How Consolidated Shipping Can Lower Your E-Commerce Logistics Costs
Reducing your shipping and logistics costs can be a great way to bring down your e-commerce cost of goods sold (COGS). While there are a number of ways to achieve those aims, consolidated shipping is one of the most effective ways to save on your fulfillment expenses.
Anytime you need to ship inventory to a warehouse – either your own or one operated by your third-party logistics (3PL) partner of choice – bulk shipments usually cost less than smaller ones. In particular, shipping inventory at full container load (FCL) prices can offer greater savings per-item shipped than those same items shipped at less than container load (LCL) volume.
For e-commerce sellers and customers, this shouldn’t be a totally foreign concept. Order consolidation is a smaller-scale version of this same principle. When a customer or address is set to receive multiple items either from the same or multiple orders, these products can be combined into a single shipment. Some marketplaces, like Amazon, even offer financial incentives for customers willing to forgo the fastest possible delivery of their orders item by item in favor of waiting for all of the items to ship together.
So, how can you tell if consolidated shipping is a match for your e-commerce brand? It starts with weighing the benefits and challenges.
3 Benefits of Consolidated Shipping Over Conventional Fulfillment
The value of consolidated shipping will vary depending on many of the unique factors associated with your omnichannel e-commerce business. In most cases, sellers who regularly have to move large quantities of inventory and stock between warehouses and/or 3PL providers stand to gain the most.
Ideally, opting for this style of bulk fulfillment should yield benefits across several areas of your operation, including:
- Reduced Costs – For the most part, any time you can ship in bulk, you can save dramatically over shipping merchandise piecemeal. Consolidated shipping is all about capitalizing on these opportunities to reduce fulfillment costs and your overall cost of goods sold (COGS). Making it a practice to combine smaller shipments into FCL shipments can give a serious boost to your bottom line over time.
- Time Savings – While there are additional steps and considerations when opting for consolidated shipping, these steps reduce the time spent preparing and packaging the same merchandise into smaller and/or individual shipments. With an effective warehouse management system (WMS) and properly coordinated team, the palletization and shipping of consolidated orders should result in noticeable time savings in the long run.
- Overall Efficiency – Larger shipments provide opportunities for shipments to be packed more efficiently. Palletizing merchandise comes with its own set of optimizations and workflows that can minimize wasted space and eliminate the excess that comes with shipping items piecemeal. This means less wasted packing material, less potential for damage during shipment, and an overall more streamlined freight experience.
3 Unique Challenges Associated with Consolidated Shipping
For all its benefits, consolidated shipping does have some potential pain points. If you aren’t careful, the value and savings can be quickly erased due to a lack of planning or miscalculation. These also may be deal-breakers that lead to your business avoiding consolidated shipping altogether.
Some of the main challenges of consolidated shipping include:
- Longer lead times – The coordination required to prepare a FCL shipment can be more involved than smaller, LCL shipments. Similarly, securing shipping containers and shipment dates can sometimes be more complicated than your traditional fulfillment arrangements. As such, you will need to plan for longer lead times and rely on accurate predictive data to avoid not having the stock where you need it when you need it.
- Higher up-front costs – While some e-commerce businesses opt to work with other businesses to take advantage of the inventory volumes required for consolidated shipping (more on this later), those that go it alone typically must be able to source the amount of inventory necessary to fill a truck or container. While this will reduce the per item fulfillment cost in the long run, it requires a higher outlay up front to achieve those savings.
- Moving larger inventory volumes can carry greater risks – When you are putting large quantities of inventory into singular shipments, there is a greater inherent risk that if something were to go wrong, you could suffer significant losses. For this reason, insurance becomes an absolute necessity. However, even with your inventory value protected, mishaps with such large quantities could lead to greater damages in lost selling potential. Be sure to thoroughly vet any consolidated shipping provider you choose to help minimize these potential risks, and get insured to be certain that you are always prepared for the worst.
Consolidated Shipping Partnerships Open New Opportunities for Savings
Even if the size of your products or your overall shipping volume does not meet the threshold to make consolidated shipping a viable option, you may still be in luck. In these circumstances, some brands create partnerships with other similar scale businesses in order to take advantage of consolidated shipping.
That said, as with any business arrangement, you need to be sure that you are selecting partners that are a good match for your needs and overall business interests.
An ideal consolidated shipping partner is …
- realistic about the processes and workflows they can adhere to. Whenever you rely on another business to help yours run more efficiently, trust is critical. This is doubly important when your partner’s delays or missteps could translate to issues with your own ability to get inventory to suppliers and/or fulfill orders for your own customers. Lock in the particulars of any consolidated shipping partnership up front.
- willing to start with a trial shipment. Given the stakes, it only makes sense to test the waters before diving into any fulfillment partnership. Make sure that any potential partner is able to follow through with the promises they have made.
- accountable. For consolidated shipping partnerships to be worthwhile, all partners need to be on the same page. Inaccurate volumes or timings by any of the parties involved can transform a savings opportunity into a costly blunder. Before entering into any consolidated shipping arrangement, be certain that there is some level of accountability for all parties involved should something go awry. This could include arrangement terms like opt-out clauses or financial penalties for failure to comply with shipping dates or volumes.
If you aren’t keen on finding a consolidated shipping partner on your own, know that there are logistics businesses that specialize in making consolidated shipping work. In some cases, you may be able to reach more cost-effective and flexible arrangements with one of these types of logistical partners due to the fact that most serve multiple clients of different sizes and needs. This allows a bit more flexibility to create and compile freight shipments than you might have if you opt to handle arrangements on your own.
No matter how you move your inventory, you need to both know where it is and have the confidence that it is being handled correctly. Sellercloud’s omnichannel e-commerce growth platform combines state-of-the-art inventory tracking and warehouse management tools to give you the insights you need to run and scale your online retail brand. Not only that, tools like 4D-Scale give you the peace of mind that your inventory is measured accurately and precisely – a must to reap the benefits of effective consolidated shipping. For more on the entire Sellecloud family of products, contact us directly for a free demo.