How to Deal With Rising Fulfillment and Shipping Costs?

May 21,2024
Industry News
In the face of a sharp increase in global ocean freight prices and rising transportation costs, how to deal with rising fulfillment and transportation costs? To maintain profitability

Recently, the global shipping market has faced an unprecedented crisis, with shipping prices rising sharply and transportation costs continuing to rise. Dealing with rising fulfillment and shipping costs is a significant challenge for businesses, especially in the current economic climate. How can you mitigate these expenses and maintain profitability?

Rising Fulfillment and Shipping Costs

Strategies for combating rising fulfillment and shipping costs

Optimize supply chain and logistics

Review and renegotiate contracts with carriers and logistics providers to secure better prices. Plan efficient delivery routes before shipping to reduce fuel consumption and transportation costs.

Negotiate discounts based on shipping volume. Carriers often offer better rates to businesses that ship large volumes on a regular basis. Regularly compare rates from different carriers and negotiate to get the best rate. Establish long-term contracts with carriers to lock in favorable rates.

Accurately forecast and plan the transportation needs of your goods to avoid inventory backlog and increased air freight costs. Strengthen supply chain management and improve logistics efficiency to cope with rising cost pressures.

Optimize packaging

By optimizing product design, packaging and material selection, we can reduce the weight and volume of goods as much as possible, thereby reducing logistics costs. Use advanced packaging technology and reusable packaging materials to improve packaging efficiency and save costs.

Choose lightweight yet strong materials to reduce shipping weight and cost. With consolidated shipping, multiple orders are combined into one shipment to reduce shipping costs.

Explore alternative shipping options

Leverage intermodal transportation, combining different modes of transportation (such as rail and truck) to take advantage of cost-effective options. Establish strategically located distribution centers to reduce long-distance transportation distances and costs. Customers may be given the option to choose a slower but more cost-effective shipping method for non-urgent deliveries.

Take Advantage of Fulfillment Centers

Find logistics partners and establish long-term and stable cooperative relationships to obtain more competitive logistics prices. Partners should have experience and strength in the field of international freight to ensure smooth cooperation.

Reduce shipping distance and costs by using fulfillment centers closer to customers. Use a multi-warehouse strategy to distribute inventory across multiple locations, reducing shipping area and shipping time.

Through various channels such as agents, we can obtain information such as the prescribed procedures for handling goods at the destination port, the reduction and exemption policy for terminal storage fees, shipping company freight rates, and route adjustments to avoid unnecessary losses.

Improve inventory management

Implement just-in-time inventory practices to reduce storage costs and minimize excess inventory. Use predictive analytics and demand forecasting to optimize inventory levels and reduce excess inventory carrying costs.

Leveraging technology and automation, implement automated systems and robotics to improve operations center efficiency and reduce labor costs. Streamline transportation planning, execution and cost management with software solutions.

Adjust pricing and fees

Increase fuel or delivery surcharges by implementing surcharges to offset increased shipping costs and transparently communicate the reasons to customers. Modify pricing strategy to review and adjust product pricing to account for higher fulfillment and shipping costs while remaining competitive.

Encourage customers to place larger orders by offering discounts or free shipping thresholds. Create a customer loyalty program to incentivize repeat customers and offset shipping costs.

Make plans in advance

The peak consumption season in Europe and the United States in the second half of the year will arrive from September to December, which will put greater pressure on global shipping logistics. In the short term, the shortage of transportation capacity may not be significantly improved, and the possibility of freight rates falling is also low. It is recommended that companies understand the relevant issues in a timely manner information and make plans in advance.

Improve warehouse efficiency

Optimize warehouse layout, improve picking and packaging efficiency, and reduce labor costs. Invest in automation technology such as conveyors, robots and automated sorting systems to increase fulfillment speed and accuracy.

Expand the market and improve your competitiveness

Find other ways to increase revenue and improve your competitiveness in response to rising international freight prices and rising logistics costs. Understand the cross-border tax policies of different countries and regions, rationally plan product pricing and sales strategies, and minimize the amount of duties and taxes paid. Make full use of policies such as duty-free zones and free trade zones to optimize the import and export processes of cross-border e-commerce.

Scientific allocation of supply

Avoid over-reliance on a single logistics channel. When the cost of a certain logistics channel rises, you can consider switching to other transportation methods or logistics channels to reduce costs. Understand the characteristics and advantages of different logistics channels and make flexible choices based on actual conditions to ensure timely and safe delivery of goods.

Work with a third-party logistics (3PL) provider

Leverage the expertise and economies of scale provided by Shopv providers to reduce fulfillment and shipping costs for a flexible and scalable fulfillment solution that can adapt to your business needs. Transparently pass on a portion of shipping costs to customers, especially for expedited or international shipments.

Use sustainable packaging materials, which may qualify for discounts from environmentally conscious carriers. Participation in a carbon offset scheme can also be a selling point for environmentally conscious consumers.

Businesses or e-commerce sellers need to adopt a variety of strategies to cope with rising fulfillment and shipping costs. By optimizing supply chain management, reducing the weight and volume of goods, consolidating orders and shipping in batches, logistics costs can be reduced, transportation efficiency can be improved, and the normal operation and sustainable development of enterprises can be ensured.

Implementing these strategies requires a comprehensive approach and often requires a combination of multiple strategies. Regularly reviewing and adapting your approach in response to market changes and cost fluctuations is critical to staying competitive.