Shipping Options For Your Business - Everything You Need to Know
Gone are the days when simply offering a product earned you a sale online. Today’s consumers are a lot savvier, and aren’t looking at just what you’re offering, but your reviews and if you have the best deal -including shipping charges. Just look at Amazon. With free shipping over $25 dollars for all customers and free prime shipping with a paid subscription, consumers have come to expect great deals on fast shipping. In fact, according to a study by the National Retail Federation, three quarters of all online customers expect free shipping on orders below $50 dollars, and nearly 85 percent say they won’t buy from a retailer again if their shipping experience is less than satisfactory. To say that shipping options are an important factor in consumers purchasing decisions is a bit of an understatement.
When it comes to shipping, it’s important to know all of the ins and outs to shipping and freight. Even if you outsource your shipping to a warehousing service, being knowledgeable about the entire process your merchandise goes through will benefit both your business and your customers alike.
The Main Types of Freight: Inbound and Outbound
On the highest level, there are two main types of freight. The first type of freight is inbound freight. The second type of freight is outbound freight. Inbound freight is the shipping of product from the supplier or manufacturer to the warehouse for storage and eventual shipping. Conversely, outbound freight is the delivery from the warehouse to your end user, or consumer.
For inbound freight, your merchandise may be transported on a plane, truck or train in bulk or on pallets, depending on the size of the merchandise, the quantity ordered and the volume you are having shipped.
For outbound freight, there are two main types of shipping levels: small parcel, and truckload shipments (either full truckload or less than truckload (LTL) shipping).
Small parcel is the shipping you might use to send something relatively light, such as a book, clothing or a small piece of furniture – generally merchandise weighing under 70-150 pounds. For the most part, these items can ship via ground and other basic services from the USPS or other logistics services like UPS, FedEx and DHL. They are usually shipped in cartons rather than on a pallet and are shipped using small package shipping carriers like UPS, FedEx, USPS or DHL.
The other option is truckload or LTL “Freight” shipping. Less than truckload shipping is used to ship larger items, such as sofas, fitness equipment or certain larger items that take up a lot of space and are cost prohibitive to ship via standard services, such as a kayak. Packages over 165 inches in length and girth (2 times width plus height) combined., over 108 inches in length, and packages with large dimensional weight calculations.
Dimensional Weight Calculations
Multiply length times width times height and divide by 166.
Inbound Freight from Overseas – Freight Forwarding
For companies that produce goods domestically, inbound shipping to the warehouse is a lot more straightforward. Goods can be shipped using small parcel carriers or by truckload/LTL carriers if items are larger or quantities are greater. But for companies that produce their goods overseas, inbound freight to the warehouse is quite a bit more complex – requiring a service called “freight forwarding”.
Freight forwarding for inbound shipments is the process of shipping products from the overseas factory to the domestic warehouse, including:
- Preparation of shipping and export documents
- Booking cargo space
- Negotiating freight charges and insurance
- Shipping the product overseas to the destination location
- Clearing customs
- Coordinating inland shipment to its final destination
There are a number of different ways that products can be shipped from overseas destinations. For smaller volume or quantities, or in scenarios where the time sensitivity is more urgently, product can be shipped overseas using air freight services. When quantities are larger, time isn’t as much of a factor, or cost savings are wished to be realized, container shipping is generally more popular.
With container shipping, cargo ships or vessels transport the goods by boat. Container shipping is generally done in 20-foot increments, with 20-foot and 40-foot containers being the most popular. Shipping a full container is referred to as full container load shipping (FCL) and shipping less than a container is referred to as less than container load shipping (LCL). When container shipping is used, product is shipped into the port for customs clearance and then final delivery to the warehouse. Final delivery could take many forms: for less time sensitive shipping and better cost savings, rail (train) shipping may be used and for more timely delivery at a higher cost, truckload or less-than-truckload shipping is commonly used.
The Best Options for Managing the Freight Forwarding Process
Freight forwarding may seem like an overwhelming concept, but when you work with a good team it’s actually quite easy. There are several options for forwarding your freight to the warehouse, both of which have their pros and cons. The first option is to quote and manage the inbound freight function yourself. If this is your first time, this may not be the wisest option. While it can potentially result in the lowest cost, there is tremendous liability with managing individual shipping carriers, properly filling out forms, managing tariff codes, and clearing customs. But for experienced companies, this is a potentially viable option, especially with robust air and sea freight quoting options online, and much more visible freight carriers than in times past.
The second option is to utilize the services of a freight forwarding company. A freight forwarding company is a business whose job is to plan and execute the shipping of your merchandise, both on the import and export end of the spectrum. Though the name may be a bit misleading, freight forwarders don’t ship your freight – they use established carriers to do so on your behalf, acting as a well-connected middleman, negotiating rates and making shipping arrangements. Furthermore, they have extensive knowledge in the overall process, including some of the more complicated issues like customs clearance and selection of harmonized tariff codes (unique product identifiers to properly tax your inbound goods).
If you choose to go with a freight forwarder, there are a few important keys you should keep in mind. First, thoroughly vet the forwarders you are considering working with. Second, check reviews and references and get bids from the best reviewed forwarders. It’s important to shop freight forwarders to make sure you are getting the best deal – but don’t skimp on quality or you may run into significant issues with delays.
The other option you have when shipping inbound freight is a fulfillment company if you outsource your warehousing and fulfillment services. Unlike freight forwarders, fulfillment companies will actually handle the transportation of your goods themselves - either via their own in-house freight forwarding division or by outsourcing themselves with a preferred freight forwarding carrier. They will arrange the pickup from a port or receive a delivery from the manufacturer, and then warehouse that merchandise in their own facility. When the time comes to ship your merchandise to the end user, the fulfillment company handles that transaction as well. From custom packaging that looks like it came directly from you to picking and packing your merchandise, your fulfillment center can handle it all. Some even offer outbound customer service to your customers. Once your merchandise is packaged and ready to go, your fulfillment company will ship out your merchandise to your consumer on your behalf. Fulfillment companies offer many services that you may not realize, such as relabeling, adding promotional items to packages and more.
Size and Weight of Shipments Can Determine Your Choice of Inbound Logistics
Each third-party logistics provider is likely to have its own profile in handling its operational processes. When negotiating to procure the services of a third-party logistics company you have to understand how it operates and how its operation can fit your needs. The Size and Weight of your shipments can have a big impact on your choice of fulfillment provider.
If you ship in small, light quantities you can make your shipments on a less than truckload (LTL) basis. LTL shipments typically weigh between 151 and 20,000 pounds. These are shipments too small to fill an entire truckload, but too large to be shipped as parcels. There are many carriers that specialize in LTL shipments and many of those will apply a discount on the heavier, larger LTL shipments.
LTL carriers collect freight from various shippers and consolidate the freight onto trailers for line-hauling to hub terminals where the freight is further sorted and consolidated for shipping to local destinations. In most cases, drivers start out the day making deliveries of loads from the previous day. Then they make pickups once the trucks are empty. They return to the terminals with new cargo for sorting and next-day delivery. Pickups are usually made in the afternoon for next day delivery.
