A Guide to Optimizing Your Shipping Strategy

Optimize Shipping from Order to Door

Organizing your shipping station

Simple and planned organization is an important first step when creating an efficient shipping system. Everything—from products to supplies—must have an exact place, and logistical efficiencies are of the utmost importance. Precision is key.

Good customer service starts when goods are packed. The way a business handles its inventory says a lot about how it cares for its customers. Careful organization at this stage will help increase shipping speed, reduce fulfillment errors, and protect the integrity of products.

Create a dedicated, well-thought-out space where all outbound goods can be scanned, packed, sealed, and labeled. Use the right sized boxes and optimal packing for each product with all the necessary shipping supplies readily available.

The strategies below will help re-engineer this critical space. By implementing these suggestions, a business can significantly cut down on the time spent fulfilling orders and even reduce the rate of returns by eliminating packing errors.

1. Choose the right packaging.

The choice of packaging can greatly impact a business’s margins. Shipping boxes full of air may end up costing much more than expected, especially if dimensional weight pricing—which is based on the cubic capacity of a package rather than on its weight—is used. The goal is to reduce container size and packing material to a feasible minimum. This helps reduce the carbon footprint while cutting down on shipping costs.

Begin by examining all the elements of packaging to determine if less could be used. Could the container be smaller? If so, costs for corrugated boxes—as well as cushioning or void fill—will go down. Plus, it saves space in the shipping station.

Pro tip: It’s important to ensure that your goods will still be delivered safely without damage if you choose to cut back on container size and interior packing.

Packaging alternatives

• Packing materials: Use low-density materials, such as inflatable air cells, to get the same protection for products while reducing package weight. Making this change can shave ounces—even pounds—from each package and might even reduce the size of the container needed.
• Packaging options: Add a few intermediate box-size options without incurring excessive handling or inventory costs. Also, consider box alternatives for items that can be safely shipped in envelopes (padded or non-padded) or shipping bags.

Be thoughtful while making packaging adjustments. Reducing packaging size and fill can pose a risk and threaten the safe shipment of your products. Any savings achieved through packaging reduction strategies can be negated if goods arrive damaged and need to be replaced.

2. Place frequently sold items closest to the shipping station.

Arrange the shipping station so that the most-sold items are closest to reduce the pick-and-pack fulfillment time. This simple savings in minutes and seconds adds up while also reducing the physical impact on fulfillment personnel.

The ABC Classification Method

Classify products into groups A, B and C to help evaluate stock and see what is performing well.

1. A: Products shipped most often, closest to shipping station
2. B: Products shipped less frequently
3. C: Products shipped infrequently, farthest from shipping station

3. Keep the right tools and supplies handy.

Stock shipping stations with the right supplies to help increase speed and efficiency. A simple glitch, such as running out of tape, can impede an entire packing operation.

• Have boxes, bags, envelopes, void-fill material and small items—like scissors and tape—handy.
• Ensure that there are flat areas wide enough to accommodate typical packages.
• Mark a table with measuring tape to create a guide for the quick assessment of package sizes.
• Use a pin board to keep tools and supplies organized and within easy reach.

Pro tip: Study your sales velocity and order characteristics. Place items that are commonly sold together near one another. For example, store electronic devices close to their adapters, battery types or cases.

When packing stations need to be resupplied with materials, the packer should not have to stop while waiting for supplies to be replenished. In many cases, restocking can take place from behind the shipping station or by simply using portable supply carts. Every station is different, but a creative, forward-thinking approach can save significant time.

Packing materials and supplies

Develop a master list to make resupplying easier:

• Boxes (list each size, flat and assembled)
• Bags and envelopes (list each size)
• Packing materials (list each type, roll width and diameter, or amount of space required for storage)
• Miscellaneous supplies (list tapes, labels, envelopes, pens, markers, and other small items)

Pro tip: Manage fill materials by storing them on hanging rolls with cutting bars. This makes them easier to access and quickly measure to the needed length.

