Jun 9, 2023 | 3PL Warehouse Management, Blog, Economics of 3PL, Fulfillment
Understanding the Components of Carrier Costs | Understanding the Economics of 3PL
Surcharges are the bane of every 3PL operator’s existence. They not only drive up costs but can prove to be an unpredictable factor when calculating expenditures. Shipping rates are constantly in flux, and this complexity can make predicting costs a daunting proposition. 3PLs must be able to manage these costs effectively to ensure they don’t adversely affect their bottom line. The good news is that there are multiple strategies that your 3PL can employ to contain these costs and protect your profits.
Base Rate vs. Accessorial Charges
Understanding the actual cost of shipping can be challenging. Although base rates provide a starting point, they are not enough to give a complete picture. Additional charges, known as accessorial charges, can accumulate quickly, making it vital to comprehend what you are paying for. To manage your outbound shipping expenses, it is essential to understand the additional charges and address them whenever feasible.
What is a Base Rate?
Base rates refer to the basic cost of transporting products from point A to point B, and they are typically negotiated between you and your carrier.
Accessorial charges, on the other hand, are additional charges that may be tacked on for specialized services like lift gates or residential delivery.
Additional charges may be temporary and contextual, but your base rate will remain the same depending on your contract agreements.
How Do You Choose the Best Base Rate?
When it comes to selecting the best base rate for shipping, it’s important to consider all options. While it’s true that carriers’ base rates tend to be similar, package specifications can make all the difference in choosing the most cost-effective option.
Take into account package size, weight, and distance, as these will all affect the rate. But don’t forget about accessorials and additional fees, which can significantly increase the overall cost of shipping.
Tools like ShipHero rate shopping will compare base rates from different carriers in real-time, so you will always find the best available shipping rate per order.
What Are Accessorial Charges?
Accessorial charges are described as supplementary fees or surcharges imposed by a carrier for services not included in the basic delivery of a shipment. These services may include loading, unloading, packing, or unpacking. The carrier may also charge fees for waiting time or delays at the loading dock.
Accessorial fees have become a contentious issue in the transportation industry over the last few years, with carriers increasingly relying on surcharges to boost their revenue. According to a recent survey, over three-quarters of carriers view accessorial surcharges as crucial to their financial well-being.
With this knowledge, you’ll be better equipped to develop shipping cost strategies that work for your 3PL. You’ll also have more information to use when negotiating rates with carriers and shipping partners.
How General Rate Increases (GRI) Affect Base Rate
General Rate Increases are a reality of the shipping industry and have the ability to impact all players involved, including 3PLs. These increases are a direct result of rising costs across the supply chain, such as fuel, insurance, wages, raw materials, and other operational expenses.
Carriers can pass on these costs to shippers through an increase in rates. These GRIs are typically announced in October-November, providing carriers with time to adjust their base rates accordingly. While these increases may seem small, hovering around 4-6%, they can significantly hike carrier base rates for 3PLs.
Here are the current increases for the top three carriers:
UPS General Rate Increase 2023
Average GRI increase at UPS: 6.9%
Effective from: December 27, 2022.
FedEx General Rate Increase 2023
Average GRI increase at FedEx: 6.7%
Effective from: January 2nd, 2023
USPS General Rate Increases 2023
Average GRI increase: 5.5%
Effective from: January 22, 2023
Know What You’re Paying For
As the logistics industry continues to evolve, so do the complexities of managing accessorial charges and other fees. Accessorials can be a significant expense for 3PLs, but there is one advantage to these fees: they are usually negotiable, and the key to successful negotiation is understanding your surcharges.
You can leverage this information by knowing the percentage of these fees in relation to your total volumes. Carriers are more likely to be receptive to your proposal if you have done your homework and can present a clear case for why the fees should be adjusted. Regularly auditing shipping bills and disputing errors or overcharges can help recover unnecessary costs and improve carrier accountability.
How to Estimate Your Shipping Cost
Our Invoice Analysis tool provides a comprehensive overview of your UPS expenses. By importing your data and using our template, you can quickly identify where your money is being spent. Our tool breaks down charges into a clear and concise format, highlighting the fees that are most impactful to your bottom line. Say goodbye to hidden fees that drain your wallet – click the link above to make more informed decisions.
Common Surcharges By Carrier
Carriers use surcharges to ensure that their volume remains manageable. Although robots and software have automated certain processes, some aspects of shipping still require manual labor. For example, when carriers must handle large packages that won’t fit into an automated sortation process, they implement oversize charges to offset the additional labor costs.
During peak shipping seasons, carriers also take on seasonal labor to sustain their service standards and manage their increased workload. By understanding the common surcharges shipping carriers impose, you can take proactive measures to minimize your shipping costs. Some common surcharges by carriers are:
- Non-Machinable Surcharge: An additional charge will be applied for packages that require manual sorting beyond the normal automated process.
