How to Reduce Shipping Costs for Small & Medium Businesses
It’s a good time in the market for shippers to optimize their supply chain—with factors like decreased customer demand, high inflation, and slow global trade affecting spot rates. Take advantage of these low prices and work on reducing shipping costs for your small business before the expected rate increase in late 2023. When that happens, it could hurt small and medium businesses’ profit margins. You might be tempted to offset the costs by raising shipping fees. But, if shipping fees are too high, you risk losing business. In fact, 48% of people abandon their carts due to extra costs like shipping or taxes.Sure, retail ecommerce giants like Amazon can afford to offer free shipping through Amazon Prime, but it’s harder for small businesses to provide that option and simultaneously eat increased shipping costs. Fortunately, you can alleviate the impact of increased carrier fees—like tariffs, accessorial fees, late fees, or damage claims—without sacrificing your bottom line by adopting these efficient practices to reduce your shipping costs.
1. Reduce package dimensions
If you’ve ever sent boxes in a pallet that’s way too big, you’re literally paying to ship air. Instead, reduce your package dimensions to fit more of them in each pallet. Shipping providers will lower shipping costs for less or lighter weight pallets, thus increasing their shipping capacity per truckload. On your end, you’ll be able to ship more packages at a time and also need less packaging material. If you ship orders in their original product packaging with a shipping label attached, then you aren’t using any extra cardboard, packing paper, or bubble wrap. By not paying for extra packing materials, you’re saving resources that can be redirected toward offsetting the increased cost of shipping. Added bonus: doing this also helps your company adopt better sustainability practices.
2. Optimize your shipping routes
Distance is a major factor in shipping costs—while shorter distances are often required, it can cost a premium per mile, unlike long haul shipping which is often the most economical. If you’re paying too much to ship to customers in different shipping zones, you can lower shipping costs by opening warehouses in a more central area where the bulk of your customers are located. Or, partner with fulfillment centers to distribute your inventory more evenly so that you’re not shipping from a single location and spending more on fees.Alternatively, consider a service like FlockDirect® that works most efficiently with LTL-size shipments on longer hauls. Through Flock’s patented technology, shipments travel via direct, hubless transit at a fraction of the cost of paying for a full truckload.
3. Extend delivery windows
When you extend your delivery windows, you give shipping companies more flexibility, and they can plan routes more efficiently and economically—and those cost savings can be passed on to you with better shipping rates. A tight delivery window might be more pleasing to customers but can also frustrate them if there are delays. With a longer delivery window, fewer customers will wonder where packages are, and they’ll likely have a more favorable view of your company and its dependable shipping.
4. Insure with third parties
When a package disappears or is damaged, customers expect the business to replace it. Instead of covering the cost out of pocket, ecommerce businesses often use shipping insurance. Using a third party instead of having each individual carrier insure your packages typically results in better rates. If you insure through each shipping service, you have to pay their rates each time, file claims with them if a package is lost, damaged, or stolen, and wait for reimbursement. A third-party insurer will do that for you with every single carrier, which ends up saving you both time and money—and you can take advantage of the latter to counteract high shipping costs.
5. Compare carrier rates
Do your research before partnering with shipping carriers so you know what kind of terms they might offer. For example, find out if you can reduce surcharges, get lower rates, or get guaranteed delivery times that you can pass on to your customers. You also need to know what you’ll offer in return—whether it’s an exclusivity agreement or an offering to increase your shipping volume with them. Make sure to get everything in writing so you have documentation of the terms you both agreed upon in case of any issues later.If you go through Flock, you get access to a trusted network of vetted carriers and ensure you’re working with the best carrier for your supply chain. From there, begin building solid, long-lasting, and mutually beneficial relationships.
6. Choose the right freight mode
Deciding what shipping method to use involves examining the pros and cons of each. Is a full truckload (FTL) cost-effective enough to help you achieve your reduction goals? Does less than truckload (LTL) help your bottom line, but make it harder for you to ship products quickly?
Full Truckload: more expensive, but a more direct route to your customer
If you ship your goods via FTL, your products will get to your customer faster—but it’s not always the most affordable option. Paying for a full truckload when your shipment doesn’t fill a truck means you’re often paying for empty space. However, there is also less risk involved with FTL shipping. Your shipment won’t be unloaded multiple times like it would in other shipping methods. It’s also a good choice when you require firm pick-up dates, as you’re able to reserve a single carrier.
Less Than Truckload: higher cost savings for smaller shipments, but more risk
Choosing LTL shipping means your small business sees reduced shipping costs. It’s also a good choice if your shipping dates are more flexible—meaning if you can extend your delivery window, then you’ll see lower costs. Keep in mind that your products will be on a truck with other companies’ goods in order to fill the truck to capacity, and it may be unloaded at different times along a route. This increases the chance of products getting damaged, so it might not be an ideal choice if you’re shipping fragile or more expensive items.
Partial Truckload: combines LTL shipments into one, but scheduling is complex
If you find your shipments fitting somewhere in between FTL and LTL, then partial truckload (PTL), or consolidated shipping, might be a wiser choice. While there are very specific prerequisites to using this mode, it’s often a way to reduce shipping costs for small and medium businesses because the load stays on a trailer from the beginning of the route to the end—mitigating damage risks and packages you have to replace. Fair warning: it can be difficult to schedule a PTL shipment due to the niche requirements and limited carrier base willing to haul it.
Shared Truckload: most efficient method for mid-sized shipments, reduces your shipping costs
Shared truckload (STL) uses pooling algorithms to combine multiple shipments onto one truck. By finding the most efficient route for your shipment, products get to their destination faster, without any loading and unloading. You’ll also avoid damage and late fees often associated with LTL—saving you time and money having to file claims with your insurance provider. STL doesn’t have any hidden costs or last-minute charges, and without all the extra stops, this mode reduces greenhouse gas emissions by up to 40%.
7. Adjust product pricing
Another method to reduce shipping costs is to absorb part or all of them into your product pricing. Doing this simplifies pricing for your customers since all the cost is upfront—and you’re not stuck covering the increased fees. This will also allow you to offer free shipping since the cost is included in the product price, and in a recent study, almost half of all shoppers indicated free shipping was the most attractive discount. Remember, a sudden increase in pricing might be jarring to current customers. Tread lightly and experiment with incremental increases before bumping the price significantly.
Save more with a shared truckload
At Flock Freight, we know all too well the frustrations associated with using traditional modes to transport your packages. You’re often stuck shipping less than a truckload, which means your products go on a longer route. Or, you’re paying more for a full truck—and empty space. Our proprietary technology helps you find space in a shared truckload and reduce shipping costs for your small to medium sized business. We’ll find empty spaces and put your shipments on the best, most efficient route to help you save money and get packages delivered on time and intact. Contact us today to learn more and set up a demo.