Operational flow chart

Create a simple flow chart to clearly outline the business’s packing operation. Defining an operational flow will provide a visual overview, allowing for consolidation of functions into a streamlined working model. When properly designed, it can help reduce wasted movements, eliminate extra handling of items, and show where to store all the equipment and supplies.

The most efficient packing systems are usually arranged in packing order sequence. This allows the packer access to all orders on one side of the packing station.

Ideas for a better customer experience

Be creative by turning packing slips into marketing tools:

• Include a coupon or special discount.
• Include a prewritten or handwritten thank-you note.
• Suggest that the buyer write a review or follow the brand on social media.
• Surprise the customer with something unexpected.

Looking for ways to customize packaging may also be worth the effort. Consider how much is currently being spent, calculate the average order size and profit margins, and assess what can be done to deliver a better experience to customers, one that compels them to shop again and share their experience with others.

Pro tip: Capitalize on the unboxing video trend, in which people film themselves opening the boxes of certain retailers because of the exceptional experience the packaging creates.

When items are packed, designate a convenient and centralized place to stage and collect packages ready for transport. Set up a skid or cart next to the shipping table so the packer doesn’t need to carry items. Instead, they can slide packages onto a cart and move them to the outbound shipping area.

4. Collaborate with carriers to improve systems.

To remain competitive, a business needs to collaborate with its shipping carriers within a single, agile supply chain built around shared data, business processes and stellar customer service. Form strong relationships based on trust, information-sharing and performance goals with key transportation providers. If both parties benefit, these relationships become even more valuable.

When evaluating carriers, keep in mind these three things:

• 

  Reach

  Does the carrier deliver to customers in cities, as well as those in suburbs and rural areas?
• 

  Tracking

  Does the carrier provide shipping for every order?
• 

  Reliability

  Is the carrier trusted by customers and businesses alike?

Analyze Your Numbers

Your shipping invoice is your business ally.

Shipping expenses can make or break a business. However, many companies tend to underestimate the financial impact that shipping can have on their bottom line. When a company ships in volume, basic rate changes and ancillary surcharges can add up quickly, leading to significant increases in shipping spend.

By carefully analyzing line items on shipping invoices, a business can identify unexpected surcharges as well as savings opportunities—without sacrificing service. This information can also come in handy when it comes time to handle contract and rate negotiations.

These are the four key invoice areas to evaluate:

1. Surcharges

Unmonitored surcharges can account for a large percentage of a business’s—and its customers’—shipping costs. A company could be paying for additional services (fuel, rural delivery, etc.) that alternate carriers provide for lesser or no charge.

Some common ancillary surcharges include:

• Residential delivery
• Delivery area surcharges (DAS) and extended DAS
• Fuel (ground and air)
• Large/oversized packages
• Saturday delivery
• Return fees (i.e., print and electronic return labels, pickup attempts)
• Package pickup and intercept
• Confirmation of delivery

Use our shipping surcharge calculator to find out just how much these charges impact a business’s bottom line.

2. Address corrections

Human error—such as a typo in the street name, a missing apartment number, a wrong digit in the ZIP Code™—can result in costly surcharges and take valuable time to correct. Plus, they delay delivery, which can disappoint customers.

Address verification is a necessary component of any successful shipping operation, and many private carriers tack on surcharges for this service. Consider including a comprehensive address verification technology system in the shipping program, making it easier to ensure that packages are headed in the right direction.

3. Minimum net charges

This is one of the most overlooked and least understood areas when negotiating terms in a shipping contract. To ensure a minimum revenue amount per package, most carriers specify the published rate for a particular zone and weight as the minimum net charge. This charge can prevent businesses from receiving the full benefit of their negotiated discounts. That’s why it’s important to ask a carrier how it affects the shipping contract.

4. DIM weight occurrences

Dimensional pricing based on the cubic capacity of a package rather than on the weight can cost businesses. If the DIM weight is greater than the actual weight of a package, a business pays extra for nonexistent weight.

