Shipping Costs

How to Reduce Shipping Costs


Reduce Shipping Costs

Today’s market is more fast-paced than ever. When it comes to shipping and delivery, providing a great customer experience requires speed, accuracy and on-time performance—all at a competitive cost. With demands for same-day to next-day delivery, businesses everywhere are feeling the sting of higher shipping costs as customer expectations rise.

As time goes on and shipping trends change, so should your processes and cost saving strategies. Now’s the time to look at your company’s parcel spend and understand how you can start to reduce your shipping costs without compromising on-time delivery requirements and quality.

Lowering shipping costs marks a clear competitive advantage, and we’ve put together a complete guide to help.

CHALLENGES

Average Cart Abandonment is 70%

The Demand for Low Cost Shipping.

Today’s customers want fast and flexible shipping and delivery options. But providing these options without accruing high shipping costs can be a major struggle. Balancing high customer demands while implementing an effective low cost shipping strategy is key to gaining an advantage over others in this highly competitive market.

Customers are shopping online more than ever. Retailers and manufacturers now face fierce competition in the global marketplace on the e-commerce front. And they all face the same challenge: cart abandonment rates of near 70%.

Cart Abandonment Based on Ages

High Shipping Costs are the Biggest Deterrent.

As customers move through the purchasing process online, surprise shipping costs lead to cart abandonment and customer complaints. In fact, 70% of customers over the age of 55 abandon their purchases when the cost of shipping is too high, as do 67% females. Moreover, 41% of people aged 35-44 abandon when they don't qualify for free shipping. [USA Today: Amazon's #1 Lesson for E-Commerce Companies]

Skilled Labor Shortage
Businesses Pass Their Shipping Costs Onto Customers.

Businesses Pass Their Shipping Costs Onto Customers.

If your cart abandonment rate is too high, the issue most likely isn’t with your products, but how you ship them. Businesses that tend to deal with tighter margins and less volume, pass on all or part of the cost of shipping to their customers. Why do they do this? The main concerns are that carrier rates are too high and/or they aren't meeting customer expectations due to an insufficient supply chain.

Efficiency is Key to an Exceptional Customer Experience.

A common misbelief is that in order to get a shipment to a destination the next day, it must be shipped with a costly next-day air service. However, very often a cheaper ground shipment service is just as efficient. This won’t be possible though with an insufficient supply chain. If you’re still manually booking carriers and have no quick rate shopping abilities, money and customers are lost. [How-To: Last Mile Fulfillment]

Shipping Largely Effects Repeat Purchases.

The main reasons a customer makes a repeat purchase online are linked to logistics and transport such as free shipping, return options, delivery times and shipping updates. Shipping is therefore important not only to logistics experts, but also to sales and marketing specialists as it is an ideal tool for conversion and customer retention. Automating your supply chain processes and putting high focus on a shipping strategy is important now more than ever for boosting your bottom line and keeping customers coming back.

Fast Shipping Vs. Free Shipping

It’s no surprise customers desire free shipping, but what companies might not know is customers are willing to wait longer periods of time to get it. While providing both free shipping and fast shipping are important, a surprising 74% of customers prefer free or cheaper shipping options over fast shipping. But this doesn’t mean that they’re willing to wait too long.

Cheaper shipping options trump convenience.
ProShip's 2017 State of Shipping in Commerce report shows that 65% of shoppers will actually increase the size of their basket in order to qualify for free shipping. This means customers are more interested in getting a better deal on shipping rather than getting their shipments faster. Even when it comes to convenience, many shoppers still choose the cheaper shipping option. For instance, an average of 33% of customers will choose click and collect, because it’s free as opposed to shipping to their home.

Customers are willing to pay a premium for fast delivery.
While free shipping is obviously important to offer, that doesn’t mean that shipping options such as hyperlocal or next day aren’t desired as well. Shoppers are still willing to pay for the convenience of speed-related delivery services, but only a few businesses are currently offering them.

Companies need to make sure they provide customers with the options they expect so they don’t lose out on sales to their competitors. For example, with only 22% of local retailers offering free shipping as a retention tactic, there’s plenty of room to compete. [Insider Q&A: Last Mile Fulfillment]

Fast Shipping vs. Free Shipping
Solutions

SOLUTIONS

How to Analyze Your Shipping Operation Costs

With shipping costs skyrocketing, it’s more important than ever now to find ways to streamline processes and reduce costs. Today, predictive analytics is being used to improve efficiencies in supply chain operations. In the shipping realm, it’s seen as a source of competitive advantage.

