Shipping represents a significant expense for most FMCG and wholesale distribution businesses. Retailers expect faster turnaround and cost-effective or even free delivery from suppliers, so managing shipping costs without eroding your profit can be challenging.
Shipping costs can also be difficult to plan for, particularly for FMCG businesses that supply to geographically scattered customers.
So, how do you reduce shipping costs and get orders to customers cheaper and faster?
Start with reporting
Reporting on product movements, trends, and replenishment by each vendor can help to identify opportunities for reducing shipping costs. For example, do you have fast-moving products that can be ordered in larger quantities less frequently? If you spot a trend of increased popularity for particular product lines over seasonal periods, you can also order in bulk during the lead-up, then reduce order quantities again when needed. Base your ordering adjustments on reliable data from your reporting to ensure you’re making the right decisions.
Automate your re-ordering
Automation can save a lot of time, manual effort, and admin costs – especially if you’re importing and distributing products. Review your stock reporting and set automated re-order points for minimum and maximum quantities. By doing this, you’ll reduce item stock-outs, ensure you’re not overstocked, and remove the effort to monitor and manually re-order products continually.
Not only can automation cut time and costs, but it can also reduce manual keying errors which take significant time and effort to fix.
Full shipment or partial shipment?
Most suppliers offer options of full shipment or part shipment for orders. With part shipment, all in-stock items from your order get fulfilled as soon as possible. Anything that’s out of stock stays on back order and ships separately when it’s available. Part shipment may sound like an appealing option to receive goods faster but can mean increased shipping costs. If you have adequate stock to cover demand until all ordered products are available, think about specifying full shipment on orders rather than partial shipment.
Have a clear returns policy
Sometimes customers will return items due to faulty products, other times it may be due to change of mind or over-supply. For faulty products, most companies will simply credit the return freight costs incurred by the customer and leave it to them. But it’s worth finding out if you can secure cheaper return shipping rates than the average customer’s freight cost that you’re crediting back.
Returns also cost you in terms of time and effort in processing and administration. Think about setting a rate for restocking fees that can account for those losses. Also, communicate returns policies to customers up front. Clear policies can help you reduce costs and set the right customer expectations.
Reorganise your warehouse
Making your warehouse operations more efficient can provide significant savings. Place your fastest moving products closest to where the pick, pack and ship process takes place. This simple change can cut down the time it takes to move the most in-demand product through your warehouse. The faster those products turn around, the bigger the reductions in total time and operating costs incurred to get deliveries out to your customers.
This article was written by Stephen Canning, CEO of JCurve Solutions.