Looking at factors such as freight/weight classifications, total costs and benchmark carrier pricing can help a business make better choices in the future. For example, one business could be paying for commercial shipments that were tagged by the carrier as residential, on top of address corrections, dimensional weight charges, and so on.

To avoid paying for services that aren’t necessary, it is critical to check invoices carefully.

For many, this task can seem daunting. As a starting point, work with carriers that can help evaluate package-level data and find savings opportunities. They do this by showing businesses what to look for on an invoice while comparing against the contract.

Look at the Big Picture

Make shipping work for you, not against you.

Knowledge really is power when it comes to shipping. When a business understands its shipping data and processes, it can use that understanding as an advantage when determining carrier and service levels.

Take the “human factor” into consideration.

Everyone makes mistakes. Check and double-check all human-involved shipping tasks like picking, packing, phone calls, replying to refund-related emails, etc.

Compare carriers.

No shipping company can be effective in every category. For example, one carrier may be cost-efficient for heavyweight international shipments while another offers the best price on lightweight local deliveries. It’s important to understand your shipping patterns and carefully compare your options.

Follow up on guarantees.

If a carrier guarantees on-time delivery, check that they are meeting their obligations. If not, the business has a right to claim a refund. After all, when these guaranteed deliveries fail and arrive late, the business must spend more time and money on customer service (i.e., answering “Where is my order?” calls), and could even lose loyal customers.

Choose the best delivery option.

It pays to consider the performance standards of various service level options. For example: evaluate how frequently a distributor can benefit from using a more cost-effective, one-day ground shipping option instead of using a more costly, overnight delivery one. Overnight shipments are typically delivered by 10:30 a.m., while one-day ground shipments are delivered by end of day.

Know your data.

Here are some important questions to ask when evaluating shipping processes:

• What percentage of your current shipments are subject to charges for address correction?
• What percentage of your shipments are subject to dimensional weight pricing?
• What percentage of your shipments go to business vs. residential addresses?
• What percentage of your current shipments are returned as undeliverable?
• What percentage of your customers live in ZIP Code™ areas that are designated for DAS or Extended DAS?
• How much did you pay for fuel surcharges in the previous year?
• What is your current experience with “Where is my order?” (WISMO) calls?
• What is your experience with redelivery requests and “notice left” situations?
• What issues are you having with claims for damaged or nondelivered shipments? Have you noticed any trends in this area?

Asking the right questions and gathering related information is worth the time. It can save a business money in the long run.

Use Best Practices for Efficient Shipping

Get to know your shipping options

Know what your options are to make the best decisions for business. Understanding how a package’s weight is calculated is a good place to start.

Dimensional Weight 101

DIM weight is a measurement used by the transportation industry worldwide for establishing a minimum charge for the cubic space a package occupies. This pricing method considers the length, width, and height of a package.

DIM weight reflects package density, which is the amount of space a package occupies on a delivery truck or plane in relation to its actual weight. Space is important for shipping carriers since their efficiency (and profitability) depend on filling their transportation vehicles with as many packages as possible. Shippers need to be keenly aware of DIM weight, because a box’s size and weight can both impact its shipping cost.

DIM weight formula

DIM is calculated by multiplying a box’s length, width and height, then dividing that number by a volumetric divisor (frequently 139 or 166).

For example, a domestic 12”inches × 12”inches × 12”inches box weighing 1 pound might be billed at the 11-pound rate using this calculation and a standard volumetric divisor of 166.

DIM weight pricing rules are applicable to virtually all packages that are shipped via ground and air. When comparing DIM weight vs. the actual weight, whichever is more is the billable weight.

• Each carrier has its own volumetric divisor for domestic and international shipments. The higher the volumetric divisor, the lower the dimensional weight and vice versa.
• Packages with cubic space greater than 130 inches may be subject to a large/oversize package surcharge. They may also be subject to a minimum billable weight of 90 pounds.