- Fuel Surcharge: Similar to other delivery services, a fuel surcharge is incorporated to account for the fluctuations in fuel expenses. This surcharge is calculated as a percentage of the standard shipping fee.
- International Fuel Surcharges: FedEx fuel surcharge percentage is subject to weekly fluctuations, depending on jet fuel prices.
- Delivery/Pick-Up Surcharge: It is important to know that shipments that require delivery or pick-up in remote areas will incur an additional fee known as an out-of-pick-up or out-of-delivery area surcharge.
- Handling Surcharge: FedEx applies additional handling surcharges to packages measuring more than 48 x 29 inches.
- Oversize Charge: This applies to packages over 96 inches long or 129 inches in combined length and width.
- Fuel Surcharge: UPS utilizes index-based pricing derived from jet fuel costs in the US Gulf Coast.
- Address Correction: Billed to the shipper for failed delivery due to an incorrect address.
- Over Maximum Limits Fee: Billed on packages weighing more than 154 pounds or more than 108 inches in length.
ShipHero WMS offers live rate shopping, so you won’t have to spend time figuring out which carrier is the most cost-effective for each shipment. Comparing and selecting carriers based on their rates, transit times, service levels, and surcharges can help reduce your shipping costs. Access to real-time rates will give you the information you need to make the smartest possible shipping decisions every time.
Additional Surcharges
DIM Weight
Dimensional weight, or DIM weight, is the formula carriers use to determine shipping costs by factoring in the size of a package. Lightweight and compact packaging can save on dimensional weight charges and transportation costs. But those who ship relatively light items in large boxes may end up paying more than expected due to this pricing model.
Peak or Demand Surcharge
Peak season and demand surcharges are additional fees carriers add to their base shipping rates to cover the increased operating costs. Typically, these surcharges come in the form of flat fees per package and may last for a fixed period or until further notice.
These peak season surcharges can hit your P&L twice; once when receiving inventory for the season and two when shipping parcels to customers. One way to avoid extra peak season costs is to use accurate demand planning. Demand planning will help you determine which products you need and where to send them to maximize your distribution strategy and optimize shipping costs. You can avoid peak season charges by ordering your inventory well before the typical peak season time frame (typically October-January).
Demand forecasting can also help you determine areas in the country where your products are most likely to be shipped – by moving products closer to these destinations, you’ll be able to cut down on transit times, fuel costs, and other transportation expenses, which includes surcharges.
Shipping Cost Strategies
Investigating accessorial charges is crucial to forecast your total shipping expenses accurately. 3PLs should take the following strategies into account:
- Negotiate fees with your carriers based on the volume of your shipments and their characteristics.
- Consolidate shipments to minimize the number of individual deliveries.
- Optimize packaging to reduce dimensional size and weight.
- Analyze and optimize shipping routes to lower fuel surcharges.
- Leverage technology to streamline the shipping process and reduce the chances of incurring fees.
By thoroughly understanding and addressing these surcharges, you can better manage your overall shipping expenses and utilize shipping cost strategies to maximize your budget.
Lessons in Outbound Shipping
As we close our discussion on outbound shipping, it’s vital to understand that it’s not just the base rates determining the overall shipping costs. Here are the key takeaways when you’re estimating your outbound shipping costs.
#1 – Know All Your Costs, Even the Hidden Ones.
When you begin negotiations, carriers will present any initial rate card with base shipping rates. However, those rates don’t tell the whole story. Ask about accessorial fees and how you can best avoid paying extra.
#2 – Analyze Your Shipping Invoices on a Regular Basis.
Pull reports that outline all the shipping costs for a set time frame (a quarter or six months) and take a closer look. Analyze these charges and ask your carriers for itemized bills if anything looks off. While this is time-consuming, understanding what you’re paying and why is the only way to ensure you’re not being overcharged. This data can also help you when your shipping contracts come up for renewal.
#3 – Plan Ahead to Avoid Peak Season Surcharges.
It’s important to order your inventory for peak season early. This is the best way to avoid paying peak surcharges twice, once when receiving inventory and again when sending individual orders to customers.
Outbound Shipping Cost Takeaways
Knowing the common surcharges by carrier and utilizing shipping cost strategies can help you save money in the long run. By taking the time to analyze your shipping costs and strategizing ways to reduce expenses, you can ensure that your business is operating as efficiently as possible.
ShipHero provides a plethora of tools and information to help you find the carrier that is right for you. With the use of our analytics and customized dashboard, you can shop real-time shipping rates to help you comprehend the total summation of your shipping fees, helping you stay informed and maintain complete control over the economics of your 3PL.