Density: LTL freight rates are structured so that the more a shipment weighs, the lower the rate per 100 lbs. LTL shipments are usually palletized on 48" X 40" pallets for ease in loading. They are classified by density which is the total weight of the shipment and pallet divided by the volume in cubic feet. Each palletized shipment is classified according to the National Motor Freight Traffic Association (NMFTA) system. The higher the density the lower the cost of shipment per pound.
Distance: The longer the haul, the higher the price per hundred-weight will be. Many LTL shippers only serve specific geographic regions. For shipments outside the shipper's serviced zip codes, the shipper will transfer your loads to other shippers for final delivery. This shipment transfer between lines ("interlining") will add to the cost of the shipment.
Freight All Kinds (FAK): Arrangements can be made with most LTL carriers that enables shipments to be filled with pallets at different weight classifications to be shipped and billed at the same freight class (usually an average). For instance, a client that ships multiple commodities ranging from class 50 to class 100 can often arrange a FAK to have the shipments to be carried as if all the commodities were classified as class 70.
Minimums: Freight companies all have minimal shipment costs below which the shipment will not go. This minimum charge is constantly increasing. Carriers are demanding a 2 to 3 percent increase every year. Carriers are doing this because the cost for a minimum charge shipment always far exceeds the costs they experience for the heavier shipments.
Full Truck Load (FTL) Shipping:
When you ship volumes of homogeneous cargo sufficient to fill an entire semi-trailer or intermodal container, the carrier will contract an entire trailer-load to a single customer. This freight is not handled en route. There is no re-packing, sorting and transfer to other trucks. Full truckload carriers deliver the semi trailer to a customer or shipper who fills it with freight for a single destination. The only thing that gets altered during the shipment is the driver whose work is limited by hours of service regulations. Customers can usually count on their shipments moving along at a rate of 47 miles per hour (including traffic jams).
Freight is usually loaded onto pallets in shipping containers or crates. Once at destination, truckloads may be broken down for further delivery by LTF carriers or express carriers.
Tips for Reducing Inbound Shipping Costs
Shipping can be one of the most complicated – and costly – activities for any small business. Poor or no planning can result in overpaying, as well as losing sales if the business can't provide consistent and cost-effective delivery to its customers.
Do you negotiate competitive discounts with your shipping providers? Do your purchase invoices include shipping and handling charges? If you answered "yes" to either of these questions, then you could very well be overpaying for your shipping.
Here are four tips for you to take control of your shipping and reducing your overall shipping costs:
#1 Obtain Discounts with Carriers
Most carriers – whether express, parcel or freight – provide discounts to businesses that routinely ship or receive merchandise. The old adage "everything is negotiable" is an immutable fact when it comes to shipping fees. The challenge, however, for small businesses is how to go about obtaining the same, steep discounts that are normally reserved for large businesses and heavy freight shippers.
One tactic a small business should consider is joining an industry trade association. Often times, industry trade associations are able to aggregate the buying clout of its members to negotiate and provide better shipping rates to all the businesses that participate in the program.
Another approach a small business can take is to work directly with a third-party logistics provider (3PL), or even directly with your carriers, to see if you can get better discounts then you presently have today. Often times if you simply "ask for better pricing" you will get it because 3PLs and carriers are always looking to retain and grow their business. If you're not sure who to call, online services like ours can be a good source for finding qualified vendors that meet your specific criteria. Be prepared to share example shipping invoices or manifests with your 3PL or carrier to help them best assess your shipping patterns and provide you with the best pricing.
#2 Develop an Inbound Shipping Management Program
One of the simplest and easiest ways to immediately cut your inbound freight costs is to change your shipping terms from "prepaid and add" to "inbound collect." Having your vendor or supplier ship collect on your recommended carrier eliminates any handling charges, thus saving you money.
When you gain more control over your inbound shipping, you can save on small package and freight shipments coming into your business every day. As the buyer and receiver of the goods, you can-and should-designate the carrier and arrange for shipping charges to be billed directly to you at your discounted rate. This is called routing shipments inbound "Collect."
In general, there are many benefits to having your inbound shipments routed collect. Most importantly, it often saves a lot of money. But even if you don't have shipping discounts that are better than your vendor, their handling mark-up could still make the overall shipping costs higher than your own.
Inbound shipping programs are often best managed through a third-party logistics provider. A good 3PL can help you develop routing instructions for your vendors, monitor compliance, and audit invoicing to ensure you're saving the most on your inbound shipping.
#3 Use the Correct Mode & Service Level
A common dilemma for small businesses is deciding the appropriate shipping mode to use for their important shipments. Shipping mode choices include LTL freight, small package, ground, air, ocean, rail, intermodal, and others. When deciding whether to use a small package or LTL freight carrier, for example, shippers must take into consideration the weight and characteristics of the shipment, the shipment destination (e.g., business, residence, etc.), service needs, pricing and fees, and loss or damage concerns.
Each mode carries with it a certain level of cost, speed, and liability protection. Choosing the right mode will help your business maximize shipping costs and customer satisfaction.
#4 Consolidate Orders When Possible
As a general rule of thumb, one big order ships for less than three smaller orders. That means small businesses should consider consolidating multiple orders into a single shipment whenever possible, and always striving to minimize the number of packages it sends. All too often, shipments are arranged as they come in from sales or order processing. However, a little planning and visibility goes along ways towards shipping savings as the table below shows.
Consolidating orders provides additional benefits to both shippers and receivers of small package and freight shipments, including:
- Reduced shipping supply expenses
- Greater fuel efficiency (better on the environment)
- Less time needed to receive, handle, and restock orders
One strategy for shipment consolidation is to create a simple shipping guide that takes into consideration all of your business rules for carriers, weight breaks, orders, and shipping contacts. Distribute this guide to your vendors and discuss it with your customers. A little communication can often go a long way towards small business savings.
Shipping is an important cost factor for any small business that ships or receives materials or merchandise. It is often possible to reduce these costs with a little planning and effort. Utilizing some or all of these four tips to control shipping costs can eliminate the strain shipping expenses put on your business. If you're not sure where to start, consider finding a reputable third-party logistics provider that specializes in working with small businesses to help you with the process. There's a good chance your shipping costs will go down and your bottom line will improve!
Finding a Logistics Outsourcer that Doesn’t Outsource Brings True Cost Savings
Outsourced warehousing and shipping can help companies alleviate the pain of storage and distribution and reduce overall costs. The theory is simple – warehousing and shipping companies specialize in these services, so they can perform them more efficiently and effectively than most companies can internally. Furthermore, by aggregating the combined services for the sum of all of their customers, third party logistics providers are able to achieve additional cost savings that they can pass on to clients. However, what about add on services, such as shipping or freight forwarding? Many third party logistics companies contract theses services out to another provider, not only adding another layer of communication but also adding another layer of cost to the equation. If you’re interested in achieving the best rates possible and looking at 3PL options, it might be wise to consider the use of a full scale logistics provider that not only has its own warehouse and labor pool, but also operates its own freight services.