When the DIM weight is larger than the actual weight, a business may end up paying extra. But not all carriers charge DIM weight pricing across the board. Compare how shipping carriers apply DIM weight to choose the one that best fits both your shipping needs and your budget.

Tips to lower DIM weight shipping costs and get more bang for your shipping buck:

• Make your package as small as possible. The larger the volume of your package, the larger its potential DIM weight. Your aim is to make the DIM weight smaller than the actual weight.
• Pack boxes as tightly as you can without sacrificing the safety of your products. Use packing materials that do not expand or bulge.
• Know your carrier's volumetric divisor. The higher the volumetric divisor, the smaller the DIM weight.
• Request a higher cubic threshold during contract negotiations. A higher cubic threshold increases the space you can use without increasing the costs. For example, your carrier's DIM weight might have a 1-cubic-foot threshold.
• Where possible, avoid shipping low-weight goods in large boxes. The DIM weight of high-volume, low-weight goods is much more than their actual weight. This can make them more expensive to ship.

Use automation to maximize shipping efficiency.

If it takes too long to complete a task, or too much time is spent correcting mistakes, a business’s bottom line takes the hit.

Thankfully, shipping technologies can help automate some of these tasks. Then, businesses can focus more of their efforts on growing. To find the right technology, look at the specific needs of the business and consider these factors:

• Scalability: While it’s important for automation software to be easy to use, it also needs to be able to support growth. Look for technology that offers basic and advanced features, or that easily integrates with other e-commerce applications. As the business grows, so too should its shipping capabilities.
• Tracking: Today’s connected customers want to know where their packages are and when they are going to be delivered. As a result, package tracking has become a key factor in customer service satisfaction. Tracking also helps cut down on WISMO calls, which can help reduce call center costs.
  
  You can automate this task by using software that provides buyers with tracking information once their shipment is being prepared. You can also look for a carrier that offers this service for free.

Know your transit time.

In an on-demand world, transit time matters and can vary greatly between carriers based on freight mode and carrier systems.

It’s important to have a carrier with dedicated drivers and informed representatives that will work within a business’s unique structure for pickup times, especially considering business days vs. delivery days. If a carrier offers two-day delivery that includes Saturdays at no extra charge, it could shorten overall delivery time. This way, customers don’t have to wait until the following Monday (the next business day) to receive their package.

Customers care more about when their package will be delivered than when it will be shipped, and less about which service level or carrier you use. Provide a calendar that illustrates this visually, with choices of delivery dates along with shipping prices, thus painting a clear picture and building trust. Widgets are also available to help a business clearly demonstrate shipping time to its customers.

Call in the experts.

If a business knows the ins and outs of its shipping practices, it can mean big savings. By carefully auditing invoices, learning how the weight of packages is calculated and automating shipping processes wherever possible, a business can get the most value from and return on its shipping investment.

An expert analysis and assessment of a shipping profile can greatly improve the accuracy of the evaluation process. Shipping experts know what to look for and can help raise red flags. Ask your carrier to help conduct an audit and highlight potential areas for savings and increased efficiency. It can make all the difference.

Make Free Shipping Profitable

Free shipping and returns can make or break a sale.

When customers know from the start what an item will cost—and that they can return it without penalty—they are more confident shoppers.

Consumers have begun to count on free shipping and returns, either as a bonus for spending a certain amount of money or as an automatic feature. They actively seek free shipping when they search for products.

But free shipping is not really free, and the cost of returns can quickly add up. So, how does a business absorb these costs without eating into their profit margins? And how does it determine whether the free-shipping boost is worth it in the long run?

Shoppers overwhelmingly said that free shipping increases their likelihood of purchasing online. That means that footing the shipping bill could result in boosting new sales in a big way. Eliminating shipping costs altogether is not feasible, but you shouldn’t underestimate the power of a free-shipping promotion.

A Retail TouchPoints survey study found that:^[1]