The bogeyman of 2021 was probably not something the general public spent much time thinking about in prior years. Sure, horror films are scary, but have you ever had to deal with supply chain issues? Sometime between the onset of the COVID-19 pandemic and the chaotic months after, supply chain issues came in like a wrecking ball. You can thank supply chain issues for the trouble finding everything from electronics to canned food. It turns out the toilet paper shortage of March 2020 was just a preview of the years to come.
Supply chain woes have disrupted business operations around the globe and led to skyrocketing costs for many essential items. Boats are left idling at ports for months. There’s a shortage of truck drivers. Warehouses are overflowing with goods. With all this disruption, getting items from point A to B has become harder and more expensive.
Do these supply chain issues represent our new normal? How can small and mid-size businesses reduce shipping and supply chain costs? The bad news: supply chain issues, and the higher costs, won’t be resolved quickly. The good news: there are strategies you can employ to minimize the impact on your operations and keep shipping costs manageable. Here we have twelve strategies from top business experts that will help you to lower your shipping and supply chain costs in 2022. May the supply chain be ever in your favor.
Minimize Packaging
“One of the most important things you can do to reduce your shipping costs is to make sure your box matches your product and doesn’t contain superfluous packaging. Extra box space will quickly eat up your packing materials, increase the weight of your shipment, and increase your shipping costs. Be sure to plan ahead and have an assortment of appropriately-sized boxes and mailers. In general, poly mailers are more cost-effective than boxes, if you are shipping clothing or similar items. Customers are generally put off by excessive packaging, as it is perceived to be wasteful and unnecessary. While some infill packaging is necessary to protect the items and promote your brand, be cautious about going overboard with packing materials.” – Daniel Patrick, Founder of DANIEL PATRICK
Consolidate Orders
“Everyone knows that bundling items will save on shipping costs, so use that knowledge to your advantage and consolidate orders as much as possible. By offering discounts on bundled items and encouraging customers to buy in bulk, you’ll reduce your shipping costs and help your customer save money too. Depending on your business model and product, you can offer product sets at a discounted rate. For example, a customer can buy a full skincare routine instead of a single product and unlock free shipping. Not only will it help the customer gain more familiarity with your brand, but you can also pass on the shipping savings to your customer and gain their loyalty. It’s a win-win for everyone.” – Ashwin Sokke, Co-Founder of WOW Skin Science
Plan Ahead
“When you’re planning ahead for shipping costs and putting your packing and shipping infrastructure into place, make sure you’re using good data to forecast. Good data and comprehensive analysis will be critical when ordering supplies and planning your shipping procedures. The last thing you want to do is run short on shipping and packing supplies and be forced to pay a premium to get last-minute supplies and then pay for expedited shipping. To be forewarned is to be forearmed, and planning ahead truly is one of the most important things you can do to save on shipping costs. Make sure you’re tracking your metrics and conducting detailed forecasting so that you can plan ahead with confidence.” – Stephanie Venn-Watson, CEO of Seraphina Therapeutics
Identify Technology Gaps
“Creating a technologically efficient and seamless shipping system will save on labor and shipping costs in the long run. If your team is constantly switching between different technology systems or performing a significant amount of work manually, not only will the labor costs add up, but inevitably the mistakes and lack of expediency will hurt your bottom line. Using an integrated system like Shopify or other eCommerce platforms will make the order process more streamlined and efficient.” – Fred Gerantabee, Chief Experience Officer of Readers.com
Expect the Unexpected
“Make sure you have a game plan for the inevitable shipping disruptions and supply chain backlogs. We know that these issues are an unfortunate fact of life, so make sure you have a plan for how you’ll deal with them when they arise. Have backup plans for your backup plans. Consider how you’ll communicate backlogs to customers, if they do occur. If the past two years have taught the business world anything, it’s to expect the unexpected.” – Justin Chan, Growth Manager of JuneShine
Re-Evaluate Your Methods Often