About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With thousands of brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
*Stats provided by Coyote Logistics*
Apr 28, 2023 | Blog, Warehouse Management Software, Warehouse Operations
As a 3PL, warehouse manager, or COO managing the operations of your warehouse, it’s essential to understand how to audit warehouse technology and processes. Auditing effectively assesses areas that need improvement while enabling businesses to maximize inventory accuracy and improve efficiency.
By evaluating current warehouse practices, you can quickly identify internal process gaps and explore potential technological solutions that can enable optimization within all activities related to order fulfillment. So, what should be considered when auditing your warehouses? Let’s dive into the specifics so you can apply best practices for successful business operations!
What is a Warehouse Audit?
A warehouse audit comprehensively reviews your warehouse’s technology and processes. It systematically and objectively examines your warehouse’s operations to identify improvement areas and optimization opportunities. The audit helps you evaluate the effectiveness of your warehouse processes, technology efficiency, and inventory management accuracy.
How to Audit a Warehouse?
Auditing a warehouse requires a systematic and structured approach. The following steps can guide you through auditing your warehouse technologies and processes:
Develop a Warehouse Audit Checklist
Develop a comprehensive warehouse audit checklist that covers all aspects of your warehouse operations. Your audit checklist should include all relevant areas, such as receiving and put away, order picking, packing and shipping, inventory management, and technology systems. This checklist will serve as a roadmap for your audit, ensuring you cover all the necessary areas.
Evaluate the Warehouse Layout and Design
A warehouse’s layout and design can significantly impact how efficient your operations are, regardless of what type of warehouse you have. Consider factors such as aisle width, storage density, and the flow of goods through your warehouse to ensure it is optimized to meet your needs.
Review Receiving and Put Away Processes
Receiving and putaway are two essential functions that play a vital role in the daily operations of a warehouse and should be audited regularly to ensure that they are working correctly and efficiently. To achieve this, you should ensure that the receiving team thoroughly examines all incoming shipments and stores them in the correct location once they are inspected.
Analyze Order Picking Processes
Warehouse operations depend heavily on order picking, and inefficient processes can lead to errors and delays. You must analyze your order picking processes to ensure they are optimized for speed, accuracy, and proper procedures, as well as the right technology to help your employees complete their tasks as efficiently as possible.
Assess Packing and Shipping Processes
The packaging and shipping processes are essential components of warehouse operations that must be evaluated to ensure they are efficient and error-free. In addition, it is important to ensure that your packers use the correct packaging materials and follow the proper packing procedures throughout the process.
Review Inventory Management Processes
To ensure a successful warehouse operation, you will need to confirm that your inventory tracking systems are up-to-date and that your warehouse staff is properly managing stock levels in your warehouse.
Evaluate Warehouse Technology Systems
As modern warehouse operations have become more technical and complex, you will need to evaluate your technology systems to ensure they are working correctly and fully integrated with your warehouse processes. You will also want to ensure that your technology systems are up-to-date and optimized for the needs of your warehouse.
Warehouse Audit Procedures
If you are planning to conduct a warehouse audit, the procedures will differ depending on your specific needs and the complexity of the operations in your warehouse. However, following some general guidelines can provide you with some helpful guidance to ensure that your audit is thorough and effective:
- Define the Scope of Your Audit
The scope of your warehouse audit should be clearly defined, including the specific aspects of your operations that you plan to examine. This will allow you to concentrate your audit on the most critical areas and ensure all aspects of your warehouse operations have been covered.
The first thing that needs to be done is to assign tasks to the individuals responsible for leading, performing, and implementing any changes that need to be made due to the audit.
During the audit, it is important to take detailed notes and document any areas of concern or opportunities for improvement so that you can refer back to them later. Ensure you follow your warehouse audit checklist to cover all relevant areas.
Utilize your audit checklist and notes as a guide for analyzing your audit results. Be sure to include key stakeholders in the process to identify any areas of concern or opportunities for improvement.
After you have analyzed the situation and identified the areas you are concerned about, it is time to develop an action plan to help you address them. Your action plan should be specific, measurable, achievable, relevant, and time-bound to address these areas.
As part of your action plan, implement the changes identified and monitor their effectiveness. Make sure to communicate any changes to your team, as well as to provide training if necessary.
Position Your Warehouse for Success
Taking the time to regularly audit your warehouse technologies and processes helps ensure that operations are running efficiently and that tasks are being completed accurately. This careful review can also uncover areas for improvement and provide the opportunity to troubleshoot any issues.
To implement a successful audit, define the scope of the audit, assign responsibilities, conduct the audit and analyze the results. Create an action plan, including implementing any necessary changes, for process improvement.
