Printing Barcodes

Registered Barcodes may be purchased from resellers or directly from GS-1. It is important to have registered barcodes if you plan to sell to distributors or wholesalers that will put your products in retail locations. If your barcodes are to be used internally for inventory and packing verification, you don’t need GS-1 codes and therefore can use any value you like. In this case, using the SKU is a popular choice as the product SKU is unique for every product and variant. It is recommended to use all uppercase letters for SKUs and barcodes generated from the SKU to avoid case issues.

Some applications that handle barcoding can automatically generate barcodes from your product SKU and allow you to print barcodes in a standard format. If none of the apps you’re using have this functionality, there are a number of apps dedicated to printing barcodes in various layouts and formats, such as the popular program BarTender. For initial test runs, you can use an online barcode generator.

Thermal printers are a great choice for printing barcodes as their output is easily scannable and there is no possibility of ink smudging and making the barcode unreadable. One caveat is that thermal printed barcodes will fade over time if stored in a hot environment.

Business-Specific Quality Control Scanning Requirements

Preparing to use barcode scanning with your products tends to quickly identify any abnormalities in your product data. For example, you may have previously input barcodes provided by a manufacturer so they would be ready for scanning. It is during the implementation of barcodes that it will come to light that the manufacturer used the same barcode for all variants of a particular item. Since the variant SKU’s are different physical items and must be distinguished from one another, unique barcodes will be required.

In addition to helping you identify and resolve issues like these you may also find that the way you package or sell items requires more specialized scanning features. Let’s look at a few common cases where additional scanning features are either required or can improve the efficiency of your workflow and operations.

Kits, Cases & Multi-Packs

Pre-defined kits of specific items allow you to group and sell many items together. Customers love kits and they are a great way to increase your average order amount. Unfortunately, kit complexity often leads to packing errors, especially if you have multiple variations of a kit.

If you sell kits or plan to, you’ll want to be sure your pick and pack verification software includes support for kitting. If your products are ordered by the case or if you often use pre-counted packs to fulfill larger quantities of the same item, you will likely want features that allow you to type in the quantity being added (rather than requiring that each item to be scanned) and to define multi-pack barcodes that can add a predefined quantity of the item on each scan.

Configurable or Dynamic Bundles

If you allow the customer to choose between several variants that are part of a bundle you’ll need to verify your shopping cart is able to pass the selected SKUs to your scanning software so they can be properly verified. An example might be a desktop computer. Purchases can choose different amounts of ram, hard drive size, and a graphics card. The SKU for each of the selected options will need to be included as a line item in the order for verification to be possible.

Lot, Batch or Serial Number Recording and Reporting

There are many instances where companies may be required to do a recall for specific lot or batch numbers. Tracking these on the sales end may be difficult or impossible depending on your current software. Lot or batch numbers of the individual items in every order can be easily recorded during packing verification if the software supports it. In addition to recording the batch number with a separate scan, some dedicated scanning apps can recognize both the product barcode value and the lot number while they are part of the same barcode label. This makes it possible to verify the product and record the lot number in a single scan. Orders containing lot numbers can then be exported and archived so they are available in the case of a recall.

Multi-Box Scanning

If you often pack orders into multiple boxes and generate per-box packing slips you know how tedious and manual this operation can be. Since boxes are chosen during packing it’s possible to implement packing verification software that will allow you to record items by box and generate a packing slip that meets your needs.

Planning Your Scanning Process

When it comes to packing verification the most essential feature is a well thought out scanning process. It should be designed to be easy to use and fool-proof, so mistakes are prevented amid rush and distraction in a chaotic warehouse environment. Features like productivity metrics for your packing team are nice but not essential. What is essential is that you take the necessary time to plan out every step to ensure the highest level of quality over your entire inventory, fulfillment and shipping process.

The Warehousing and Fulfillment Industry is Changing from the Inside Out

Changes in the Warehousing and Fulfillment IndustryWarehousing and fulfillment – two words that bring up mental images of huge structures, palletized goods, and complex shipping rules. Some large brands have the resources to tackle these processes on their own. Many small businesses, however, tend to struggle to find the warehousing and fulfillment solutions that work best for them.

Recent shifts are altering that landscape further, as e-commerce selling and marketplaces grow in popularity. What was once a drab, uninteresting industry has transformed into something much “sexier.” Budding interest in the sector has brought a lot of changes – some for the better and some that remain to be seen.

In fact, the industry is changing so rapidly that it is becoming somewhat unrecognizable in many ways. In this article we will explore some of these more seismic shifts and look towards some of the changes that are forever altering the landscape of warehousing and fulfillment forever.

