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3 Ways to Reduce Fulfilment Costs

16Jul, 2014
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For many companies fulfilment is like a double-edged word. On the one hand, it’s vital to your business’ success and without it your company wouldn’t exist. On the other hand however, the costs associated with order fulfilment can quickly spiral out of control, thus threatening the financial health of your company.

It’s with the above in mind that I wrote this article. There are probably multiple areas where you could be reducing your fulfilment costs right now, and three of the most vital ones are listed below.

1. Negotiate on price and rates.

It doesn’t matter whether you’re using a national shipping company, or a third party logistics provider (3PL), the chances are you could be paying less for each delivery. This is especially true if you have a long-standing relationship with your shipping provider, or move a high volume of products. In both cases, your business is probably extremely valuable to the fulfilment company, and they should be more than willing to give you some discounted pricing as a way of saying “thank you.”

Another great way to reduce the shipping prices you’re paying is to start shopping around. Take some time to speak to other companies, and find out what they’d charge to perform the same services as your current provider. If their quote is less than what you’re currently paying, you can either bring it to your current logistics partner and ask them to match it, or make the switch. No matter which of these two options you choose though, you win through increased savings.

2. Tier Your Shipping Options for Consumers

A lot of times retailers only give their customers one or two shipping options. Not only does this frustrate the consumer by leaving them with limited options, it could be costing you money. Here’s why…

Shoppers today are conditioned to expect tiered shipping options. Better still, they understand that if they want to get their items delivered more quickly, they’ll have to pay more. So in other words, if your customer is willing to pay a premium for express delivery, you should offer that option at a healthy margin to your business. And if the customer doesn’t care how long it takes to receive their purchase, then you shouldn’t be paying more than you need to for fast shipping. There’s no one-size-fits-all solution: and the sooner you understand that, the more profitable your fulfilment will be.

3. Consider Outsourcing your Current Logistics Processes.

If you currently handle fulfilment in-house, it may be time to look at other alternatives. There are very few instances where a company can handle the fulfilment process better than a third party logistics provider. And when you think about it, that makes a lot of sense. These 3PLs only do one thing: order fulfilment. That means they have dedicated systems and technologies in place that ensure order accuracy and speed. And because they deal in such high volumes, they can typically get much better shipping rates than you can.

Ultimately you need to look at your inventory management and fulfilment processes as opportunities. If you take the time to evaluate their effectiveness, it is almost certain that you will uncover numerous areas where costs can be reduced. And in turn, those cost savings will lead to a healthier, stronger, and more robust business.

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