Why is analyzing your shipping operation important?
Shipping analytics software will allow you to proactively handle shipping problems before the customer is aware and eliminate bad experiences. Your shipping data and the analysis of carrier performance, shipping rates and more can provide useful analytics to optimize your supply chain and improve your logistics management strategy.

Turn shipping data into actionable insight.
With shipping analytics software, you can get preventative and quantitative analysis of shipping data for freight and parcel shippers. Shippers receive the data needed to reduce transportation costs and identify carrier failures prior to the final delivery.

Calculate and compare actual shipping cost.
Software with non-time-critical audit functionality can be used to calculate and compare the true shipping cost between carriers—and rank performance relative to each other. You reduce transportation spend by optimizing carriers and service level routing.

Determine how to reduce cost per package.
Shipping analytics can also help with the issue of cost per pound or cost per package, by allowing you to measure them together. There are many factors that can cause variation in these data points, but being aware of them can help you uncover if and why costs are hurting you, which can push you toward making better logistics management decisions.

ROI

ROI

Cutting Costs With Shipping Software.

Cutting Costs With Shipping Software.

As consumer expectations continue to shift and demand instant satisfaction, a lot of pressure is put on retailers, distribution centers, third party logistics (3PL) providers, manufacturers and carriers as they all work to get orders out to customers as quickly and efficiently as possible. Multi-carrier shipping software can be an essential way to increase profits, cut labor costs and help your company grow. [The ProShip ROI]

The Real Cost of a Negative Shipping Experience.

The Real Cost of a Negative Shipping Experience.

It happens all the time. A shipment is lost, delayed or arrives to the customer damaged. Although many companies have policies in place that give customers refunds or replacements, they often don't make up for the disappointment or exasperation a customer feels when the inevitable happens. [Top 10 Carrier-Related Shipping Concerns]

Keeps Customers Coming Back.

Keeps Customers Coming Back.

Every mis-picked, mis-packed, mis-labeled, or mis-shipped customer order results in an additional cost per shipment. These mistakes or delays in the order fulfillment process can cost a sale or even a customer. But with the right shipping strategy and execution, there are rewards to reap: increased customer loyalty, improved brand sentiment, decreased shipping costs and most importantly, revenue growth. [Top 15 Peak Season Shipping Pain Points]

How Shipping Software Lowers Costs.

How Shipping Software Lowers Costs.

Multi-carrier shipping software can significantly reduce transportation costs by up to 30%! It will also help streamline your warehouse processes, reduce labor and potentially help reduce your inventory levels. Investing in multi-carrier shipping software will produce numerous benefits and pay your company dividends.

4 Ways Software Can Save You Time and Money

1. Automation means faster shipment processing.
Multi-carrier shipping software will significantly reduce the time to process a package through your carriers. Use the equation below to calculate your cost savings!

Automation for faster shipping

Assuming $24 per hour is the cost of a fully burdened employee, and there are 3,000 packages shipped each day, and you save 5 seconds per package, then the cost savings of 4.2 hours per day at $24 an hour x 260 work days per year = $26,208 per year. [More equations]

Automation for faster shipping

Shipping software can drastically reduce the time it takes to process a single LTL or TL order. Currently, if it takes approximately 15-20 minutes, automated shipping software can cut that time to 1-2 minutes per shipment to produce the required paperwork. Assuming $24 per hour is the cost of a fully burdened employee, and there are 35 LTL/TLs per day and a savings of 15 minutes per order is realized, then the cost savings of 8.75 hours per day at $24 an hour= $210 per day, or $54,600 per year[More equations]

2. Less customer service calls due to order visibility.
By giving customers the ability to track their own shipment, you will save money even if you are only getting 20 calls a day and it is taking five minutes per call. Assuming $24 per hour is the cost of a fully burdened employee you could potentially save: 20 calls each taking 5 minutes per call is 1.6 hours saved per day at $24 an hour x 260 work days per year is $9,984 per year.

