With a rising numbers of internet orders, the e–commerce business is booming. That also means everything in the shipping process is sped-up, with high pressure to get things done quickly, from order fulfillment to delivery.
Many ecommerce merchants are paying for shipping themselves, at least at certain purchase levels, making it even more important to keep shipping costs low. And while options like shipping audit software are a great way to lower these automated shipping is one option that should be heavily considered.
Optimizing the shipping process with automation decreases the number of tasks completed with a manual process. The automated shipping process also captures efficiencies that software can provide in packaging and carrier choice, choosing the most appropriate postage and service. This type of shipping automation can lead to growth as well as lower costs.
A Deloitte survey of 400 supply chain executives globally showed that 79% of organizations with top level of supply chain capabilities saw revenue growth significantly above the average.
Imagine using automation technology for sorting incoming inventory, picking and packing, and for the multiple-step shipping process. In each logistic step, automation can fine tune the order fulfillment process and allow the company to increase their turnaround times and process more orders in less time. That can help the company’s image and better serve the customer while boosting profits.
What is automated shipping?
Shipping automation uses automation to perform some or all of the tasks involved with processing an order for shipment from the ecommerce platform. That can mean receiving and printing the ecommerce shipping order automatically, picking and packing the order through an automated system like a robot, and using automation rules to efficiently and cost-effectively choose the best shipping package and carrier. Of course this is an overview, and there are many more detailed parts of an automated shipping system that can be involved.
Benefits of automated shipping
There are many benefits to automated shipping. Here are just a few of them:
The shipping company can gain efficiency and increased productivity by using an automated shipping system. This means the company can handle more orders without necessarily scaling up in labor. This allows them to grow their customer and order base and increase profits.
Labor costs are a huge issue for fulfillment centers, as is the process of hiring and retaining labor. Labor makes up 50%-70% of a warehousing budget, according to one estimation.
The Bureau of Labor Statistics notes that the average hourly earnings for a nonsupervisory warehouse employee is $18.19 an hour. If working full time, that’s $37,835 a year without any benefits added in. Multiply that by 100 warehouse workers, and the warehouse is looking at $3,783,500 in salary alone. If some of those workers don’t need to be hired, that’s a big savings. Some existing employees could be redeployed to other jobs in the warehouse which have higher value to the employer.
The fulfillment process can be manually intensive and highly repetitive. With a current low unemployment rate and issues with infection control and the COVID-19 pandemic, needing fewer employees in the warehouse can be a good thing. Even before the pandemic, hiring was difficult and there’s a high turnover rate in these positions. If your company is using a 3PL, they rely on warehouse employees for the fulfillment operation, and if they have hiring difficulties, it affects your business.
Decreasing labor is one way to lower costs, but there are other ways that the shipper can reduce costs using automation. An automation shipping solution can optimize packaging to ensure the lowest cost, to potentially avoid dimensional weight surcharges, for example. Carriers like UPS and FedEx use dimensional weight based on the package volume relative to its weight. That means lighter weight packages cost more to ship than in the past. Using shipping software to optimize packaging can lower shipping costs.
Lower error rates
Decreasing error rates can positively impact customer service and lower the cost of return logistics and reshipping items that as a result of a mistake. A survey of 200 retailers showed that human error was the top cause of inventory fulfillment problems, according to 62% of survey respondents. They cited manual process management as leading to mistakes. Using automation can improve error rates.
While this has been cited already in several of the benefits, a better customer experience leads to loyalty and more orders.
How to automate your ecommerce shipping from A to Z
There are varying degrees to which an ecommerce business can incorporate shipping automation into its processes. On one end of the spectrum is an autonomous ship, where inventory is picked, packed and shipped completely by robots and automation technology. But shippers can also dip their toes into automation, implementing it in phases. And of course if using a 3PL, contracting with a highly automated organization can help your company benefit from its efficiency.
Inventory software systems
A good place to start is using an enterprise resource planning (ERP) system that has modules for order management, inventory management and transportation management. These modules don’t have to be part of the same software system, but if using different software like an ecommerce platform, they should integrate with each other. Some 3PLs and distribution centers offer integration with their systems as well, sometimes negating the need to buy your own, especially if you are still scaling up. An ERP does more than just manage the inventory and provide real-time insights into your inventory and shipping information, though. It also integrates the financial end and provides visibility into all aspects of the general operation.