One Contact Streamlines Communication
Dealing with a shipping issue can be especially painful when using a fulfillment services company that contracts out freight services. Most likely, you’ll speak directly to the fulfillment company about the issue, and they’ll handle the communications with the freight company. Many times, dealing with multiple companies results in additional time wasted due to duplication of communication and correspondence. Furthermore, key information can easily be lost in translation, leading to more frustration. On the other hand, when a logistics management services company also has its own trucking services, all of the communication remains under one roof, and in most cases can be managed with a single point of contact. In addition to streamlined communications, the 3PL also has more control over fixing any issues and bringing proper resolution.
Avoid Needless Markup
In most cases, warehousing companies mark up the cost of shipping services so that they can make some level of profit. Also, the warehousing company, in most cases, isn’t getting the lowest cost possible for freight services, unless they have significant volume that justifies a sizeable discount. Conversely, when a warehousing company has its own shipping division, it can offer you freight services without an additional layer of markup, helping reduce your overall freight bill.
More Services Means Better Negotiating Power
One of the greatest benefits of utilizing a full service logistics provider is that it tips the scales of negotiating leverage in your favor. When you bring more services into the equation, the 3PL has the potential of winning more business, and will most likely be more willing to entertain the best pricing possible to win your business. Furthermore, with more areas within the business to make a profit margin, the 3PL company doesn’t have to make quite as much margin in each area to survive. And as your volume increases, you can leverage this increase into further potential cost savings, as the 3PL will gain further synergies through an overall increase in volume.
What to Consider When Shipping Your Merchandise to Customers
Shipping merchandise is not always as straightforward as it may seem to be. There are a lot of factors to consider before assigning a shipping rate to your products. For starters, you must know the characteristics of your product, including its dimensions, weight, materials and its destination. These characteristics will help you determine an accurate cost for your merchandise. For example, if you are shipping a vase, you should know the dimensions of the vase, its weight, whether it is made of a fragile material or not, and where it is heading. If it is heading to Akron, Ohio it may cost significantly less to ship than it would were it headed to Juneau, Alaska. Another big factor in shipping cost can be packaging. If the vase is oversized, it may require a larger box that not only costs more to ship, but costs you more to provide. Also, if that vase is fragile, you will need to protect it during shipment, so you should also factor in the cost of shipping materials like bubble wrap, packing peanuts or air cushions.
Next, consider how fast the product must be delivered to the end user. If the customer wants standard ground shipping it will cost a lot less than if they want it overnighted. Someone has to absorb that cost, whether it's you or the consumer, though generally speaking the consumer expects to incur this cost unless a free upgrade promotion is running.
The following are important factors to consider when devising your outbound shipping plan:
- Shipping Volume
- Shipment Size
- Types of products (e.g. hazardous)
- Time of Delivery
- Shipping Methods
- Distances Shipped
- Pick up and drop off options
- Tracking and Insurance
- Commercial Volume and Discounts
- Label Printing Options
- Customer Service Options
Types of Outbound Shipping Services
Small Parcel Delivery
As we alluded to before, small parcel delivery is the delivery of small parcels that usually have a weight maximum of under 150 pounds and dimensions under a certain size determined by the logistics provider.
Small Parcel Shipping Services by Carrier
- First Class Mail: For single piece envelopes up to 3.5 ounces, and large envelopes and small packages weighing up to 13 ounces with delivery in 3 days or less.
- Priority Mail: Ships 1, 2 or 3 business days based on delivery times.
- Priority Mail Express: 7 days per week, used for time-sensitive letters, documents, or merchandise and is guaranteed overnight delivery to most locations.
- UPS Retail Ground: Less-than-urgent packages and oversized packages. Max 70 pounds and 130 inches length and girth combined.
- Media Mail: For media and educational materials. (books, printed music, test materials, video and sound recordings, printed educational materials, medical loose-leaf pages, computer-readable media). Max 70 pounds.
USPS: Retail rates (at the Post Office), Commerical Base rates (on USPS.com), Commercial Plus rates (if you spend greater than 50,000 priority mail pieces per year, 5,000 priority mail express pieces per year, or $100,000 in postage value of international shipments. Discounts: First Class Package (up to 28%), Priority Mail (up to 40%), Priority Mail Express (up to 15%), First Clas Package Intl. Service (up to 5%), Priority Mail International (up to 5%), Priority Mail Express International (up to 6%)
- Ground: 1-5 business days (3-7 to Alaksa and Hawaii)
- Home Delivery (residential delivery via Ground in 1-7 business days)
- SmartPost (2-7 business days, Monday-Saturday, injected into USPS for final delivery, achieve cost savings)
- Express Saver 3-Day (3 business days by 4:30 to most areas)
- 2-Day (2 business days by 4:30 pm to most areas)
- 2 Day A.M. (2 business days by 10:30 am to most areas)
- Standard Overnight (next business day delivery by 3:00 to most areas)
- Priority Overnight (next business day delivery by 10:30 am to most areas)
- First Overnight (next business day delivery by 8/8:30/9 to most areas)
- Same Day (Fast shipping for time-sensitive packages: City direct, City priority, City Standard 4 hours, City economy 5 pm) – available in select cities
- Next-Day Air Saver
- Next-Day Air Early AM
- Hundredweight – discounted multi-parcel shipments
- LTL /Truckload: LTL or less than truckload shipping is the shipment of larger items that occupy a section of a larger truck. Often you can get a bulk rate shipping these items, essentially renting the section of the truck your merchandise is shipped on.
LTL and FTL Outbound Freight
Sellers 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.
- 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.
- 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.
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.
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.
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.
Other Outbound Shipping Options You May Encounter
- Pick Up: Many stores have begun to offer local pickup as an option to their customers. This is service may be free or have a nominal fee, but allows the consumer to get their merchandise faster and saves them money. It also benefits you by attracting the customer to your retail location and allowing them to view more of your merchandise in person.
- Third-Party Shipping: Third party shipping is when your customer arranges for the shipment of their product from your facility. Many business customers have their own account with some of the larger logistics providers and may opt to ship through their own account to save money or consolidate payments into one monthly bill.
- Free Shipping: Free shipping is something many consumers look for when making a final decision about a purchase. Of course, free shipping still costs your business money, so that so-called free shipping is only free to the consumer. That’s why you should factor in the shipping cost to items you offer free shipping on, or only offer free shipping on items that have high profit margins. You can also offer free shipping as an occasional promotion, or on purchases over a certain dollar amount. Studies have shown that three out of five consumers have spent more money at an online retailer to reach a minimum purchase for free shipping.
How to Set Your Shipping Rates on Your Web Store
Flat Rate Shipping: Flat rate shipping can be a streamlined way to offer shipping to your customers, but there’s a fine line. Set the price too high and customers will go elsewhere, set it too low and you must recoup losses in the cost of your merchandise. For example, if you charge a flat rate of $7.95 to ship any order like Zulily does and your customer is only interested in purchasing one pair of earrings, you may lose that sale over what the customer perceives as high shipping. On the other hand, if a customer is buying 20 items or a heavy item, $7.95 may be considered a great deal.
