Shipping carriers have diverted trade from the Red Sea in the past few weeks. Ocean freight is taking longer routes around Africa to avoid the threat of violence in the Middle East area. Shipping parcels and freight to different places is becoming expensive. And so, shipping costs are rising for many businesses globally.
Furthermore, the shipping rates imposed by different parcel carriers like UPS and FedEx will increase in 2024. Companies have the challenge of reducing shipping costs efficiently. In addition, it is necessary to build back some profit margins for e-commerce businesses.
Calculating and understanding shipping costs is confusing for many shippers. So, we have compiled ways to reduce shipping costs in this blog. Our earlier blogs on shipping costs are also helpful. Check our blogs on shipping costs related to shipping reports, data analytics, and more.
Initially, let’s start with the concept of Shipping costs.
These are the expenses involved in sending packages from warehouses to customers. Packaging, transportation expenses, labor, carrier fees, etc., form part of the shipping costs. In addition, fuel charges, taxes, shipping services, and distance contribute to shipping costs. Moreover, businesses have to find the shipping carrier that suits their needs. The cost of shipping can lead to customers abandoning their carts.
Businesses can cut down shipping costs by adopting cost-effective strategies. Further, shippers can improve their profit margins by following reliable ways to reduce shipping expenses.
Efficient and reliable ways to reduce shipping costs
Many factors cause a rise in shipping costs. Understanding them is essential in lowering shipping expenses. Below are a few ways to reduce shipping costs and boost profits.
- Make packaging lighter and smaller.
Packaging is an integral factor in reducing shipping costs. Shippers can optimize packaging using efficient, lightweight packing materials like corrugated cardboard, EPS foam, PET plastic, etc. Lightweight packaging helps reduce storage costs and the weight of the shipments. In addition, recyclable materials and customized packaging can save money for businesses.
By using small boxes and mailers, shippers can reduce transportation costs. Small packages occupy less space, allowing companies to ship more packages quickly. For instance, using poly bags or mailers for shipping clothes is feasible. Sustainable and durable packaging can improve businesses’ operational efficiency. Low package weights can minimize shipping costs considerably.
- Keep DIM Weights in check.
Dimensions of parcels can make a difference in shipping expenses. Dimensional (or DIM) weights can determine the shipping costs. DIM weights are calculated based on the space occupied by a package rather than its actual weight. For instance, an irregular box containing balloons will cost more than a compact box of books. Space-consuming packages cost more.
Shippers can keep DIM weights in check by opting for small and compact packaging materials. In addition packaging efficiently and using sustainable options helps the environment. Some companies can also partner with third-party Logistics (3PL) for managing DIM weights.
- Utilize packaging provided by shipping carriers.
Another way of reducing shipping costs involves the use of packaging provided by shipping carriers. Companies that use their packaging might face additional charges. For instance, shippers pay more if the box size exceeds the shipping carriers’ regulations.
Parcel carriers like UPS and FedEx have their branded logo on their boxes. The advantage of using carrier packaging is shippers don’t need to calculate their DIM weights. Moreover, shipping carriers give special rates or services for using their packaging.
Shippers can look for discounted supplies to decrease shipping costs. Shipping carriers like UPS offer discounts or free supplies to small businesses. Packaging materials like bubble wraps, poly mailers, etc, can be purchased in bulk. Many companies offer discounts for buying supplies in bulk. Discounted supplies will help small business owners to boost their profits.
- Consolidate orders wherever possible
Businesses can consolidate orders in a single shipment if many items go to the same address. Shippers save money if they don’t have to pay for multiple packages. Consolidating orders improves the customer experience and reduces the need for returns. It helps in reducing shipping costs and minimizes package waste.
- Opt for PrePaid Shipping
Shippers can purchase numerous prepaid shipping labels from shipping carriers. Prepaid shipping labels contain the required information with a barcode. It helps businesses ship packages at no additional cost. It is ideal for packages with the same weight to be shipped out often. Businesses get discounts from shipping carriers like UPS and FedEx for using their printing services. It is a way of reducing shipping costs for shippers and boosting profits.
- Reduce shipping distances
Shipping fees increase with further distances. Shipping carriers impose a fuel surcharge if the package has to go a longer distance. In addition, parcel carriers charge more for handling the packages. Shipping packages internationally attract custom fees. Shippers need to reduce the shipping distance of their packages to save money.
Businesses can choose warehouse locations closer to customers so that the shipping charges decrease. Further, shippers can partner with fulfillment centers in each shipping zone to reduce shipping distance. These steps will help reduce shipping costs and boost profits.
- Negotiate with several shipping carriers.
Companies need not stick with a single shipping carrier for their shipping needs. Several shipping carriers offer different prices for various services. Higher shipping volumes attract lower shipping fees. Hybrid services by UPS and FedEx use local post offices for last-mile delivery. It reduces shipping expenses for shippers. Further, smaller regional carriers offer discounts or value-added services for some locations.
Shippers can negotiate with the shipping carriers to lower shipping rates. Shipping companies offer discounts to businesses even with low shipping volumes. Competitive shipping rates provided by shipping carriers help shippers. Building relationships with the shipping carriers helps shippers reduce fees. And so businesses can reduce shipping costs and increase their profit margin.
- Use third-party insurance
During shipping, there are chances of untoward events affecting the cargo. Businesses need to insure their products to prevent any damage or loss. For example, valuable goods like precious stones and musical instruments require insurance. Shipping carriers offer their insurance as part of the service or as a stand-alone charge.
Shipping insurance of shipping carriers can often cause a dent in a business’s profit margins. Third-party insurance companies offer cheaper rates than these shipping carriers. So, shippers can use third-party insurance to save on shipping costs.
- Minimum purchase amount for free shipping
Shippers should set a minimum purchase amount when offering customers free shipping. Businesses can set the rate for those orders that are profitable to them and are highly purchased by customers. Payment will be for orders which don’t meet the free shipping threshold. The concept of free shipping encourages customers to buy more and avail of free shipping. Shippers can reduce shipping costs and increase their profits by this method.
As discussed above, there are many methods to reduce shipping costs.
Here are some tips for small businesses to reduce shipping costs
Automate shipping processes
By implementing advanced technology, small business owners can reduce shipping costs. Software solutions can automate shipping processes, give real-time tracking data, and speed up order processing. Further, data analytics helps avoid excess inventory expenses and forecasts shipping volumes. Audintel has state-of-the-art technology to help small business owners streamline their processes.
- Customer-friendly approach
Regular assessment of data helps shippers offer shipping incentives to customers. Providing customers with real-time tracking information reduces inquiries. Further, any shipment delay notification to customers brings in a level of transparency. Small business owners can also offer loyalty programs that reward repeat customers. It can increase profit margins for shippers.
- Partner with 3PL
A 3PL partner can lower shipping costs for small business owners. They can negotiate lower shipping rates with shipping carriers due to their shipping volumes. Further, small business owners can separate their inventory across different warehouses across the US. It helps to reduce labor costs and shipping errors.
The bottom line
Whether you are a small or large business owner, reducing shipping costs is vital. The methods described above help businesses save money and garner profits. Audintel aids its clients in managing their shipping costs and increasing their profits. Our team of experts can optimize your shipping operations seamlessly.
If you need help understanding shipping costs, contact us at +1 (619) 354 8539. Further, you can visit our Audintel website.