A warehouse management system is extremely beneficial in this process as it streamlines tasks and reduces errors. Give ShipHero a try today and get ultimate control over your inventory with improved visibility into daily activities – perfect for performing an absolutely successful audit!
About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With thousands of brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
Apr 21, 2023 | Blog
Shipping operations play a pivotal role in the world of eCommerce businesses. Regardless of how exceptional your product is, its true value to both customers and investors is only realized when it’s delivered without hitches. Even outstanding product reviews can be overshadowed by shipping problems such as delays, incorrect shipments, or goods arriving damaged. These issues can range from minor problems to major disruptions that can significantly impact the business.
To truly scale your eCommerce business, it’s essential to refine your shipping processes. This not only ensures timely and cost-effective deliveries but also broadens your customer reach. Many shipping companies face problems in their operations, from cargo handling to tracking shipments. The scale of these issues can vary, but they often impact the business’s bottom line and investor confidence.
In This Article:
- Explore best practices for shipping products both domestically and internationally.
- Dive into strategies for optimizing labor costs, ensuring workplace safety, and leveraging data-driven software to boost your company’s order fulfillment efficiency.
Understanding Shipping Operations
Shipping operations encompass the various processes that eCommerce companies put in place to guarantee timely deliveries. Effective management of these operations is paramount. Disruptions in areas like warehousing, inventory, or the broader supply chain can lead to significant losses. Whether you’re a small business sending out daily packages or a global enterprise handling vast cargoes, shipping operations are the backbone of your success. From shippers and carriers to importers and exporters, everyone in the shipping lines plays a crucial role. A cohesive team, including the shipper and shipowner, ensures that the freight reaches its destination safely.
Four Core Stages of Shipping Operations
Shipping operations, although they might differ across industries, generally involve four primary stages:
Picking:
This stage involves a dedicated team, often referred to as pickers, retrieving items from warehouse storage for packaging. Efficient warehouse picking is crucial for meeting customer demands and ensuring worker safety. Modern software solutions can guide pickers in selecting the right products and maintaining accurate documentation. Learn more about warehouse processes here.
Packing:
In larger operations, picking and packing are distinct processes. Proper coordination ensures optimal use of resources, from equipment to personnel. It’s also essential to consider the consolidation of goods, and shipping label especially when dealing with containers.
Labeling:
Proper labeling of shipping carrier is paramount. Incorrect or missing labels can lead to issues with customs clearance, delivery, and trade rights. Understanding how shipping labels work is essential.
Shipping:
Once products are en route, especially via sea vessels or other ships, control diminishes. Challenges can arise, emphasizing the importance of insurance for all shipments. Discover more about expedited shipping options here. It’s also vital to consider maritime regulations, port criteria, and charter agreements. Effective tracking systems and efficient terminals play a significant role in ensuring the cargo reaches its destination.
Local vs. International Shipping:
While the core stages remain consistent, nuances arise when comparing domestic shipping rates to international shipping:
Local Shipping:
Shipping within a region offers more control. Choices offering free shipping range from UPS to local couriers, depending on the delivery area. Local terminals and ports play a significant role in ensuring smooth transportation.
International Shipping:
Shipping overseas, for instance to Canada or France, introduces complexities like customs and tariffs. Shipowners and shipping companies must be aware of the rights and responsibilities associated with international freight. Exporters must also navigate maritime regulations and charter agreements that dictate the terms of cargo transport.
eCommerce Shipping Software:
Such software aids in managing product shipping operations. Most warehouse management systems incorporate shipping features, streamlining the logistics and transportation processes. This includes tracking containers, managing storage facilities, and ensuring the right equipment is used to ship products.
Five Tips for Successful eCommerce Shipping
Holistic Cost Analysis:
Consider the entire operational cost, not just shipping expenses. Having multiple warehouses might reduce shipping times and costs but could increase maintenance and storage expenses.
Data Analysis:
Utilize warehouse and eCommerce software to assess shipping cost and efficiency. Base strategies on concrete information, not mere assumptions.
Automation:
Minimizing manual processes reduces errors, ensuring accurate order fulfillment and efficient handling free shipping of goods.
Prioritize Safety:
Worker safety should always come first. Avoid potential legal and financial repercussions by ensuring a safe working environment.
Regular Reevaluation:
Continuously assess and adapt your shipping strategy to changing market conditions and business criteria.
Sustainability in Shipping
In the dynamic world of eCommerce shipping operations, sustainability emerges as a guiding star. Beyond the seamless delivery of products, a growing focus on environmental responsibility is steering the conversation. Embracing sustainable shipping practices entails utilizing eco-friendly packaging materials, optimizing routes to curb emissions, and harnessing renewable energy sources within logistics. This harmonious approach not only ensures business success but also contributes to a greener planet. Dive into the realm of sustainable ecommerce shipping solutions and discover the fusion of commerce and conservation.