Table Rates: Table rates are often a better option for those who don’t want to offer free shipping. Table rates can work by dollar amount or weight, depending on your preference. An example of a table rate is $5.00 for purchases under $15 dollars, $8 dollars for purchases up to $50 dollars, and free shipping for purchases over $100. Table rates can make customers feel as though they are getting a better rate on their shipping if they buy a smaller or lighter item.
Live Rates: Live rates are rates directly from the logistics provider on the day they are requested. So for example, if the customer is buying a coffee table from you, and your site offers a live rate you would then call around and get an exact quote from your shipper and pass along those options to your consumer. This empowers the consumer to choose their provider, but it also doesn’t cost you anything but materials. You can still make money off of this type of sale if you choose to charge a surcharge for packaging.
Mixed rates: Mixed rates are a combination of several different types of shipping and pricing models. You could, for example, offer a mix of free shipping for all orders, and then a fee for expedited orders that are guaranteed to arrive within a certain time frame. You could also offer live rates in conjunction with or in lieu of the expedited fees.
Free Shipping - Everything You Need to Know
Recent data have shown that nearly 90 percent of customers say that free shipping at any speed is more desirable than paying extra for expedited shipping. With the Amazons of the world offering free Prime shipping and free shipping over $25 dollars, it’s becoming par for the course to offer this type of promotion. But how can you make money if you aren’t charging any? Believe it or not, it is possible.
First, you need to decide if free shipping is right for your business. If your competitors aren’t offering it and you’re still profitable without it, you it may not be necessary to maintain and increase sales. You also may not need to offer it if you offer other options like live rates, where your customer has full transparency on rates.
Next, you’ll need to decide what category to put your shipping into. Is it a marketing expense for promotional purposes, or is it going to be factored into the price of your inventory on a regular basis? Furthermore, you should decide where you offer free shipping to. Do you only want to offer free shipping to the 48 contiguous states? To North America? Or how about free international shipping? Offering such options to more expensive places will cut into your margins.
Next, determine any surcharges that you may incur to ship merchandise. Overnight or express delivery isn’t free for you and may not be factored into the cost of an item, so you may want to charge an additional fee for those. Furthermore, for bulky or heavy items you may want to add a surcharge to recoup fees incurred there, even if the item itself is not a high value item.
When showing your shipping rates, make it clear to the customer how long they can expect their merchandise to take to arrive on their doorstep. This can help you upsell expedited shipping services, especially if the free or discounted shipping takes longer than a week. Customers who are sending or buying gifts will especially appreciate this option.
Next, you’ll need to decide when to offer free shipping. Do you want to offer it year-round on all merchandise? Or would it make more sense to offer it a few times a year to boost sales? Also, do you want to offer free shipping with a minimum purchase, and if so what is the minimum? If you do decide to offer free shipping once a dollar amount is met, you can even notify customers at checkout how much money they need to spend to qualify for free shipping, offering them one last chance to save, and giving your business one last opportunity to increase sales.
Remember, always be as transparent as possible when it comes to shipping rates. Provide a link to your shipping rates on your homepage so customers can see exactly what you charge and why. If you offer a flat rate or free shipping, be sure to feature that at the top of your website so customers can factor that into their purchasing decision.
Your Shipping Rates Play a Big Role
Most business-to-consumer shipping is done via small parcel shipping, though larger products may use other methods such as less-than-truckload (LTL). We’ll focus on small parcel shipping in this article but the same general rules apply for larger freight. If you’re an existing company with regular order volume, you no doubt have your own rates that you’ve negotiated with the carriers such as USPS, UPS, and FedEx. The shipping companies provide you volume discounted rates based upon how many orders you ship and other volume characteristics, such as percentage of residential shipments, average dimensions and weight, among others.
In order to provide any free shipping offers to your customers, the first step is to make sure that the rates you obtain from the carriers are as good as possible. If you haven’t had a discussion with your freight carrier of choice, be sure to reach out to them periodically (at least yearly but more frequently if you have events that may help justify a rate decrease) – and don’t be afraid to shop with another carrier that you aren’t using. Shopping your freight rates with multiple carriers increases the competition and can result in better pricing.
Assuming you do have the best rates possible based upon your own volume characteristics, there is still one other option to improve upon your shipping rates – using a fulfillment service. Fulfillment companies store and ship orders on behalf of companies. You may have heard of them before or perhaps you use one now. If you don’t use one now, using one may offer significant savings in freight costs. Like your e-commerce company, they also obtain freight rates from the various shipping carriers, and because they ship products for multiple companies, their rates may be significantly better than yours. By using a fulfillment service, you can “piggy back” off of their rates. This will help ensure you have the lowest rates possible so that you can employ some of the free shipping strategies. According to Joseph Palisano at Lincoln Warehousing, “we work with multiple carriers to ensure our customers get the best rates and services for their e-commerce fulfillment shipping needs.” If you are using a fulfillment service, be sure that you check with them every so often as well to make sure that you’re taking advantage of their best rates.
Identify Ways to Improve Other Warehousing and Shipping Costs
Improving shipping costs isn’t the only way to create additional margin to justify free shipping. Be sure to take a look at some of the other warehousing and shipping related costs of your business to see if there’s any wiggle room for improvement. For example, some of the major shipping carriers have “free box” programs. This is a way to decrease some of the packaging costs of your business. While you may not get some of the benefit of custom packaging, it allows you to cut down on part of your shipping expenses. Another alternative is to utilize recycled boxes or re-use boxes from returns. Every dollar counts when trying to help compete with other free shipping programs of competitors.
Sometimes, it makes sense to change some of your procedures to reduce fulfillment and shipping costs. For example, minimizing some returns can help lower overall costs. In this case, you’ll have to weigh the pros and cons and do a thorough analysis, but taking a creative look at your processes and procedures may open the door for other cost saving methods.
Finally, there may also be other shipping services that you can use to lower costs. For example, FedEX has its smart post option where their drivers deliver to a certain stage and then “inject” the package into USPS systems. Because of this, they’re able to offer the service at a slightly lower cost. These types of programs are worth looking into to make sure you’re as competitive as possible.
How Free Shipping and Free Returns are Now the Norm for Retailers
One thing you've probably noticed from your competitors is that they now offer free shipping and free returns for their customers. It's a service arguably started by Amazon years ago as part of their supreme attention to customer service. Since they started it, almost every other retailer began doing the same thing.
No wonder online shopping has taken off into the stratosphere over the last few years as a result. During the holidays, there isn't any better peace of mind for consumers than being able to buy something without being smacked with a large shipping fee. The same goes for pain-free returns when gifts aren't what they expect.
At one time, many stores balked at this until realizing it's really good insurance for bringing in new customers and nurturing loyalty.
Here's a look at how how free shipping and free returns are becoming the norm for retailers, and why you should consider it yourself.
Changing the Philosophy on Free Services
As maybe a startup, you realize shipping and returns policies can become major expenses when you're adhering to a budget. Nevertheless, philosophies have begun to change on offering free services in order to attract more customers.
