How to Save up on Logistics Costs
An oft-neglected area while planning an ecommerce business is logistics. Logistics is the actual process with which your product is stored, transported and delivered to your customers. So, while it is important to fiddle with your website UI to make it more engaging, and promote your venture online so that people shop on your website, it is also important that you sort out your logistics and keep checking up on those systems in regular intervals.
A typical company will spend around 5% to 50% of their costs on logistics and supply chain management, depending on the sector. The costs incurred on logistics are also some of the most volatile numbers that you will encounter. The main reason for this is that they are influenced by multiple factors, like the rising fuel prices, government policies, changing tariff laws, warehousing costs and in case of overseas shipping, international trade laws, etc. A typical overseas package will get delivered in about eight to ten days, while actually being in transit for only about 5% to 10% of the time. The rest of the time it will be sitting in a warehouse along with hundreds of other boxes, waiting to undergo security and customs checks, loading and offloading and other paperwork.
So how to make your logistics more efficient on the pocket? Here are a few tips that can help.
Tips to Cut Down on Logistics Costs
Understand Your Supply Chain
The first step to cutting down logistics costs is to poke around under the hood and thoroughly understand your supply chain. If you are an online retailer, start from the point when you purchase your goods. These goods are then transported to your warehouse. Once an order arrives, the product must be packed, tagged and handed over to your logistics provider.
Most large online marketplaces offer their own logistics services if you sign up with them, but for your standalone website, you have to make an effort to find a trustworthy shipping partner. We previously made a comprehensive list of shipping partners, along with their pros and cons, which would be helpful here. Once your product is deployed, it lands first and foremost in your shipping partner’s warehouse. Here it is sorted according to its destination zone, and shipped off.
Then begins its journey, replete with pit stops and sorting, until at last it is delivered to your customer’s doorstep. Of course, the details of every product’s journey vary, but this is a general gist. Understand the true costs of shipping your product as it passes through these phases and check for bottlenecks.
Warehouse efficiency is a pillar of good supply chain management. We previously wrote about why you should be conducting a weekly audit for your warehouse. An efficient warehouse means that you can locate, tag and ship your product off in the least amount of time. You need to test the warehouse to see if there is wastage of space, whether products are stored in a way that they are easy to access, whether there is a virtual record of all the products moving through the warehouse and whether the packing and tagging processes are fast enough. Be on guard to find a few bottlenecks and sort them out.
Use an Inventory Management System
You can save a lot of time and money by using an inventory management system to do the grunt work for you. An inventory management system is essentially a service that helps you manage multiple aspects of your job as an online retailer. All your inventory and orders are saved online, which means it is easy for you to track them down. Your customers are provided with automated emails informing them of the status of their package. Spending a little on an inventory management system ensures that you save up by making your transactions and logistics highly efficient. Try to automate as many processes as you can.
Consider Having Multiple Shipping Partners
Thoroughly compare the shipping costs of various shipping partners. You don’t have to choose one and stick with them. Instead, you can sign up with multiple partners depending upon their efficiency, reliability and cost effectiveness in different geographic zones. A particular shipping company may have a better reach, or higher efficiency in a particular geographic area. Why deprive yourself of this benefit? Similarly, if you have multiple suppliers from a particular geographic area, don’t hesitate to consolidate.
We repeatedly stress how important returns are for your business. Providing a free returns policy is a must in today’s world. But what about return shipping? Reverse Logistics, as it is known, must not be taken lightly. Talk to your shipping partner about reverse logistics and streamline the processes related to it using periodic audits and automation.
These are a few things you can do to make your logistics more cost efficient. To know more, just get in touch with Browntape. We are always happy to help!