Last-Mile Delivery Innovations
Amid the tapestry of the ecommerce shipping process, the final stretch known as last-mile delivery unveils innovation’s vibrant tapestry. Picture a realm where drones soar with packages, autonomous vehicles navigate streets, and crowdshipping paints a collaborative canvas. This realm is now. The veil between order and doorstep is thinning, driven by cutting-edge technologies that redefine the eCommerce experience. These innovations are not mere concepts; they are tangible threads knitting the future of shipping.
Reverse Logistics Reimagined
In the dance of eCommerce, returns play an unforeseen role – enter reverse logistics. This backstage choreography involves handling returns with grace, orchestrating restocking, and nurturing customer satisfaction. Embracing returns as part of the performance, businesses can pivot this process into a symphony of efficiency. The spotlight shines on managing expectations and orchestrating returns seamlessly. Unravel the script of reverse logistics and find harmony amid the complexity.
Navigating Global Trade Agreements
Within the world of international eCommerce, a hidden labyrinth awaits – the realm of global trade agreements. The tapestry of cross-border commerce is woven with the threads of trade pacts, shifting regulations, and intertwined destinies. Here, businesses voyage through a sea of complexities, adapting their sails to ever-changing winds. Understanding this landscape is akin to deciphering a map to success across international waters.
Customer-Centric Shipping Experience
Beneath the logistics, a heartbeat echoes – the rhythm of customer experience. Transparent communication, timely deliveries, and the art of the unboxing experience converge to create a symphony of delight. Nurturing this customer-centric melody sets the stage for applause. Here, the curtain rises on strategies that transform shipping into a captivating experience, where customers become avid fans and brand advocates.
Risk Management and Insurance Insights
Amid the whirlwind of shipping, unforeseen storms can arise. The anchor that steadies the ship is risk management and insurance. A safety net woven with insights, strategies, and contingency plans shields businesses from financial tempests. This narrative of preparedness weaves together the significance of understanding insurance types, risk assessment, and sailing through the waves of uncertainty.
Innovative Packaging Solutions
In the realm of shipping, packaging is not just a cover but an art form. Imagine a world where packages are shields against damage, bearers of eco-friendliness, pioneers of privacy with discreet shipping, and creators of enchanting unboxing experiences. This world exists. Innovative packaging and shipping solutions redefine the ordinary, crafting a symphony of protection and aesthetics. Let the journey through inventive packaging unveil a new dimension of shipping’s visual and tactile poetry.
Tech-Driven Future of Shipping
On the horizon of shipping, a dazzling sunrise emerges – the age of technology. Blockchain brings transparency to tracking, AI predicts the tides of demand, and IoT breathes life into real-time monitoring. This symphony of innovation orchestrates a harmonious future where data dances, machines collaborate, and the efficiency of shipping is transformed. Unveil the future, where tech’s crescendo shapes the destiny of shipping operations.
Cultural Nuances in Shipping
Across the seas of international shipping, cultural currents flow. Navigating these waters entails more than charts and coordinates – it requires an understanding of cultural nuances, customer preferences, and the art of respectful interactions. Each shore is a tapestry of traditions, and each customer a unique chapter. By embracing cultural considerations, businesses unfurl the sails of cross-border success.
Synergy with Shipping Partners
In the symphony of shipping, partnerships are the harmonies that elevate the melody. Shipping carriers, couriers, and freight forwarders weave a fabric of collaboration that carries the eCommerce chorus to distant shores. Nurturing these alliances is more than a transaction; it’s the secret to seamless logistics. Discover the art of synergy, where partnerships propel the rhythm of successful ecommerce shipping strategy.
Post-Delivery Analytics Unveiled
After the applause of delivery fades, the analysis takes center stage. Post-delivery analytics, a symphony of data, offers insights into performance and points towards the future. Feedback from customers, patterns in delivery times, and a scorecard of satisfaction compose this insightful melody. By embracing this data-driven tune, businesses refine their shipping operas and shape the encore of success.
Key Takeaways
- Success in eCommerce is intrinsically linked to efficient shipping operations.
- Utilizing eCommerce shipping software can streamline and optimize these operations, enhancing the overall performance of the business and attracting investors.
Shipping Operations FAQs
What is Dropshipping?
Dropshipping involves selling products stored at a third-party location, often an online store without the seller maintaining a physical inventory.
What are the 3 Methods of Shipping?
Land, sea, and air are the primary shipping methods. The choice of shipping method depends on the product, its value, and the destination.
Should Shipping be Included in the Cost of Goods Sold?