All consumers have more astute radars to what constitutes a good deal and what doesn't during online shopping. When they see you've made an effort to give them free services like this, they'll know you're doing it for them and not thinking of yourself.
On the other hand, it's a good psychological tactic drawing more customers to you from competitors who still feel tepid offering free shipping.
Much of this rests on forming long-term relationships with customers, which is imperative for the future of your business's survival.
Why Free Shipping is So Important to Consumers
Recent statistics show 78% of shoppers find free shipping more important to them than expedited shipping. Only 38% of those surveyed found faster shipping more attractive over free shipping processes.
In this regard, you have some proof many customers have willingness to wait a little longer for their packages to save money. There isn't anything that creates more abandonment of shopping carts than a customer seeing expensive shipping charges.
It's something you've perhaps had to raise in recent years to keep yourself profitable. Offering free shipping (at least around the holidays) is going to give you a bigger rate of return thanks to the buying boost.
You can survive financial losses and steady your fulfillment costs from this by simply offering free shipping annually. Thanks to creating more loyal customers, you'll have a full year ahead to keep yourself profitable through each quarter.
Free Returns Net Higher Profits
Don't think not offering free returns hurts your profitability. You'll find statistics showing when consumers see a free returns offer, it increases profits for the business by 25% six months after the returns occur.
Here you see another example of how offering free now helps pay off in coming months and years. Now you see the secret to why the big retail stores offer free returns not only during the holidays, but other times of the year as well.
Since the future is what truly matters in your business, knowing you'll have more loyal customers as a result of free shipping and returns gives you solid insurance.
First, though, you need to work closely with a "fulfillment center near me" so they can provide top-tier shipping and returns to make free worth the price.
Weighing the Pros and Cons to Offering Free Shipping on Your Web Store
With internet business booming, many stores are offering free shipping to get a leg up on the competition. While this may work for some stores, others may suffer greatly if they cover the full cost of shipping on their own. With so much pressure to offer free shipping, how can small businesses make the best decision for their company?
If you can offer free shipping, is it a smart choice for your business? There is no denying that offering free shipping from your web store can significantly impact your e-commerce. A couple of years ago, Lab42 released data stating that 96% of consumers are more likely to shop on a site if it offers free shipping. Not only this, but ComScore released data stating that 58% of shoppers will add items to their shopping cart to qualify for free shipping.
For a consumer, the benefit of free shipping is obvious. As a business owner, it may not be. Here are some of the benefits to offering free shipping through your site:
- Short-Term Sales Boost. The results of offering free shipping are usually immediate, boosting sales and revenue. For those with minimum thresholds, it can also lead to larger orders.
- Increased Profitability. There is a chance that free shipping can lead to an increase in profits long-term. However, this doesn't happen for everyone, so it should be watched.
- Long-Term Customer Gain. Many customers will only shop from stores that offer free shipping. By offering it, you gain these customers who may become repeat buyers.
- Competition. Offering free shipping helps your store to remain competitive with what similar businesses to yours are offering. While it doesn't necessarily put you ahead of your competitors, it does level the playing field.
The downfalls of free shipping obviously start with the loss of profit margin that is used to absorb the shipping costs. Some additional downfalls include:
- Slower Delivery. Your business can choose economy shipping instead of regular shipping, but the cost of shipping has still been increasing in the past few years. Economy shipping, however, takes much longer to get the product to your customer.
- Programming and Marketing Expense. Some programming may be required by your IT team to offer the free shipping on your site, depending on how complex your system is. Marketing free shipping can increase sales, but care should be taken in order to take design and advertising expenses into consideration.
- Is the Incentive Needed? You may find that the customer that buy from you after offering free shipping would have bought from you in the first place. It is hard to know if the incentive is what makes the sale, it may just be an unnecessary cost to your business.
When looking at whether you should offer free shipping, Web Marketing Today offers some insight on how to decide if it's right for you. Consider your profit margins and how they will be effected if you offer free shipping from your site. Additionally, consider the type, size, and weight of the products you would be shipping, and to where. If you do a lot of international shipping, it's going to be less cost-effective to offer free shipping, which is why many retailers only offer it within the US. Finally, consider your order size. If the typical order is $35, consider a threshold of $50 to qualify for free shipping. If the typical order is higher, take that into consideration when deciding on your threshold.
What is Your Competition Doing?
Before we provide a listing of some of the free shipping options at your disposal, it’s worth mentioning that you should always take a look at the free shipping competitive landscape in your niche before jumping in with both feet. Pay close attention to what others are doing. Are they offering free shipping? What types of free shipping offers do they employ on their site? By doing your own research, you can see how to best position yourself versus your competitors.
If you have decided that offering free shipping on your web store is something you want to try out, here are some ideas for ways to test it.
- Free Shipping on Everything...with stipulations- economy shipping only, within the continental US, for example.
- Free Shipping with Minimum Thresholds.
- Free Shipping on Certain Items.
- Free Shipping Periodically. Not all the time.
- With a Fee-Based Membership Program. One year free shipping with membership.
- Loyalty Programs. Offer free shipping to repeat customers.
- Free Return Shipping.
- Flat Rate Shipping. This can encourage larger orders.
- Put Shipping Costs into the Price of the Product.
Above all else, research your competition and look at what they are offering and what is bringing them customers. Free shipping can significantly level the playing field if the majority of your compatitors are already offering it. To learn more about how to handle the fulfillment of your orders in the most cost-effective manner, contact us.
Determining where to ship is a piece of cake when you’re shipping within your own country. But offering international shipping can be a confusing and overwhelming option for many sellers. The good news about international sales is that they open sales to literally billions of new customers around the world. When you think about it that way, it’s worth the complications of becoming an international seller. Best of all, international shipping isn’t really that difficult, especially if you know what you’re doing- or working with a freight forwarder or fulfillment center who does. To get started, here’s what you need to know about international shipping.
First, determine whether or not your products would make sense to ship overseas. Things like food and furniture may not be the best items to ship because food goes bad, and heavy items like furniture may be just too costly to ship.
Another question you need to ask yourself is whether or not the foreign market needs your product. If they can get the same thing within their own country, or it’s a cultural item that simply won’t be used or isn’t compatible with their technology, there is no point offering it to that market.
Next, you will need to determine how you will ship your merchandise out of the country. Will you use a fulfillment service or freight broker and let them handle the details? Will you use one of the larger international shippers like DHL or Fedex? Shop around for rates, and choose your shipper accordingly.
Last, brush up on everything you need to know about international customs. Sending a package to Turkey isn’t as straightforward as sending one to California, so its important to know the ins and outs of it before you violate any laws. Important things you should know about shipping international include:
- Harmonized tariff codes: A harmonized tariff code is a code which describes the contents of your shipment. Though it may change the cost of your tariff depending on what your merchandise is, omitting this code whether intentional or not could result in delayed shipment or higher fees and taxes on merchandise.