“Keep in mind that the supply chain is constantly changing, and plan to re-evaluate your methods often. The fastest and most efficient shipping method right now may not be the most efficient method a year from now. In the past few years, shipping routes and supply chain processes changed dramatically; if you were still committed to your shipping methods from ten years ago, you probably cut pretty deeply into your profit margins. Keep track of your shipping metrics and revisit them frequently. Negotiate with your vendors and suppliers, and be on the lookout for more cost-effective options.” – Dylan Trussell, Co-Founder of Culprit Underwear
Negotiate Your Shipping Costs
“Once your business reaches a certain volume you should negotiate with your carriers to see if you can achieve a lower rate. Keep in mind that you can do this earlier than you’d think; even if you’re not sending out thousands of shipments a month, you can probably negotiate a lower rate. Many carriers are willing to offer a shipping discount if you’re working with them frequently, and it’s worth it to establish a strong relationship with your carrier. See what deals they can offer you in exchange for your business.” – Luca Capula, CEO of Son of a Barista
Decrease Shipping Distance
“Moving your product across shorter distances will be cheaper and less prone to disruption. Shipping costs are largely determined by shipping zones, so consider where your fulfillment warehouses are located when you’re starting out. Even once your company is established, review your warehouse and shipping strategies frequently to see if there are better options available. Fulfillment companies with multiple warehouse locations typically offer faster and more cost-effective shipping options.” – Shaunak Amin, CEO and Co-Founder of SnackMagic
Consider Prepaid Shipping
“Some shipping companies offer discounts when you prepay for shipping labels, so if you consistently ship packages with a specific size and weight, consider prepaying for your shipping labels. This will save you time and money, especially if you know you’ll be shipping out a certain volume on a consistent basis. Make sure you’re tracking your metrics closely to ensure you don’t overestimate how many labels you’ll need.” – Adelle Archer, CEO and Co-Founder of Eterneva
Take Advantage of Ecommerce Integrations
“If you use an eCommerce platform, take advantage of their real-time shipping carrier rates to generate accurate prices. When companies attempt to determine shipping costs on their own, they typically overestimate their costs to play it safe. We know that high shipping costs lead to cart abandonment, as customers balk at the idea of overpaying for shipping. When you work with a platform like Shopify, you can use their shipping integration to ensure your shipping quotes are accurate, while also giving the customer a range of options.” – Jeremy Gardner, CEO of MadeMan
Avoid Expedited Shipping Charges
“Expedited shipping charges can slaughter your bottom line. For example, a 5-pound box ships from Knoxville to San Francisco at a rate of $19.06 via FedEx Ground. Delivery takes approximately six days, but FedEx Express Saver will get it there a day earlier for $46.92. And FedEx 2Day costs $60.85. In general, ground shipping will be more expensive than air shipping, and you will trade time for money. The best way to avoid expedited shipping charges is to process your orders quickly. If an order languishes at the fulfillment center for several days before it’s picked and packed, you’ve shortened your window for on-time shipping. Instead, handing it off to the carrier sooner gives you a better chance to meet delivery expectations. If a customer has paid for expedited shipping and the order leaves the warehouse late, you could lose money. You might need to use a faster delivery service and pay the difference.” – Jake Rheude, Vice President of Marketing for Red Stag Fulfillment
Don’t Expect Prices to Go Down Soon
“We should not expect the environment of higher prices and lower product availability to go away at the end of the year. The logistics of getting materials to where they are needed continues to be strained. We keep hearing about the shortage of truck drivers (to get the product to its destination). However, in addition to a personnel shortage, the logistics industry is also looking at equipment shortages. As you might expect, those shortages are caused by equipment manufacturers not being able to get the raw materials they need to build their products. This becomes a vicious cycle. For 2022, businesses and their supply chains are going to need to take a very close look at their logistics and planning functions. They will have to rethink how they are going to increase accessibility to the material they need to keep customers happy and make the profits necessary to grow.” – Tom Kelly, Instructor of Integrated Supply Management at Western Michigan University
The supply chain turmoil will likely last through 2022 and perhaps longer, increasing the cost of doing business for years to come. The COVID-19 pandemic upended our lives in more ways than one, and it will take years to fully understand the long-term impact. But with careful planning and foresight, your business can still thrive despite the supply chain disturbances. The keywords for 2022 will be resilience and adaptability, and the most successful businesses will be the ones that take the lessons of the past two years to heart.