For U.S. tax purposes, shipping costs should not be included in the cost of goods sold.
Apr 21, 2023 | Blog
Picking: The Essential Step in Order Processing
In the world of e-commerce, picking items from your warehouse is a pivotal part of the order fulfillment process. Without a reliable picking list, there’s a risk of sending products that might be out of stock or on backorder. Delays in generating pick lists can also postpone customer orders, especially when items are requested for delivery by a specific date. Dive deeper into the world of picking lists and discover ways to enhance their creation. Read more about warehouse picking strategies here.
Understanding the Picking List
A picking list is a vital document used by warehouse personnel during the order fulfillment phase of ecommerce businesses. This list provides the necessary information to find the items ordered within your warehouse or fulfillment center. In the fast-paced manner of e-commerce operations, it’s essential to have accurate picking lists. Relying solely on memory can lead to errors, especially when dealing with a high volume of orders or when items are on backorder. For example, if one product is out of stock, the system can flag it, ensuring that available alternatives are considered.
Distinguishing Between the Two Types of Picking Lists
With the rise of e-commerce, picking lists have evolved. These digital pick lists are accessed via devices like smartphones, tablets, or even more advanced tablets with specialized software. They’ve become increasingly popular due to their convenience. With digital lists, warehouse managers can automatically generate order details, including the quantity and bin location, and forward them to pickers. These lists can also provide comprehensive product information, ensuring pickers don’t mistakenly select the wrong item. Discover the best practices for warehouse bin storage systems here.
Key Components of a Picking List
A picking list should contain specific details about the customer order to guide warehouse pickers. Here are the crucial elements of pick tickets:
- Order Number: This auto-generated number offers transparency, allowing you to trace any issues back to the picker responsible. It’s especially crucial when handling purchase orders or when items are requested for delivery by a specific date.
- Product Details: The SKU, quantity (qty), and warehouse location, down to the specific bin, are paramount. Detailed location data, such as aisle, shelf, and bin, should be included. Regular inventory counts by hand ensure that items needed soon are available and those nearing their reorder point are flagged.
- Customer Information: While this isn’t essential for pickers, packers and shippers need the customer’s name and shipping details to verify order specifics and generate a packing slip. This section might also include special delivery instructions provided by the customer.
Optimizing the Picking and Packing Process
To enhance your picking and packing operations:
- Organize Your Warehouse: Minimize movement within the warehouse for increased productivity. Consider zoning and clustering frequently purchased items together. This not only reduces travel time but also minimizes errors. Regular inventory counts by hand can help maintain accuracy, especially when determining reorder points.
- Evaluate Your Picking Method: There are various picking methods, like batch picking, zone picking, and wave picking. The ideal method depends on factors like order volume and warehouse layout. For example, batch picking might be best for high-volume operations.
- Embrace Automation: Implementing a warehouse management system (WMS) can offer real-time insights and improve staff performance. Other automation options include warehouse robots and conveyor belts.
- Prioritize Packaging: Selecting the right box size and packing materials is crucial. Cartonization, a process of determining optimal box sizes based on product dimensions, can be beneficial. Learn about the different types of warehouses in supply chain management here.
The Role of Picking Lists in a Warehouse Management System (WMS)
Integrating picking lists with your WMS offers numerous advantages. A WMS can auto-generate picking lists when a customer places an order, eliminating manual creation. It also tracks stock movements in real-time, enhancing inventory management. This real-time data ensures that manual stock checks aren’t required after each order. A WMS digital picking list can also suggest temporary containers for pickers to place items before forwarding them to packers.
Optimal Picking Routes: Enhancing Warehouse Efficiency
Imagine a dance of efficiency within the warehouse – the art of optimal picking routes. Just as choreography guides dancers, optimized routes lead pickers through a symphony of productivity. By sequencing the order of item retrieval, businesses can cut down on unnecessary travel, decrease aisle congestion, and create a ballet of streamlined warehouse operations.
Picking List Customization: Tailoring to Uniqueness
In the vibrant tapestry of business, no two threads are alike. Extend this notion to picking lists by exploring the realm of customization. Unveil the power of tailoring lists to specific orders or customer quirks. Whether it’s prioritizing high-value treasures or grouping similar gems, customization of pick lists adds a bespoke touch to the art of order fulfillment.
Real-time Inventory Updates: Navigating the Now
In a world where seconds matter, the magic of real-time inventory comes alive. Dive into the fusion of picking lists with real-time updates, ensuring that pickers aren’t led astray by phantom stock. Imagine a harmony where customers access real-time product availability, enhancing transparency and trust.
