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Eight ways to reduce the operational cost of your shipping business

JULY 16, 2021

If your business heavily relies on shipping and logistics (such as e-commerce) or you run a shipping business, then there are high chances that your margins would have taken a hit in recent times due to higher shipping costs. The huge demand for home delivery, coupled with a shortage of truck drivers in this pandemic, has added to the operational costs of shipping.

You have multiple factors that come into play determining your operational costs. This includes total weight, size, volume, how far it has to be transported, mode of transit, etc. Optimising these factors can help reduce the operational costs of your shipping business.

Even though most e-commerce logistics companies allocate sufficient budget to shipping operations, they still end up overshooting it most of the time. This is predominantly due to a lack of knowledge about best practices.

In this post, we have compiled a list of 8 best practices or ideas that you can incorporate to reduce the operational cost of your shipping business.

1. Watch out for shipping distance

Though no distance is too long for an efficient shipping logistics company, still more miles cost more money. As a thumb rule, try not to cover the extra miles, that is, addresses too far away from the warehouse at the initial stage of your business. Though it might prevent you from expanding your target audience, you can use the time and cost you saved to deliver the products to existing customers quicker, thereby increasing customer satisfaction. You can even charge more if you deliver quicker. For example, a study shows that 41% of customers are willing to pay more for same-day delivery. One way to reduce costs due to distance and offer same/next day delivery is to store closer to the customer across regionally distributed warehouses across the country. Delhivery operates warehouses across all major cities and demand pockets in India for you to store locally and deliver faster for less.

2. Combine the shipments

You can reduce the operational cost of shipping by combining the packages to a single destination. If two products have a delivery gap of just 1 or 2 days, try shipping both the products by the earlier shipping date of the two. Here is an example to explain this better -

In the above case, both the packages are being delivered to Bengaluru at the gap of just one day. Try shipping both the packages on 12th May so that both can reach the destination on 14th May. This ensures that one product arrives on time, and the other reaches early. Apart from saving costs, you also end up winning the customer’s loyalty for delivering faster. This can also be done by maximising the cart value. Various incentives, such as free shipping, discounts, cashback, and loyalty points, can maximise cart value, thus optimising logistics cost.

3. Secure the package

Most shipping carriers are careful while handling your products. But the journey is always not smooth for your packages. They might end up travelling in multiple modes of transportation, handled by hundreds of people. There are high chances that your package might get lost or damaged in transit. You will end up sending the product once again to the buyer, thus increasing your operational cost further.

To avoid this, try packing the products well with bubble wraps and fillers. Also, get the packages insured. It’s a tiny amount to pay, considering the losses you will face due to damages.

4. Save on boxes

If you're running a business dealing with products like clothing, shipping orders in a polybag would be cost-effective compared to boxes. As the final dimensions will be smaller, you will save money, taking up less room on a delivery truck, and it requires fewer packing supplies like tape and bubble wrap.

5. Establish long-term partnership with a shipping and logistic company

A long-term relationship with your shipping vendors helps in cutting down costs. Try to strike a long-term deal at a discount. Most vendors value the loyalty of customers over short-term gains. They will happily sign contracts for a year or two and offer you a good discount if you agree to give them sufficient orders in a year.

6. Partner with a shipping logistics expert

Shipping and logistics management in a business isn’t easy. There are multiple costs involved, starting from labourers to packing supplies. When you do not know the ins and outs of the shipping business, you will spend unnecessarily on many overheads. This is where partnering with a shipping logistics company can help. Most shipping logistics companies take care of your complete shipping operations without you having to worry about leaking money in them. You can instead focus on more mission-critical operations in your business.

7. Choose the plan that works best for you

Do you ship products that are often oversized? Are your shipping costs skyrocketing due to heavy packages? Talk to your logistics partner about your special requirements and come up with a negotiated rate for this. Most partners like Delhivery offer special services related to large oversized deliveries.

8. Save on warehouses and fulfilment centres

Save on huge fixed costs related to setting up warehouses and fulfilment centres for your business by partnering with a vendor like Delhivery. We have over 85 fulfilment centres across India, along with a proprietary warehouse management system that lets you scale your delivery operations with zero fixed costs. We combine warehousing and freight solutions to help save costs in your distribution activities.

Final verdict

As we have seen so far, shipping operations can be expensive when you do not handle it well. Following the best practices suggested in this post can help reduce the costs. Start with tiny hacks such as categorising the product by weight and dimensions, choose the packaging materials intelligently, etc.

If things seem complicated (especially when handling large volumes), partner with a shipping and logistics company like Delhivery - India's leading shipping transport companies offering a wide variety of services categorised into different plans based on your needs. You can schedule pickups, track orders, and manage returns and replacements.

To know more about Delhivery and its global shipping services, reach out today.

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