Within your inventory management system, automating aspects like reordering can streamline operations and help prevent stock-outs and manual efforts. This involves instituting rules in the software, to reorder when the inventory reaches a certain threshold. These rules can be adjusted based on circumstances, like longer shipping times, seasonal needs and increased demand elsewhere.
Warehouse picking and packing
This applies whether your company runs its own warehouse and order fulfillment operations, or you contract with a 3PL. Increased automation in picking and packing can improve efficiency, speed up turnaround, and lower the error rate. Warehouses can be huge facilities, and pickers can spend up to half their time traversing the floor to find the items. The average warehouse size in 2018 was 672,080 square feet, up from 473,400 in 2017. Automation software can plan efficient picking routes that minimize the time needed for picking so human pickers don’t spend their paid time walking, but spend it picking. Using robots can greatly improve the picking process as well.
Robotics companies offer different methods for robot usage. That can include sending robots to the aisles, where a human employee picks the inventory and puts it in the robot’s bin. The robot then moves to a different aisle where another employee is stationed. Or the robot can do the picking by itself, as is done in micro fulfillment centers. At some Amazon warehouses, robots move bins of inventory to the stationary picker, who takes items off the traveling bins and puts the orders together in one place. In 2018, robots could handle about 43% of SKUs in a warehouse, according to Logistics Management. With an average of almost 14,000 SKUS per warehouse, that makes a big difference.
Barcode or RFID
Using barcodes or RFID can help with automation as well, in putting away items, picking, packing and taking inventory. Robots or human pickers use scanners to confirm the right inventory items were picked or stored, and the shipping department can identify the recipient from the barcode on the package or order form. These barcodes then send the information via shipping software to the carriers and the customers, allowing them to track shipments as well. The barcodes also update the inventory system in real time, allowing for better inventory management. RFID scanners are popular as a way to count inventory without needing to scan each pallet or item. Regular inventory counts that may take several days to a week by humans, can be done in minutes to hours using RFID.
Automation software can trigger exception handling as a shipping rule. With predetermined criteria, the ecommerce business might want human intervention to ensure quality checks on items leaving the fulfillment center. That may be for high value inventory, specific customers, or international orders. Automation makes this process easy, and it can help a business provide better customer service.
There are multiple ways that shipping software can improve and automate the shipping process. One way is through reduction of dimensional weight surcharges. This can be done through cartonization, which makes sure the inventory is in optimally-sized packages. Shipments that do not meet this DIM weight test can be diverted and repackaged for lower shipping costs.
The software can also weigh the package and compare it to similar packages to check for order accuracy. If it’s outside the expected range, it can be manually inspected to avoid potential errors.
The other area where this software is helpful is in choosing the best option from multiple carriers, and printing out the appropriate shipping label. Sometimes USPS Priority Mail is a better option than UPS or FedEx, and the software can sort through the various shipping automation rules and package information, to find the best option.
This rate shopping aspect is time consuming and error prone for a human to do, but it can be quick and easy with shipping software. This software is good for more than just parcels. It can be used by freight forwarders in the shipping industry as well, to determine the best rates for freight traveling LTL or FTL.
Automation software in the warehouse can be used to direct packages to the proper lane for shipping, once they have shipping labels and are ready to leave the warehouse. Scanners on the conveyor belt can move them to the truck loading area, or pallet loading area for multiple carriers at once. Again, this reduces the opportunity for human error and lowers costs from returns and package diversion.
Now that packages have barcodes and are in the shipping system, tracking by carriers and customers is activated. Customers can track their items at each point in the journey.
Invoice audit recovery
Once those packages are en route, the carrier will invoice for the final amounts. Automation can help ensure these invoices are accurate, and apply for credits when they’re not. Shipware’s invoice audit recovery service does this by connecting the customer’s account to Shipware’s software. Each night, without the shipper doing any work or even thinking about it, the invoices are reviewed for 65 points of potential error. If the errors affect pricing, Shipware then applies for credit directly with the carriers and any credit refunds are applied to the customer’s account. This type of automation can save customers 1-9% of their shipping invoice amounts without any effort, and the service is funded from those refunds.
Shipping automation has the potential to save your ecommerce business a lot of money in both direct costs and improved growth and efficiency. Some of the items to automate are time consuming and involve capital investments. Others, like invoice audit recovery, don’t cost you anything out of pocket, and can still make significant improvements in your bottom line. Pair that with proper usage of shipping data analytics and last mile delivery best practices to further capitalize on efficiency and returns.
To learn more about how Shipware can help you lower your carrier costs, including by capturing invoice audit savings, contact us online or at (858) 879-2020.