Multi-Location Picking: Across Warehouses and Beyond
Imagine a puzzle where pieces reside in different realms. This is the essence of multi-location digital picking lists. Illuminate the complexity and benefits of managing inventory across diverse warehouses or fulfillment centers. From warehouse to warehouse, the orchestration of picking lists shifts to encompass a world of diverse storage landscapes.
Picking List Visualization: A Picture of Precision
In the sea of text, visuals emerge as guiding stars. Welcome the concept of visually enriched picking lists – a world where images and QR codes guide the pickers’ hands. Like an artist’s palette, visual aids simplify the picking process, and reduce errors born from similar-looking items.
Picking List Auditing: The Rhythm of Accuracy
In the symphony of the order fulfillment process, harmony is maintained through routine audits. Envision the rhythm of picking list audits, where meticulous checks ensure alignment between paper and reality. Uncover how these rhythmic checks keep the performance accurate and the applause unmarred.
Picking Metrics and KPIs: Measuring the Symphony
Amid the crescendo of picking, metrics emerge as the scorecards of success. Enter the world of measuring performance with KPIs – pick accuracy, pick to order, fill rates, and picker productivity. This is where numbers paint a vivid picture of efficiency and guide the melody of improvement.
Voice-Powered Picking: Commanding Efficiency
Imagine a world where words hold the power of action. Enter voice-powered picking, where spoken commands guide the hands of pickers. Unshackled from screens or paper, pickers navigate the warehouse with seamless commands, like a symphony conducted by speech.
Picking List Integration with Customer Experience: Beyond the Box
Extend the narrative to a realm where accuracy becomes synonymous with customer delight. Showcase how precision in picking list details translates to seamless order fulfillment. This journey uncovers how accurate and discrete picking list also influences the chorus of customer satisfaction.
Picking List Adaptation to Seasonal Demand: Shifting with the Seasons
In the tapestry of commerce, seasons cast their spell. Unveil the art of adapting picking lists to the ebb and flow of demand. As seasons change, picking lists transform, ensuring that both the quantities and right products dance forward in sync with customer desires.
Picking List Training and Onboarding: Nurturing Expertise
In the realm of order fulfillment, pickers wield expertise. Explore the significance of training and onboarding, where pickers master the art of deciphering picking list details, navigating warehouse maps, and finding their rhythm in the symphony of operations.
Picking List and Returns: The Echo of Efficiency
As the curtain falls on order fulfillment, returns take center stage. Extend the spotlight to picking lists in the realm of returns. Unveil how a well-crafted pick list, guides the choreography of return processing, ensuring that items find their way back to the warehouse with grace.
Picking List Beyond Warehousing: Unveiling Possibilities
From warehouses to the world, the concept of picking lists journeys beyond your own warehouse. Embrace the broader canvas, where picking lists guide not only warehouse staff but also retail employees replenishing store shelves or orchestrating in-store pickup experiences.
Take a look at what a picking list in our ShipHero software looks like!
Key Takeaways
- Picking lists guide warehouse staff in retrieving customer-ordered items.
- They detail product codes, warehouse location, and quantities.
- Properly crafted picking lists reduce errors and offer pickers a clear tool for their daily tasks.
Picking List FAQs
What is a picking list?
A document detailing a customer’s order, aiding warehouse staff in selecting the right items for shipping.
What’s the purpose of a pick list?
It helps locate the correct items in the warehouse to fulfill customer orders.
How does order picking affect profitability?
Efficient order picking ensures order accuracy, leading to fewer returns, reduced costs, and enhanced customer satisfaction.
Apr 21, 2023 | Blog
Stock-keeping units (SKUs) are essential for retailers. They let you track inventory quantity and stock movements without having to do physical checks every day.
But what do SKUs really do, and how do you make them? Read on for a comprehensive guide on SKUs!
What Is a Stock Keeping Unit (SKU)?
A stock-keeping unit (SKU) is an alphanumeric code assigned to each of your products. They usually come in the form of scannable barcodes printed on labels. An SKU usually contains the product’s details like its price, variant, size and more.
Each product variant has a unique SKU. So, for example, you have purple and yellow T-shirts in three sizes each: small, medium and large. Each variant of these T-shirts has its own SKU, meaning you have six SKUs.
Why do you need unique SKUs for each variant? This is to prevent mix-ups during the picking process. If an SKU only registers the color, your picker might retrieve T-shirts of the wrong size.
Why Are SKUs Important?
SKUs are important for stock tracking and sales data collecting. Tracking the movement of SKUs alongside customer orders means you know what products are selling and which variants are most popular. This way, you can anticipate high demand by stocking up on popular items.
SKUs are also often used for product recommendations in online stores. Let’s say a customer puts an action movie DVD in their cart. Your system can search for similar SKUs and recommend them to other action movies. This might trigger an extra purchase and increase your profits.
