When reviewing an annual company budget, one area to pay special attention to is the shipping budget. Whether you run an ecommerce store or another business that might ship frequently, it’s likely that your shipping and logistics costs are high and rising each year.
There are, of course, ways to optimize that shipping budget; however, this can involve a bit of work — from digging into your data to even tweaking how you currently ship. Ways to lower your shipping budget without making any major changes to your workflow or business operations also exist, but it’s critical to take a comprehensive approach to realize success, which where services like shipping consulting can come in handy.
Here’s an in-depth look at how to reduce your overall shipping rate with both large and small carriers and make the most of your annual shipping budget:
Tips for how to best optimize your shipping budget
While searching for ways to optimize your shipping budget with carriers like FedEx, UPS, DHL, USPS and others, it’s worth considering the following tips.
- Use multiple carriers: Some companies use only one shipping service because their contract shipping volume demands it. Perhaps negotiated UPS rates are lower when maintaining that shipment volume, or it’s just easier to work with one company; however, it’s worth exploring whether adding multiple carriers into the mix would help optimize your shipping budget going forward. Sometimes regional carriers offer better rates and faster service for some destinations, and a portion of your shipping volume can be cleaved off for their business.
- Turn to hybrid carriers: Some ecommerce companies find value in using UPS SurePost or FedEx SmartPost, which start off with UPS or FedEx. The packages are later given to the USPS for final mile delivery. This service may be less expensive than using UPS Air service or FedEx for the entire delivery. That’s because the USPS delivers to each address in the U.S., making it more economical for them to bring packages to a residence than making a separate trip. UPS and FedEx may add on residential surcharges or quote a higher rate to deliver to a residence, while the USPS does not.
- Optimize your package: To lower your shipping rates and get savings, try changing your packaging. This might include reducing the dimensions and weight, using less filler, or using a polymailer instead of a box. If the box is not a standard size, you might be paying more FedEx, UPS or USPS postage or surcharges.
- Adopt flat rate pricing: Using a flat rate box can lower costs and increase efficiency in some cases, and several carriers offer this option. The USPS offers a flat rate box and envelope in various sizes, as does FedEx and UPS. With USPS and FedEx, you’ll need to use their packaging but not with UPS. Using their packaging, though, makes it easier to understand whether something can be shipped in that service, and it saves cost in supplies, since the companies supply these packages for free and even deliver them to you. That said, flat rate pricing is not always cheaper than other services, so it’s important to understand your package weights, dimensions and destinations to ensure it’s cost-effective. Sometimes ecommerce customers are fine with paying slightly higher flat rate pricing because it saves on labor costs, but it may be easier to just use the service seasonally when busy with holiday orders, for example, than to use other shipping methods.
- Explore free packaging: Even if you’re not using flat rate shipping, you can still often get free shipping supplies like boxes, mailers and envelopes, from the major carriers. You may have to use a specific service to use them though. For example, USPS provides supplies for Priority Mail, and they specify that those materials can only be used for that service.
- Change service levels: If you are willing and able to change your delivery time, that can greatly lower prices. This is especially helpful if you offer free shipping. Customers paying for shipping are usually willing to wait longer for delivery if they’re paying less for it (or if it’s free). Using UPS Ground shipment instead of UPS 2nd Day Air will be less money as a shipping option.
Thinking outside the box can also help when it comes to maximizing your shipping budget. The following are more great ways to reduce your costs annually.
- Adopt shipping software: Based on their overall customer volume alone, shipping software companies may provide you with a discounted rate without you even needing to negotiate it. With this software, you may also be able to determine which shipping company to use based on price and terms — or you can just always go with your preferred carrier. Some ecommerce stores like to use the Shopify plan for their business tools, which includes some shipping discounts like a UPS discount and the ability to print a shipping label. It also allows a customer to use a coupon code.
- Explore warehousing: If your company uses fulfillment centers, consider using centers in different parts of the country, or close to your customers if they’re mostly in one region. By decreasing the number of shipping zones in between the warehouse and the destination, you can decrease your shipping prices through reduced transportation costs for the shipper.
- Purchase insurance: If you want or need to insure your packages, you can use a third-party insurance carrier, or one associated with the carrier, like UPS Capital Insurance Agency. Either way, that can provide additional insurance beyond what the carrier offers as standard coverage. Ultimately this can save your company money if the FedEx item or UPS freight is lost or damaged.
- Identify shipping discounts: You can sometimes get a UPS shipping discount or FedEx shipping discount if you’re not currently signed up with a UPS or FedEx account. As for answering the question of “Is FedEx or UPS cheaper?”, check for promotions that both couriers are offering. These might include a percentage off of shipping options as you get started. The FedEx or UPS savings program may also offer discounts on international shipping. As both these carriers have affiliated stores, you may also find a UPS promo code or FedEx discount code for eligible products and services, like printing.
Make the most of your budget with shipping services
Beyond the methods previously mentioned, two of the bigger savings vehicles to optimize your shipping budget are renegotiating your contracts and using invoice auditing services.
Renegotiate your contracts
If you already have a shipping contract with UPS, FedEx, and/or DHL, it may be a good time to renegotiate it. Perhaps your shipping volume has changed or you have different shipping needs, whether that entails ground shipping, international shipping or freight. No matter the reason, staying in the same contract and not trying to optimize it can cost you money.
Some ecommerce stores and other companies feel they have good relationships with their courier and are savvy negotiators, but even so, you could be leaving money on the table. Shipware’s experts come from the very industry side you’re going to be negotiating with, and our experts know what percentages to target and what services can be negotiated.
Even more importantly, Shipware’s in-depth analysis of your shipping data can bring out subtle characteristics that might otherwise be missed. We can analyze your shipping approach and find ways to tweak the services to improve your shipping budget. We can also provide a blueprint for renegotiating your shipping contracts with carriers, so you can maximize your service levels and lower your costs. The savings can be up to 30% from this process.
Reviewing your invoices
Invoice audit recovery services are another option for saving money. Carriers can often make mistakes — delivering packages outside the guaranteed delivery time or accidentally using a surcharge that’s inappropriate for the situation — and manually checking for these invoice errors can be an exercise in frustration.
That’s where our proprietary software comes in. It identifies errors in the invoices, which can mean refunds or credits to the customer account. The service costs nothing out of pocket, and is funded with a portion of the fees saved. Customers typically save 1% to 9% of invoiced amounts.
The good news is that it’s an easy program to run and maintain. The set-up process takes minutes, connecting our system to your shipping account. The software runs behind the scenes and the savings are automatically credited to your account. It saves your staff time, which means it saves you staff money as well.
As the year ends and a new one begins, use this time to do an overhaul of your shipping budget. See which hacks work for your company and pick some low-hanging fruit like invoice audit recovery services to implement early. Let us know how we can help you save money with your shipping budget. Contact us online and start making changes.