resources

Optmyzr Blog

5 Ways to Reduce Ecommerce Fulfillment Costs Without Sacrificing Quality

Ecommerce Guest Post Apr 07, 2022

Having a cost-effective business can help aid your PPC campaign efforts. How? By saving money in different aspects of your business, you can set aside the additional funds to go towards your campaigns.

Businesses will consider cutting production costs or thinking about the quality of their products. But, fulfillment is normally the one thing that often gets overlooked.

An ideal fulfillment partner will help your business save money. Reducing fulfillment costs allows you to allocate funds to your PPC campaign. For fulfillment, there are different aspects that can be cost-efficient for your business.

In this article, we discuss how to reduce fulfillment costs without sacrificing quality or customer experience.

1. Inventory Accuracy

Inventory accuracy is what you would think it means. It refers to inventory inaccuracies between your physical inventory and what is in your records. For most businesses that work through a 3PL provider, it would refer to the inconsistencies you might have with the inventory management software and what is actually in stock, whether it’s in the warehouse or in your store.

By keeping an accurate count of your inventory, you can reduce unneeded costs. How? First, you can reduce the number of purchases from your supplier. For example, you might see that you’re low on a best-selling item, so your instinct is to submit another order to your supplier. But, what if your inventory numbers actually were off? This could result in additional spending that was ultimately not needed.

Second, you can potentially reduce labor costs. By working with an inventory management system or a fulfillment provider that already has one, you can accurately keep track of your order and not spend hours manually counting all your items. Allowing you to allocate the additional labor costs you might have used to manually count your inventory to your marketing efforts, like your PPC campaign.

Inventory accuracy can also help with the promises you made on your website and in your ads. For example, you might create ads around on-time delivery and customer satisfaction. If your customers aren’t getting their packages on time, this can show your customers that you aren’t fulfilling your promises.

Keeping your inventory as accurate as possible allows for a few mistakes when it comes to delays. By seeing that a particular item is starting to run low on your warehouse shelves, you can be proactive by ordering more products. This in turn reduces the need for your customers to wait for a restock of their favorite item.x

However, a Campaign Automator can present customers with great alternatives and perhaps still make a purchase from your site when your items are low on stock.

Lastly, it can help guide ad efforts by helping you decide on which product to promote. If you have items that have been collecting dust on your shelves, it can be a motivator for you to create a campaign around them allowing you to reduce your storage costs at your warehouse.

On the flip side of this, you can also see how fast a product is selling and create a campaign to generate even more sales and revenue for your business.

2. Inventory Shrinkage

Inventory shrinkage plays a part in inventory accuracy. Inventory shrinkage ultimately explains why your inventory might not be accurate. Unfortunately, it’s unavoidable to have some amount of shrinkage. Why? It really boils down to three main root causes — employee theft, lost goods, and damaged goods.

Similar to inventory accuracy, missing inventory increases costs for your business. However, inventory shrinkage can be reduced. By working with a fulfillment provider that implements measures to reduce shrinkage, you can save money. However, you can even implement these measures yourself.

Here are measures you or your fulfillment provider can take to ensure inventory shrinkage is avoided:

  • Reduce dock time for your inventory by quickly moving your product to your shelves to sell.
  • Create checks and double-checks for your receiving processes.
  • Improve your employee inventory management training.
  • Create incentives for your employees to work harder and focus more.
  • Mark your SKUs clearly so it’s easier to find on your shelves.
  • Have security systems to reduce thefts.

By implementing these measures, you can avoid damaged, lost, or stolen inventory. Reducing the amount of money you spend on replacing items.

3. Better Rates with Carriers

The benefit of working with a fulfillment provider is better carrier rates. The rates you receive when working with national carriers aren’t the same as what 3PLs receive. 3PL providers work one-on-one with national carriers to get the best deals possible for both businesses.

In most cases, the right 3PL provider for your business can reduce shipping costs per item — enabling you to compete on price. By receiving better shipping costs, you use the additional spend you would save towards your PPC campaign.

You also have the opportunity to reduce product costs allowing for you to have a potential lead on your competition. But, you might ask fulfillment companies to get better deals on shipping. As mentioned before, fulfillment providers have one-on-one relationships with national carriers, but that is not all.

The first reason is package volume. Since normal fulfillment providers have dozens of brands and products sitting on their shelves, national carriers are constantly coming through the warehouse to pick up items instead of visiting one store a few times a month.

The second reason is contracts. Each 3PL creates contracts with the national carriers at the beginning of the year. These contracts involve negotiations and deals to ensure that the fulfillment’s clients get the best deals possible.

4. Packaging Supplies

Another way fulfillment can be cost-effective and allow for your PPC campaign to grow is the packaging. Fulfillment companies know packaging. It’s their job.

By offering different size boxes and infill options, fulfillment companies can help you find the right packaging system for your company.

You might not think it can reduce costs, but finding the perfect box for your products is essential. Why? The wrong size of your box could create additional costs for your business. Most national carriers rely on DIM weight over actual weight; however, both are used.

DIM weight vs actual weight

DIM or dimensional weight is a formula used by carriers to determine the price based on the volume of the package. By using this formula, carriers are able to add in box size rather than just weight. The actual weight is just that — the actual weight of your package.

As mentioned before, carriers use both options to determine the billable weight, but it’s more of an either-or scenario. If your box is heavier than the DIM weight calculation, you will be charged for the actual weight of the package. If your DIM weight is more than your actual weight, then you will be charged based on the DIM weight instead.

The issue businesses will run into is picking a larger box for a smaller item. This in turn increases your shipping cost. By picking the correct box, you will pay the appropriate amount for shipping and not run into additional shipping costs.

Green Packaging

Did you know that 64% of Americans spend more on green products? If you sell green products, why not go the extra mile with green packaging? For some fulfillment companies like Red Stag Fulfillment, the leftover cardboard is turned into infill — reducing the number of times plastic infill is used. It helps the environment and also reduces costs on infill.

5. Increase Customer Orders

If you work with a fulfillment provider, you can gain customer loyalty. Having your packages arrive on time and intact, it can make your customers happy. Happy customers increase customer loyalty.

Accurate and on-time deliveries can make or break a customer’s buying journey. It might sound a little extreme but think back to your recent delivery that was late. How did you feel about the brand as you anxiously waited for the delivery? You might not have been too happy.

For some people, it could convince them to hold off on ordering from that brand for a while or ever again. However, a package that comes on time and in great condition can persuade your customer to come back to your site.

By increasing happy customers, you could see an increase in orders which in turn allows you to have more revenue to plan campaigns based on your marketing strategy.

Conclusion

By turning to fulfillment, you can look at ways to be more cost-effective and allow you to add additional funds to your PPC campaign or even create new ones. So, it’s important to look for an ideal partner that cares about your inventory and delivery standards.

You might see a complete change in available funds when making your fulfillment cost-effective, but a little goes a long way when it comes to PPC campaigns.

This is a guest post by Jake Rheude, Vice President of Marketing for Red Stag Fulfillment.

About the author:

Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.


Author

Jake Rheude

Vice President of Marketing

Red Stag Fulfillment

Take control of PPC and save time with our PPC expert's toolkit.