Stock Keeping Units (SKU) vs Universal Product Codes (UPC)
SKUs and UPCs are used for similar things. They both track inventory and stock levels. But there’s one key difference.
SKUs are retailer-specific. Even if two companies sell identical items, the SKUs will be different. Meanwhile, UPCs are universal, as the name implies. The same product will have the same UPCs across all retailers.
SKUs are more flexible than UPCs because they can either be printed in text or as a barcode. Meanwhile, UPCs can only be printed as a barcode. This means humans can easily read SKUs, while UPCs need a barcode scanner.
How Do You Create SKU Numbers?
You can create SKU numbers by splitting an alphanumeric string into different parts and defining each of them. Let’s take a look at the steps to create a SKU number:
- Make a top-level identifier: The first two or three digits of an SKU are a general classification of the product. These categories can be anything. Some examples include the product’s type, brand, manufacturer and department.
- Define a unique identifier: The middle part of the SKU is usually for unique identifiers like the item’s size, material and color.
- Finish with a sequential number: The last bit of the SKU is usually a sequential number that shows when it arrived in your warehouse. This means you won’t have a hard time calculating stock. Sequential numbers also help you prioritize selling items that have been in the warehouse longer.
- Input the SKUs into your inventory management system or point-of-sale: Manually managing hundreds or thousands of SKUs is extremely hard. That’s why the next step is to input your SKU in a database provided by your point-of-sale (POS) or inventory management system.
- Print SKU barcodes: Your POS system will convert the SKU numbers into barcodes. Print them and attach them with labels to your products.
What does an SKU number look like? Here’s an example SKU for an item sold at a clothing retail store:
Here’s the code broken down:
- JK: Jacket
- S01: Style 01
- YL: Yellow
- S: Small
- 001: First product at the warehouse
As you can see, the SKU system defines everything about the item to its most minute details. By reading the code, a picker can tell it’s a small yellow Style 01 jacket. They can also tell this is the first jacket of that type in the warehouse. From this information, they can send out the right item when a customer orders it.
Top 5 Uses of SKUs for Business
Now that we’ve learned what SKUs are and how to make them, it’s time to learn their uses. There are five major uses of SKUs in businesses.
1. Analysis
SKUs can track which items are selling and which ones aren’t. This helps you anticipate customer demand by purchasing more or less of certain products.
You can use SKU tracking data to predict which items might be top sellers so you can order more and maximize revenue. Conversely, you can reduce orders on items that aren’t selling well to prevent overstocking. Keeping inventory levels manageable also lets you save money on storage space.
SKUs don’t just give you insight into inventory. You can glean some behavioral insights, like learning which items are often bought together. This way, you can consider selling them as a package to further drive sales.
2. Inventory Management
SKU barcodes make inventory management easier through real-time tracking. As products arrive and leave your warehouse, your staff will scan their barcodes. This lets you monitor the stock levels of each item you have, even if you have multiple fulfillment centers.
More advanced warehouse management systems will even alert you when items are low in stock. By setting reorder points, you can prevent your most popular products from running out of stock. This prevents customers from shopping from other stores if something isn’t available.
3. Customer Assistance
SKUs organize your products so your warehouse team can easily find them. This means they can pick and pack goods faster, decreasing customer wait time. Faster deliveries mean happier consumers. This is especially important if you promise two-day delivery for your products.
4. Advertising and Marketing
Some eCommerce retailers use SKUs when advertising their products. They use this to ensure customers view the items they’re selling.
SKUs also work as an anti-poaching measure. When you promote a product based on its SKU, competitors can’t easily see which products you’re promoting because SKUs aren’t usually public. This makes customer poaching with lower prices and discounts tougher.
5. Product Recommendations
SKUs categorize items to make product recommendations easier. Your eCommerce platform can upsell or cross-sell other products to your customers based on what items they have in the cart.
Product recommendations usually show up on the checkout page just before people get their credit cards out. It can also “save” a sale by recommending similar products when the product a customer wants is out of stock.
Key Takeaways
SKUs don’t just help your pickers retrieve the right items. You can use SKU information for a variety of purposes, like behavioral analytics, demand prediction and product recommendations.
However, managing hundreds of SKU codes isn’t easy. You might need inventory management software to reliably handle all of them.
SKU FAQs
Is a barcode an SKU?
A barcode isn’t an SKU by itself. A SKU can be converted into a barcode, but barcodes can contain a variety of information.
What makes a good SKU?
A good SKU needs to contain the key details of a product without being overly long. Some essential details to include are size, color, category and order it arrived in the warehouse.
How are SKUs used in eCommerce?
SKUs are used in eCommerce in many different ways. Some of the more popular uses include inventory management, product recommendations and analysis.
