Aug 2, 2023 | Blog
Every client has different logistics needs. If your third-party logistics (3PL) company offers custom pricing, you need to analyze what clients need and offer prices that satisfy their requirements while still being reasonable. However, calculating 3PL service prices individually each time you get a new client takes a lot of time and effort.
3PL pricing templates are here to help you streamline that process. With a template, you can come up with quick cost estimates to show prospective clients to ensure you reach an agreement faster.
Keep reading for a complete rundown of 3PL pricing templates and what components you should include in them. You’ll also find a link to download our free 3PL pricing template!
What is a 3PL Pricing Template?
A 3PL pricing template is a document that helps you determine 3PL service costs. It usually comes in the form of a document or sheet where you can insert various cost items and find the total regular cost of your whole 3PL service.
This template generally includes essential cost items like inbound handling, receiving, storage and order fulfillment. Once you’ve plugged in the per unit price of each cost item, you can check with the prospective client how much of each service they need every month and the sheet will calculate the total costs for you. With a template, you can come up with a quote within minutes.
How is 3PL Pricing Calculated?
3PL pricing is calculated by summing up all the relevant cost components. Whatever the total of the inbound handling, receiving, storage and order fulfillment is your monthly 3PL cost for that client. This is the most common way to calculate 3PL pricing, but every logistics provider is unique. You might have extra cost items or considerations that may change how you calculate 3PL pricing.
As a 3PL company, you calculate 3PL pricing for clients. Accurately calculating 3PL pricing means understanding how many products they sell each month, so you can estimate the labor needed to handle their orders.
If you can’t correctly estimate the labor needed to handle your client’s logistics operations, you may overcharge or undercharge on service costs.
Components of a 3PL Pricing Template
What do you put in your 3PL pricing template? The answer differs for every logistics company, but there are common items you’ll find in just about all 3PL pricing templates. Here’s a look at each of them:
3PL Warehousing/Storage Fees
Warehousing and storage fees generally make up most of your 3PL pricing structure. This component encompasses receiving, unloading and storage costs for your client’s items.
Many 3PL companies have a tiered price structure for inventory unloading. Generally, unloading larger containers are more expensive than unloading pallets or cartons. This is because containers usually contain multiple pallets or cartons, which means more work to unload.
In addition to unloading, 3PL companies also charge receiving costs. This part of warehousing costs covers the work of inputting the items into the warehouse management system and moving them into the storage space. You can also charge extra for applying shrink wrap to keep the items safe.
The last part of storage fees is the storage charge itself. You can charge by space or by item stored. This cost is usually a recurring fee charged weekly. Some third-party logistics providers also rent pallets if the client ships items in cartons.
3PL Pick & Pack Fees
As the name implies, picking and packing fees cover the labor when you pick and pack the client’s products. 3PLs usually charge pick and pack fees per item or container, depending on the client’s needs. They also charge a processing fee for every order to be fulfilled.
In some larger orders, fulfillment companies can add shrink wrap as an extra expense for more protection when shipping packages. You can also apply bulk order discounts to improve client satisfaction.
3PL Shipping Fees
Shipping and transportation fees cover the cost of delivering your client’s products to customers. Your shipping rate can be based on volume, weight, or both combined. You may also offer different shipping rates for various delivery speeds, like two-day and regular deliveries.
If you work with multiple shipping carriers, you can include their names in the template so the client can choose whichever shipping partner works best for their needs and budget.
Setup and Account Management Fees
Before starting to work with a client, you need to set up a WMS and prepare everything for proper logistics management. This is where setup fees come in. It’s a one-time fee you charge when starting work with a new client and it’s usually based on the size of the client’s company and what kind of fulfillment services they need.
Account management fees include document storage, inventory reporting, shipping label printing and other costs required to keep your 3PL operations running. Account management fees are generally small and charged every month.
Additional Charges
In addition to all the aforementioned cost items, you can include any additional charges in the pricing template. Additional costs include things like safety charges for storing hazardous materials and refrigeration expenses for perishable goods.
Some 3PL companies may charge seasonal adjustment costs. This cost compensates for the extra labor their team may need to handle the increased order volume during high-demand seasons.
Click to Download Our Free 3PL Pricing Template
Importance of a 3PL Pricing Template in Business
A 3PL pricing template is important in business because it helps you come up with price quotes faster. Instead of spending time calculating each cost item manually, you can input the price and quantity into the available slots and get an instant cost estimate. You may still need to adjust the final quote to fit the client’s needs, but it provides a great starting point when discussing a 3PL service offering.
Having all the cost items listed on the template also minimizes human error. If you accidentally skip a cost item in your 3PL service rate calculations, you may end up with an inaccurate quote for the prospective client
Transparency is also a good reason to use 3PL pricing templates. With a fixed template, the prospective client knows how much they have to pay for receiving, shipping and other expenses. This way, they’re more likely to trust your company since they know what they’ll pay for when using your services.
3PL Pricing Models
Every client has their preference for 3PL pricing models. Some prefer fixed-price 3PL services, while others think variable pricing is better for their finances. Plus, there’s the Amazon FBA model that has fixed pricing and profit sharing.