Live Package Visibility Leads to 40% Less Calls to Customer Service

3. Automated rate shopping ensures you get the lowest-cost options.
Rate shopping multiple carriers at a shipment level is a powerful tool to ensure least-cost alternatives and benefit from the value regional carriers could offer. Average savings should exceed 5% of total annual carrier spend. For example, if your total carrier spend is $300,000 per year and you save just 5%, that calculates to a savings of $15,000 per year.

$300,000 Shipping Savings with Automation

4. Better planning and management with analytics and reporting.
Dashboards and/or reports can be created to isolate cost centers and monitor trends, while helping greatly reduce unnecessary use of premium transportation services. The impact of better planning and management reporting through shipping software may be different for each organization, but is critical in effectively managing freight costs. Businesses who embrace shipping software are able to provide a great customer experience, even when demands are high. This creates a smooth and efficient process for both companies and customers alike, growing your bottom line.

 

Implementation

IMPLEMENTATION

Finding the Best Shipping Solution.

Finding the Best Shipping Solution.

Delivering your products to customers in a cost-effective manner, on-time and in adherence with local and international regulations is a critical success factor, especially in today’s ever-changing e-commerce world. Adopting the right shipping strategy can give companies a competitive advantage, while providing an outstanding customer experience.

What to Look for in Shipping Software.

What to Look for in Shipping Software.

Shipping software tools optimize service, efficiency, control costs, and ensure orders get on the right truck faster. And that keeps customers coming back.

With numerous shipping software solutions out there however, it can feel overwhelming trying to find the right one for your business. After all—what features should the ideal shipping software solution even include?

Cost-effective shipping is a challenge because each shipment can potentially involve multiple carriers with numerous levels of services and constantly changing rates. Intricate business rules and shipping restrictions for parcels that differ in size and weight, include anything fragile, hazardous or perishable, or are shipped outside the country further complicate the process.


9 Things to Look for in a Shipping Software Solution

1. Faster Shipment Processing
Fast, real-time processing of complex business rules and rating logic will save all branches time and money without incurring additional costs. You’ll be able to easily produce carrier-compliant labels, documents and manifests to reduce manual processes and keep up with the pressure for next-day or same-day delivery.

2. Multi-mode Track
Trace Directly connect your on-demand e-commerce data or warehouse systems to real-time and batched carrier tracking feeds. Customers can track their orders without ever leaving your online store. That means they can continue to browse, find other must-have items and snap them up with a simple click.

3. Rate Shopping Software
Automated rate shopping software sorts through all carrier conditions to help find the lowest cost to meet the expected delivery. This enables you to take full advantage of special conditions and seasonal offers—such as extended pickup times or extra trailers—to get more orders out the door each day, at a lower cost.

4. International Shipping Services
Whether you’re shipping to Asia, Europe or South America, shipping software should perform the different regulatory steps for each destination, and produce or electronically transmit the required documentation and customs forms. Automatic rate shopping among the international carriers assures that you’re shipping most economically when carrier costs are the highest.

5. Analytics and Reporting
Comprehensive analytics and reporting tools help you evaluate the complete transportation spend to effectively manage freight costs. Reporting can be designed to help evaluate and understand the complete transportation spend by carrier, division, location, department, customer and more.

6. Custom Address Validation Modules
It’s mission critical to have a shipping software solution that verifies addresses worldwide before a label is even generated. Custom address validation modules will reduce or eliminate carrier charges for address corrections, allowing you to improve on-time delivery to your customers. Additionally, bar codes and bar code scanners eliminate manual key-entry in shipping which eliminates the chance for human error.

7. Carrier Compliance
Multi-carrier shipping software enables companies to easily meet the requirements for compliant labeling without having to change printers, label stock, or systems. This can reduce carrier charge-backs for non-compliant issues and reduce the overall amount spent on freight.

8. Scalability
Shipping software is often designed with a modular architecture, allowing you to install, pay for, and maintain only those modules that your business actually needs, saving both time and money. The flexibility of scalable solutions allows for your business to grow without having to expend more time, energy and cost shopping for a new solution.

9. Continuous Customer Support
Customer support, though hard to quantify, should also be considered a value. Your organization may not need 24/7/365 support, but be sure you have a process to get the help you need if your system is down. Support should come from a team of engineers familiar with your environment, who because of their certified status have access to carrier support.

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