The Astonishing Shifts Within the Warehousing and Fulfillment Industry

Brands Morphing into Fulfillment Services Companies

As has always been the case, many brands and companies that sell products choose to pursue their own fulfillment operations – in many cases because they can’t find an outsourced fulfillment service that meets all of their needs. But what is happening more frequently is that more and more of these brands are leveraging their own in-house fulfillment divisions into the creation of a full-service outsourced fulfillment operation. One of our own customers, Next Level Resource Partners, successfully achieved this metamorphosis. NLRP began as a sporting goods business and has evolved into an organization that also offers highly customized fulfillment services.

“We have always managed our back of house operations for our brand Harrow Sports, so the formation of NLRP was very organic,” noted Keith Krasney, V.P. of sales of Next Level Resource Partners. “Our sporting goods business is extremely custom & specialized and it would be difficult to turn that over to a 3rd party. To us it was clear, there are thousands of brands who need specialized, white glove services and we had decades of experience via our own brand. The ability to think like a brand owner allows us to provide a very consultative approach to our clients. Some of the biggest pain points our apparel customers experience when attempting to outsource with other providers are their extremely high SKU counts, the dynamic storage space requirements needed, the strict process controls necessary to pick similar and “like” items, and the specialized services needed the would require customization. We’ve done it well for years, so it was only natural to help others. This has streamlined our supply chain, increased our capabilities, and has allowed the company to help numerous other brands that need specialized fulfillment services as well.”

Easy Access to Technology and Airbnb Style Fulfillment Networks

Technology, in part, has fueled some of this shift. Currently, it is easier than ever to procure highly sophisticated warehouse management systems to “become” a third party logistics warehousing company (3PL). These systems, in many cases, integrate with shopping carts, marketplaces, and shipping platforms – making third party fulfillment more attainable for newbie 3PLs.

Other brands– that aren’t even fulfillment providers– are also starting to plug-in to Airbnb-style fulfillment networks. These provide an easy opportunity to amass additional revenue streams. Simply put, these networks allow anyone with a warehouse to plug into their warehouse management system and use their technology to process warehousing (and in some cases, fulfilment) for other businesses that need additional help. In the case of these Airbnb-style options, there are some significant potential downfalls (read here for more details), but they are gaining in popularity nonetheless.

Fulfillment Companies are Incubating Small Businesses

Fulfillment companies are changing the way they do business, too. Some of them have even begun to “incubate” small businesses. This partnership helps small businesses grow thanks to fulfillment companies’ support. Fulfillment companies may take any number of steps to help incubate a small business, including:

  • Assisting with marketing (especially online marketing services such as paid search marketing and search engine optimization)
  • Providing fulfillment spaces for collaboration
  • Connecting small businesses with investors
  • Placing small businesses in flex spaces at fulfillment centers so that they can “grow into” more advanced fulfillment services

Even the Big Online Selling Platforms are Shifting Towards Fulfilment

If you try to think of the biggest corporate name in the fulfillment world today, your mind probably flies to Amazon. We don’t blame you! Amazon is still a giant in the realm of fulfillment, but other big players are beginning to recognize opportunities in the industry, too.

Shopify, Walmart, eBay, and other commerce leaders are inching further into the fulfillment world to compete with Amazon. Nobody can predict how these shifts will play out – for Amazon or for The Other Guys. But they’re changing the landscape of fulfillment as experts know it.

Fulfillment Centers and Businesses Working Together for Expansion

Fulfillment centers have even started to partner strategically with other businesses that have idle warehouse space. More and more we’re hearing stories of companies in our vast network of warehouses where, instead of procuring and leasing warehouse space in a new market, they are hunting down a company with idle warehouse space in their target new market and partnering up with them to expand into that new market.

Here’s how it works – rather than starting a new operation in a new market from the ground up, they simply train the partner company’s staff on systems and processes used, spend some time with them for a short period of time overseeing the training process, and then remotely monitor their performance alongside occasional visits. Then, once the operation grows enough, they lease or purchase space in the area and branch out on their own.

The entire process mitigates risk and ramps up the time to market in new locations. Procuring warehousing is expensive, difficult, and comes with a plethora of red tape. In some cases, it’s easier to work together with other businesses to create a solution somewhere in the middle.

Co-Warehousing with Other Merchants

You’ve heard about co-working, but how about co-warehousing?

Co-warehouse space is beginning to pop up across the country. In these spaces, self-fulfillers have the freedom to rent and share flex space as desired (or necessary). This allows small brands to handle shipping services without committing to the lease of a full warehouse on their own. Places like Saltbox in Atlanta are pioneering this new option. Usually, the co-warehouse space will provide warehouse space for storage, forklifts or pallet jacks, shipping stations, pick areas, and other aspects needed to perform the entire spectrum of do-it-yourself fulfillment.

Change is the New Constant for the Warehousing and Fulfillment Industry

These new changes are helping sellers and distributors of products find creative solutions to their problems and challenges. In the coming years, we expect to see more and more “outside of the box” thinking in this otherwise very predictable and historically undisrupted industry.