How does each pricing model work and what are its benefits and caveats? Let’s take a look:
Fixed Pricing Model
A fixed pricing model is just as the name implies. Clients pay a set cost to get all your 3PL services. Businesses usually prefer a fixed pricing model if they want to eliminate uncertainty about their 3PL costs. The pricing model’s predictability also helps small businesses and companies with thin profit margins stay within budget.
On your side of the deal, using a fixed pricing model fosters a partnership between your company and the client. If you provide excellent 3PL service, your client may see they’re getting more bang for their buck. Additionally, a fixed-price model ensures you get the same amount of money each month regardless of how well the client’s products sell.
However, there is a downside to fixed pricing models. Applying a fixed pricing model means you might take on more work than what the income is worth if the partner company keeps growing. In these cases, you may need to renegotiate the monthly cost with the client to ensure the 3PL company and the client get the most out of this partnership.
Variable Pricing Model
A variable pricing model is more commonly used by 3PL companies. Clients often prefer variable rates because they know what they’ll be paying for and can adjust their business operations accordingly. For instance, your client can reduce items shipped to your warehouse if they don’t have enough money to store all of them.
A 3PL pricing template works best when you use variable pricing because you can adjust cost items according to the client’s needs. Using a 3PL pricing template to outline your variable pricing also builds trust since the document covers everything the client is about to pay, ensuring hidden costs won’t blindside them.
The downside to variable pricing models for the client is that it adds a level of unpredictability since how much they pay is determined by their sales. This unpredictability might be a dealbreaker for small businesses wanting to make every dollar count.
Variable pricing models also add a layer of unpredictability on your end since how much you make depends on the client’s sales. You might receive less money during low-demand periods since the client isn’t selling as many goods as they do regularly.
Amazon FBA “Fixed-Pricing-Profit Sharing” Pricing Model
Another pricing model that’s worth noting is the Fulfillment by Amazon (FBA) pricing model. This pricing model works somewhat like a fixed-price model. Sellers pay a regular 3PL services fee, but they also pay a “selling on Amazon fee,” that’s around 15% of the profit margin.
15% of the seller’s profit on top of the fixed fulfillment fees sounds pretty steep. However, sellers sometimes prefer to fulfill orders through Amazon because they can reach a larger audience, use Amazon’s ready-made storefront and potentially gain more sales.
Plus, Amazon is known for its vast fulfillment network. There are over 170 Amazon fulfillment centers and warehouses worldwide, so sellers can sell internationally rather than just domestically. With a large enough customer base, they can offset the increased fulfillment costs of using Amazon FBA.
Another thing sellers need to know about Amazon FBA is its no-questions return policy. Once they sign up for Amazon FBA, they may see an increase in returns.
Key Takeaways
A 3PL pricing template is a document that assists in calculating 3PL service costs. It contains fillable cost items that you can modify according to the client’s needs, making it much easier to determine how much you’ll charge them.
Your pricing template does more than just help you determine service costs. It also promotes transparency and builds client trust because everything they’ll be paying for is listed on the template, meaning everything is above the board and hidden costs won’t blindside them.
As a 3PL company, you need a robust warehouse management system to ensure you provide the best services to clients. ShipHero’s WMS improves order accuracy, reduces warehouse costs and much more. Contact us today to learn how our WMS can help you succeed.
Frequently Asked Questions (FAQs)
What are the Advantages of Using a 3PL Pricing Template?
The advantages of using a 3PL pricing template include increased transparency, reduced human error and faster cost calculations. All three things build client trust because everything is on the table and clients can trust that there won’t be any hidden costs that surprise them once they start working with you.
How Can I Choose the Right Pricing Model for My Business?
You can choose the right pricing model for your business by examining your client base first. Small businesses and companies with thin profit margins usually prefer flat-rate pricing because there are fewer surprises. Meanwhile, companies selling products with fluctuating demand might fare better with variable-rate pricing.
Each pricing model has its own pros and cons, so research your clients well and choose the most cost-effective pricing model that suits your capabilities.
What is the Impact of a 3PL Pricing Template on Cost Efficiency?
A 3PL pricing template helps you improve cost efficiency because it’s easier to review the client’s entire cost structure once the template’s been filled out. You can examine potential overspending and give the client suggestions on how to increase your 3PL services’ cost efficiency.
Jul 28, 2023 | 3PL Warehouse Management, Blog, Economics of 3PL, Fulfillment
Shipping costs can quickly add up and devour your budget, but it doesn’t have to be this way. The trick is to avoid common pitfalls that lead to inefficient processes and additional charges. In this post, we’ll explore some common mistakes that should be avoided at all costs to save money on fulfillment – equipping you with the know-how needed for sound business decisions moving forward.
Invoice Errors
Did you know that 5% of invoices contain errors and inaccuracies? The root causes of these mistakes are often common shipping issues like accessorials and late fees. When rate errors go undetected, a shipper may be overcharged an average of 3%-5% of the total invoice.