- Customs Forms: You will need customs forms to ship any item out of the country, though which forms you need will depend on where you are shipping to. These forms cover everything from the invoice to a value declaration, to a certificate of origin which indicates the country in which the item is being shipped from
- Taxes / Duties: Taxes and duties are a way of life when it comes to international shipping. These fees help the economy local to the delivery, and can often dramatically change the price of a shipment. Generally, these fees are assigned to the consumer, but they are charged to the shipper, so be sure to know what they are so you can charge the customer fairly. This is known as delivery duty paid- or DDP. Another way to charge duties is DDU, or delivery duty unpaid. This requires your international customer to pay the duty to the logistics provider before their package is delivered. Be sure to communicate to the customer that they will owe a tax before they can receive their item before it ships so they can budget that fee into their total cost.
Ultimately, it’s not hard to make money on direct to consumer shipping if you know what you’re doing. Whether you choose to outsource your shipping to a service like a freight forwarder or a fulfillment center or to handle it yourself in-house, knowing the best strategies for pricing and for customer satisfaction can help increase sales and keep profit margins high. As for international shipping, it doesn’t have to be complicated if you do it right- and it may have the potential to unlock even more sales from foreign markets, truly making the world your businesses oyster.
Things to Consider for International Shipping: Minimizing Costs and Timeframes
In the coming year, perhaps one of your top business agendas is branching out to international markets. Doing so is one of the best moves you can make to expand your customer horizons, though it's not easy to do on your own. If you've gone this long without working with a fulfillment center, you'll find it overwhelming doing international shipping on your own.
You're going to need a fulfillment warehouse to take care of overseas shipping complexities. Considering all the regulatory issues, payment processing, and complicated logistics in shipping things to foreign countries, you need someone professional to help you.
When you properly vet a quality fulfillment center with experience in international shipping, things can work out easily. Nevertheless, you need to know what the details are in this type of shipping so you know it's being done right.
Here's some things to consider for international shipping while minimizing costs and shipping things faster to your new overseas customers.
Researching Import Compliance Laws
To show how complicated it sometimes becomes shipping to foreign markets, some countries don't allow certain products across their borders. Before you ship anything there, you absolutely need to diligently research the country's import compliance laws.
Not keeping up on this could result in major fines and custom restrictions. This encompasses various products from ordinary objects to specific foods. In the latter case, some edible products might not get delivered due to strict mandates on listing ingredients and expiration dates.
You can research this at reliable sources like DHL Express where they have a complete database by country. There are even courses where you can get educated on this if you're just starting.
Knowing Your Custom Fees
Before you can even send a product into another country, you have to know what the custom fees are, as well as duties, and taxes. These change often, so working closely with your fulfillment center is important to keep up on the latest fees.
If you have an e-commerce store, it can become more difficult to keep up with these custom fee changes. It's all the more reason to research the countries you're shipping to so you don't become complacent. Be sure to pass on this information to your fulfillment center so they know how to handle shipments properly to avoid taking blame for violations.
Preventing Delivery to Inaccurate Addresses
One thing about international deliveries is addresses are frequently written differently from those in the United States. This could lead to a mistake if you have to create some of those addresses manually.
There are different source you can use to help you verify addresses before you ship out overseas. Otherwise, making too many mistakes could end up costing you more money to re-ship an item, including more custom fees. It also delays fast delivery, which only risks your reputation with first-time customers.
Estimating Transit to the Location
Your transit time is where cost and time frames meet. They may collide when you realize you have no choice but to ship through a faster method, at a major fee.
It's important to list exactly what shipping charges are to your overseas customers so they know exactly how long it's going to take. If you think you can go cheaper and do a route by ship instead of air, doing so minimizes your costs. In situations where you're shipping food, this might not become the best way for obvious reasons.
Whether you use air transport or not should all depend on what your product is and the exact distance between where you are and the country you're sending to.
Shipping Rate Comparison Software
Shippo, Shipstation, S
How to Reduce Delivery Issues While Keeping Your Customers Happy
The old term "I want it yesterday" is a statement perhaps sounding contrived, yet it's a possible motto of the 21st century when it comes to package deliveries. Each ensuing year, consumers want their packages faster than ever to accommodate heavy demands, especially around the holidays.
While the big league players like Amazon have done a lot to speed up logistics (including same-day deliveries...for a price), you're seeing many small to mid-sized businesses do the same.
It's something to think about through this holiday season, though it needs maintaining all year. As a still-growing business, do you know how to reduce delivery issues and keep your customers happy? Even if you've mastered the art of quicker delivery times, other issues can certainly develop.
You may get some customer complaints about things you can't always control directly. Yet, the important thing is to keep communicated with your fulfillment center, including working with one if you're attempting logistics alone.
Typical Problems With Package Delivery Issues
No doubt you experienced some issues while delivering packages this holiday season. Typical complaints to delivery companies usually hovers around parcels being left out in the rain, or left in view of neighbors.
If this happened to some of your deliveries, did you manage to package it well enough so the product wouldn't get ruined in the rain? What methods did you take to prevent any theft of the package?
We all know package thieves are a big problem in recent years due to deliverers leaving those items on people's doorsteps.
These are the major hurdles you need to overcome to keep customers loyal, and before they go to a competitor already solving package delivery problems.
Communicating With Your Fulfillment Center
Unfortunately, far too many businesses don't keep up communication with their fulfillment centers out of thought the latter can operate autonomously. It's important to know exactly what's occurring there every day and not assume management is going to follow procedures you expect.
First, it's time to find a fulfillment center if you're attempting package deliveries on your own. Maybe if you're a very small business, doing logistics on your own can work for a while. Once growth occurs (sometimes overnight), you're going to realize handling deliveries alone is going to become too overwhelming.
Working closely with a fulfillment center is essential because they're a direct extension of your business. Visit in person, or keep real-time communication going every day to assure deliveries go out on time and get fulfilled the right way.
Providing More Transparency With Customers
Receiving customer complaints about a package not arriving or taking too long can become painful when they start piling up. Many recommend prepaid shipping services online to reduce chances of a package going missing.
Another recommendation is to provide complete transparency to customers in regards to shipping time and arrival. Tracking services pinpoint exactly where a package is to perhaps find it if it turns up missing.
Finding Alternative Places to Deliver a Package
Some customers may feel nervous about you delivering a package at your door. Provide other delivery options to give customers a choice. Even delivery to a P.O. Box can become a good alternative to customers who want to assure their package won't end up being swiped.
Using standard USPS delivery can also bring safer deliveries. In some places (like apartments or duplexes), the USPS has multiple lock boxes for packages to assure safety.
Most importantly, you need a quality fulfillment center before any of the above can work efficiently.
Keep it Simple When It Comes to Shipping
- Use the most effective means of shipping, even if it’s a cheaper option. For example, if sending to a PO box, use the USPS instead of shipping via UPS and you could save your customer the hassle of potentially making an unwanted trip to their nearest UPS store.
- Set clear expectations with customers. If you’re going to ship lower priced items in batch less frequently, let your customers know so that they have that expectation. If you can ship orders same day, define that standard. But regardless of the standard, make sure that you’re able to deliver on the standard consistently.
