Supply Chain issues for manufacturing are one of the main drivers for increasing costs, delayed production, and unreliability in shop floor schedules and overall operations. This is causing huge stress on the bottom line of many mid-sized and smaller manufacturing companies.
5 Key Strategies to Manage Shipping Costs
Many manufacturers feel a constant strain on their businesses in the form of ever-increasing expenses. Day-to-day business expenses such as rent, utilities, and insurance all continue to climb, while competitive pressures deter companies from raising prices to cover any shortfall. Businesses must find a way to cut operating expenses.
Reducing shipping costs is often ignored to combat rising expenses. With annual carrier rate increases, skyrocketing fuel costs, and accessorial charges that may increase 10-15% or more year over year, finding a way to reduce your shipping expenses can make a serious impact on your overall balance sheet.
On average a business spends 4% to 8% of total sales on shipping. This can vary by the size of the company, total company sales volume, or the type of products the company is shipping and receiving. How much is your business spending on shipping? Conduct an analysis.
Here are five key strategies to help you get your shipping costs in line. Implement one or all five of them and watch your shipping costs go down—increasing profits. We have built a shipping solution to enable savings on your shipping costs via all of the strategies as stated here, providing a great ROI on your investments.
Key Strategy #1 – Obtain Discounts with Carriers
If you think you must be the size of Wal-Mart or Home Depot to obtain discounts with carriers, think again. Many larger businesses have the volume and favorable shipping characteristics to negotiate directly with carriers. If you, too, have been able to successfully navigate this process, you are on the right track. If you have not been successful, or simply don’t have enough volume to negotiate such discounts, implementing our solution is one of the ways to realize these discounts of up to 50% on your shipping costs.
We have worked out a teaming agreement with the brokers of many carriers and have negotiated a discounted shipping rate. We will pass on these discounted rates to you, irrespective of the volume.
Key Strategy #2 – Develop an Inbound Shipping Program
Reducing inbound shipping costs is one of the easiest, yet most overlooked ways to reduce overall transportation expenses. When you control and route your inbound shipments and share your shipping labels with your vendor that has discounted shipping rates, you have an excellent opportunity to significantly lower your costs. If you allow suppliers to route your shipment and invoice you for shipping charges, your transportation costs are probably higher than they should be. Being the buyer allows you to not only determine what you purchase from a particular vendor, but also how it is shipped to you.
Key Strategy #3 -Use the Correct Mode and Service Level
Examine where you spend your transportation dollars. Is your spending concentrated on less-than-truckload (LTL) freight rather than small package, or air instead of ground? These distinctions are called modes of transportation. Ground shipping and air shipping are the two most common transportation modes that businesses use on a day-to-day basis. Clearly, using the correct service level to meet your needs is critical to keeping your transportation costs down.
Key Strategy #4 -Track All packages and Receive Credit for Lost Shipments
It is estimated that between 1.5% -3% of packages are either lost or misplaced. Our solution keeps track of all your packages and/or receives notifications from the recipient upon final delivery. This helps mitigate loss of shipments due to undelivered or packages delivered to the wrong address. Set up auto notifications for each stage of shipping process that helps keep track of all shipments. Companies could also recover costs of shipped goods via insurance or shipping companies when packages are lost or delivered to the wrong addresses.
Key Strategy #5 – Consolidation of Shipments
Why send three separate shipments if you can consolidate and send just one?
Consolidation will save you time and money, as an example here helps illustrate.
For a two-day guaranteed service, you can send a 45 lb. package from Cleveland to Boston and pay a ground rate of $73.50. Sending three separate 15 lb. packages would cost approximately $99. That’s a difference of 26% to ship one versus three separate shipments!
Final thoughts:
For many manufacturers, shipping costs could provide an easy means for substantial cost savings, without much change in your organizational operations. Shipping costs have been steadily increasing more than a decade now, with changing dynamics that include more remote workforce, increased e-commerce activities, and increased inter-continental commerce, a shipping solution that offers discounted shipping, shipping options, and ability to keep track of items shipped provides a great ROI for the entire organization.