- Communicate with your customers. Be sure to send your customer a quick email detailing the status of their shipment, and update them at critical points in the shipping process. This can be automated with most e-commerce programs.
- Be careful not to set the bar too low. Sending orders less frequently may be a way to cut costs, but make sure you don’t scrimp on timely deliveries. If your competitors are shipping within 24 hours of receipt of order, consider matching that service level to keep customers happy.
The most important thing to remember is that shipping can either be a competitive advantage or an Achilles Heel. By realizing that shipping is another area to “touch” your customers and provide them with a favorable experience, you’ll be able to take advantage of this often overlooked opportunity and turn more of your customers into raving fans.
How Important is it to Offer Fast or Even Same-Day Shipping?
You place an order for that special, one of a kind, last item in stock, most important gift for your loved one. There is one more site that has one left in stock, but you take your chances with this website. The order needs to be delivered quickly to make it in time for the special day, but after checking the order tracking a couple of days later, you see that the company’s fulfillment provider has yet to ship your item. Disaster is about to strike for this customer, and as a result, the small business responsible for this order is going to pay a serious price.
As a small business owner, you have probably been on the end of many calls from customers just like this one. “Seriously guys? Your website is the only website I have troubles with. I want a refund.” Despite the fact that it was a fulfillment company that shipped the goods for you, the customer will blame you, the company they ordered from. They don’t care that you outsource your fulfillment, and because you chose an inexperienced fulfillment company, ultimately you lost a client and perhaps many of their referrals.
When an item ships is a key component in searching for the right warehouse to fulfill your orders. Most companies offer same day shipping with a cut-off at some point in the afternoon. What this means is that they guarantee that they will ship the product the same day that they receive the order up until a certain cut off time during the day. However, same day shipping doesn’t guarantee success. It’s also very important to understand what actually separates a good fulfillment company from a mediocre one. In order to best understand everything involved, you should ask the following questions:
- What is your cut-off time for orders placed in order to get same day shipping?
If the cut off time for placing orders is 1 pm then it is important to know if that depends on certain time zones or locations. If you miss the 1 pm deadline, the order may be shipped the next day. In this case the one day of shipping time is lost.
- How do you handle a larger supply of orders at Christmas time and Holidays? Do they all go out same day if received by the cut-off?
If you have larger orders being placed during holidays it’s important to find out if they add extra staff in order to ship the items out quickly.
- Will I pay more for same day shipping?
Some companies will charge more to ship the same day. Do you want to offer a free shipping option? Are you going to eat the shipping costs yourselves? Maybe 2 day shipping will be more cost effective. Don’t make promises you can’t keep!
- Do you have multiple locations in order to ship items at a faster rate?
Maybe you have a product that is widely popular in Canada. Will you be able to offer the same shipping rates and delivered in the same timely manner as items that are shipping within the US?
- What happens if you make a mistake and the order does not ship out to the customer in time?
Will the fulfillment company pay for the shipping mistakes they make?
- What happens when part of the order isn’t in stock?
Will the fulfillment company short ship the order or wait until the entire order is available? If they wait for all items before shipping, is there a message sent to the customer to let them know?
- Does the company ship on the weekends?
What happens when an order is placed on a Friday? Will the company send out an email letting the client know they might not get updates until the next business day Do they still ship same day or is it shipped the next business day?
Customers don’t really care about the logistics of shipping their purchased goods as long as the order is accurate and the delivery is timely. As a small business it is important to find a fulfillment company that has built in systems, processes and qualified people to help ensure accuracy throughout the logistics function. Offering same day shipping is a wonderful incentive to the customer, especially around peak seasons. But the promise of same day shipping is only a small part of the equation. The key is to find a great fulfillment company that can work with you to achieve the goals of same day shipping while also offering superior service to your customers. Fulfillment companies are an important part of your company and an extension that can prove to add to your bottom line or cause you to spend an enormous time of energy and profits on mad customers.
Shipping Speed vs. Fulfillment Time
At first glance, the difference between shipping speed and fulfillment time might not seem significant. However, when the two different terms are explored in further detail, it is obvious that the chasm between the two time frames is certainly pronounced.
Shipping speed is fairly straightforward: it is the time that a product takes to reach the end user after being sent out from the vendor. Common examples of shipping speeds are same day (think Amazon.com), next day, and 2nd day. However, fulfillment time is by definition the amount of time the that elapses from when a customer places an order to the time that the customer has the product in hand.
After establishing the different meaning of the two disparate terms, it should come as no surprise that fulfillment time is the more important metric to a consumer. The rationale behind this is simple: if Customer Doe places an order on January 1st with 2nd day shipping and the order doesn't ship out from the vendor until February 10th, that 2nd day shipping doesn't hold much value, given that five weeks has elapsed from the time that the order is placed until the customer receives the order. The fulfillment time in this case would be the five weeks -- plus the two days for shipping.
Now take the scenario where a business promises a two-week order fulfillment time. The same Customer Doe would get their order by January 15th, assuming he put the order in on the same day (January 1st).
Striving to shorten fulfillment times is a top priority for businesses that depend on shipping as the medium to facilitate sales to their customers. In this age of exponential online growth and the concurring downsizing of brick and mortar setups, this translates into significantly more businesses looking to minimize their fulfillment numbers.
What are some solid practices and measures that businesses should utilize to cut down on their fulfillment times? Let's take a look at three of the top tips for saving valuable fulfillment time.
Start to Finish Order Tracking
Although employing the same order management system as your suppliers is important, this by itself won't suffice. What is more valuable is the visibility that your business has into the inventory and processes of the suppliers that you work with. Perhaps one of your suppliers is experiencing an issue with their inventory? Ideally, you should be privy to that knowledge so that your own website reflects that factor. Hiccups known ahead of time are invaluable in keeping your own customer apprised of possible issues that could delay the time it takes to fulfill their order, resulting in a higher level of customer satisfaction.
Maintaining the capability to track supplier orders and convey that information to your customers assists in managing customer expectations and generally improves the credibility of your company across the board. In addition, a second upside of order and inventory visibility is that this information can be showcased to shoppers on your company's website. This recent UPS Pulse of the Online Shopper study reveals that 58% of shoppers are of the opinion that being able to view if the product that they are shopping for is available is crucial to their ending purchase decision.
Use the Best Shipping Method
Customers that are shopping online have come to expect rapid shipping times. Obviously, shipping time is a component of the total fulfillment time. However, assuming that the fastest shipping method is always the best method is not the answer. Other factors that can and do come into play when deciding on a shipping method include the location of the customer, where the product is in relation to that customer's location, and the length of time that the order is going to take to prepare for shipment.
The answer to selecting the best shipping method can be found with smart shipping algorithms. Many cloud-based software programs make real-time ordering possible. Having the ability to select the optimal shipping method ensures that your organization delivers your offerings in a timely manner, and also automatically keeps an eye on your bottom line by preventing shipping upgrades that are not necessary.
Consistent Customer Communication
Business that operate in the e-commerce environment must account for the fact that the order fulfillment clock starts ticking the moment that your customer consummates their transaction. What this translates into is a customer waiting as your company completes each and every step of the process.
Because you are dealing with a customer who is expecting speed, it is imperative that you keep your customer informed and up-to-date by forwarding salient details regarding their order with them all along the way. That's why a superior order management system will allow for updates such as when the order was received by your supplier, the date and time that the order has been dispatched, and where it is in the transit process. By sending this information along via email notifications, you are effectively keeping your customer satisfied -- resulting in a happy customer and repeat business.
Order fulfillment time carries more weight with a customer than merely the time that the product takes to ship. By utilizing constant tracking, choosing the best shipping method for the situation, and keeping your customer in the know, you can minimize fulfillment time and increase customer satisfaction.
How to Reduce Shipping Costs by Auditing Your Shipping Charges
The packages that you ship using FedEx® and UPS® are guaranteed to arrive on time or you’re owed a shipping refund. The problem is that most companies simply don’t have the time or resources to filter through guaranteed dates, actual delivery dates, zones, carrier exceptions and the hundreds of pages of invoices received each week from the carriers. For many companies, the choice is made to leave these proverbial refunds on the table – and the major carriers most likely bank on the fact that a vast majority of shipping refunds won’t be researched, leading to an estimated $2 billion in unclaimed refunds each year! But there is an alternative – a way to receive your deserved shipping refunds without investing internal company time. By looking at some of the pitfalls to self-auditing, especially for smaller and mid-sized 3PL companies, outsourcing becomes even more attractive.
Why Internal Auditing Fails
Understanding why internal auditing of freight invoices fails becomes quite apparent when looking at a typical, real-world warehouse example. A common scenario that shippers run into is the discovery and examination of a package that gets delivered late. For most fulfillment firms, it begins with an angry call from the customer, letting the account rep know that their customer isn’t happy because the package hasn’t arrived at its destination at the appropriate time. You know the call – oftentimes exasperated by the fact that the package is late for a special occasion!
Your customer service and warehouse team dive in both feet by researching the package, attempting to track it and find out why it didn’t get there in time. The clock is ticking as the angry customer awaits a response. Was it a delivery issue on the part of the carrier? In times like these, it’s cumbersome to have such a critical part of the business in the hands of other companies. Oh, but wait, upon further inspection, your team uncovers that the package was delayed due to an incorrect address entered by a warehouse staff. While you won’t have to fill out the shippers’ documentation for a shipping claim, the realization hits like a ton of bricks that you’ve spent valuable time researching just one package only to find out that not only was it late because of an incorrect address, the carrier has charged you an additional $10.00 for this address entry mistake (not to mention that you’ll have to offer the customer some sort of compensation for the mistake)! By the way – all of this time spent researching shipping issues is during the middle of the day on top of all of the other duties and functions that need to be completed as well.
Do You Have Enough Time in the Day to Audit?
The important question to ask is how much time do you and your team have in your weekly duties to take on the audit of your carrier accounts making sure that all charges are correct and that you are not owed money? Is there additional time to perform this function above and beyond the standard time to perform day-to-day tasks as well as plan for any emergencies that seem to strike to frequently in the world of logistics? Furthermore, would it make good use of your staff’s time to manually track and audit each package – a process that has proven to suffer from human error while resulting in a net negative to the company’s bottom line?
So What is a Parcel Auditing Company Anyway?
You’re too busy to perform a daily tracking of all shipments – making sure you audit each parcel confirming it gets to its destination on-time. Who has time for this?
Parcel auditing companies secure refunds for all late packages shipped using your FedEx® and UPS® account(s) on a weekly basis. These companies can track your guaranteed parcels and notify you when credits/refunds have been applied to your account(s) due to the packages arriving late and ultimately secure these credits/refunds on your behalf. In addition, they supply you with additional value added tools including address correction, customs delay notices, package and cost management to help control logistic and financial operations. Typically, these companies operate on a performance-based model in that they only invoice for a percentage of the savings after they are credited to your carrier account – significantly reducing any inherent risk of using their service.
Claim Your Refunds
Did you know that 3% of packages delivered by UPS/FedEx arrive late? Their Money-Back Guarantee policy states that you are entitled to a full refund on that shipment, even if it’s only minutes late! However, the catch is that they make you initiate the refund process, and don't do it automatically. Requesting credits for service failures, overcharges, weight discrepancies, etc. can definitely add up and will significantly reduce your costs. However, you do have to be knowledgeable in the 40+ parameters for refunds (service failures are just one of those parameters) to claim them and constantly be monitoring your account which can prove to be very time consuming. Furthermore, the carriers only give you a window of 15 days from the date of invoice to claim those refunds. Using a 3rd party parcel and freight auditor is recommended to both increase your refunds and save you time.
Get the Right Discount
If you are a high volume shipper of either ground, domestic express, or international, then most likely you can negotiate with your carrier for better rates. Don't be ashamed to ask for it. You are the customer who is spending hundreds, if not thousands of dollars every month and therefore have the right to obtain higher discounts. To effectively negotiate with UPS/FedEx, shipping managers need to be very knowledgeable in their shipping needs, volume, and projections. If one isn't up to date on this, it is recommended to consult with a 3rd party auditing firm.
Use a 3rd Party Shipping Insurance Provider
Another way that UPS & FedEx make their money is by overcharging the customer on insurance costs. While UPS/FedEx charge $0.70 for every $100 of Declared Value, a 3rd party will charge significantly less, usually around $0.30 per $100 of Declared Value. So for a shipment that has a declared value of $5,000, UPS/FedEx will charge you $34.30 (the first $100 of declared value is free) and the 3rd party will charge you only $14.70. So that equals to a 57% discount by using a 3rd party! Multiply this amount by hundreds of packages that you might insure a month and you are greatly decreasing your insurance costs.
Does This Really Work for Actual Companies?
The best way to see the potential time and cost savings in action is to take a look at a real world example. For example, RCS Audit is just such a company that operates a small package control and recovery solution and has helped many clients take advantage of the shipping refunds process and save legitimate money. One of its clients had previously been serviced by a package-auditing firm, which failed to secure refunds on more than 0.5% of total packages. The client felt that it was not worth the time to continue the audit. Shipments are handled by both major carriers and include all main carrier service types of both air (express) and ground. The client maintains three carrier accounts.
Without changing any operations, the Client’s account was activated within 3 minutes and the auditing began. The first week auditing resulted in securing a failure rate of 7.1%; identified 10 incorrect address and 31 Customs Delay notices. After the first 8 weeks of auditing, the Client is enjoying an average secured failure rate of 4% with an air spend reduction of 12%. First eight week hard dollar savings was $8,694.00.
It Only Makes Sense to Audit
Unfortunately, your company gets the blame for the late package. By using a small package auditing service, you can make sure that your carrier account is credited for those late packages. Late packages, even when caused by FedEx® or UPS®, become your problem and now you can take control. Even the most well intentioned fulfillment companies have a hard time keeping up with all of the tracking and paperwork required to consistently battle the shipping refunds process. By utilizing the very outsourcing strategy that they employ with their sales pitch to prospects, they can unload on this administrative burden and save money in the process.
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