For example, if you look at the FedEx Invoice below, the total charges are $1,831.17. If 5% of those charges are riddled with inaccuracy, then you’d be paying $92 in unnecessary overages – which adds up.
Accessorial Charges
These costs are not always clear-cut and can fluctuate depending on the carrier. Our in-depth article on accessorial charges outlined three key lessons businesses can use to minimize mistakes and unexpected fees.
- Know all your costs, even the hidden ones, and ask about accessorial fees upfront.
- Analyze your shipping invoices regularly to catch any billing mistakes early.
- Plan ahead for peak surcharges to save your business significant money on shipping costs.
See more details in our guide to managing accessorial charges.
Late Fees
Inefficient systems can often delay the clearing of invoices, which results in unnecessary late fees. For example, both UPS and FedEx have instituted late payment fees. To avoid incurring these fees, make sure that payment is received by UPS within 14 days of the invoice due date and for FedEx, within 15 days of the invoice date. If payment is not received by the due date, both carriers charge a late payment fee of 6% of the total past-due balance. FedEx places delinquent accounts on cash-only status, which could cause delays in your shipments and the loss of applicable discounts.
Shipping companies are responsible for ensuring an effective system to avoid late charges and penalties. Failure to meet the terms of the agreement can also result in carriers charging additional interest fees.
Know Where Your Charges Are Coming From
When a shipper hires a transportation company to move their goods, an invoice or bill is created for each job. These documents contain important information about the shipment, the services provided, and any additional services rendered. For carriers, it compiles all charges from every Bill of Lading associated with the shipment.
Your Bill of Lading Should Include the Following:
- Purchase order or account number
- Shipment date
- Shipper’s name and address
- Recipient’s name and address
- Number of units being shipped
- Description of what’s being shipped
- Declared value of goods being shipped
- Shipment packaging – cartons, crates, pallets, etc.
- A notation if the product in the shipment is hazardous
- Exact shipment weight
- Pickup or delivery specifications
Common Shipping Errors
Shipping errors are an unfortunate reality in the fulfillment industry. Every 3PL wants to ensure a seamless pick, pack, and ship process, but mistakes can and do happen. It’s important to be vigilant and watch for common errors.
Incorrect Measurements, Dimensions, and Packaging
Small mistakes in measurements, dimensions, and packaging can lead to expensive surcharges for shipping. Even slight errors can cause significant charges to accumulate. It’s important to remember that shipping fees are calculated based on the greater value of weight or size, which means DIM weight can also affect shipping fees. Measuring and weighing packages accurately is crucial to avoid these unnecessary expenses.
Measurements and Dimensions
UPS, for example, if your package dimensions don’t match your labels, the mislabeled packages will be subject to a shipping correction fee. If you get charged with a shipping charge correction audit fee, you’ll have to pay the greater of the following:
- $1.00 per mislabelled package during the applicable invoice period; or
- 6% of the total shipping charge corrections during that invoice period
So, invest in a reliable scale and WMS to avoid incorrect estimates and unnecessary fees. This will ensure your measurements match your carrier’s, reducing the risk of unexpected charges. Giving incorrect delivery details might seem insignificant, but it can quickly snowball into a logistical nightmare.
Packaging
Rather than trying to save money by using cheap materials or skimping on protective measures, investing in better packaging will ultimately save you money in the long run by reducing re-shipping fees caused by transit damage.
Keep packages as small as possible and minimize inserts to minimize your costs further. Standardizing packaging is also important in reducing costs, helping you to streamline the process and minimize materials. Following these tips can significantly reduce your packaging costs without compromising quality. With so much at stake, taking shipping accuracy seriously is essential.
You Don’t Have a Diverse Carrier Mix
To avoid high shipping costs, diversify your carrier mix. Relying solely on one carrier may leave you vulnerable if they face capacity issues, raise prices, or go out of business. Without other options, you may have to pay expensive fees to ship your goods.
Why You Need a Multi-Carrier Platform
Cost Effective: To save on shipping costs, choose carriers that fit your budget and take advantage of available deals and discounts. Comparing rates on a single platform is easy and helps you make informed decisions. Let the software do the work for you.
Saves Time: Input package details into your WMS and let technology compare rates from various carriers. You’ll have diverse shipping options to select the most affordable and efficient.
Reduces Disruptions: Using a multi-carrier platform can prevent shipping delays by seamlessly switching to another carrier if one experiences trouble.
Handling Unique Scenarios: When you use multiple carriers, it’s possible to choose a more affordable option for free shipping and give customers the choice to upgrade for faster delivery times.
Not Using a WMS
When managing logistics operations, using a warehouse management system is not just a nice-to-have; it’s a must. Manually determining the cheapest rate based on address, weight/dimensions, and shipping speed is tedious and complex. Not to mention the risk of shipping errors and lost time.
With ShipHero’s Rate Shopping, you can access the most up-to-the-minute shipping rates from major carriers. Buy the label at the cheapest price. It’s time to take advantage of a WMS.
Utilize Technology and Automation
A WMS is not just about the convenience of having everything in one place – but the benefits of automation. By reducing the need for personnel in the shipping process, companies can save money, reduce processing time, and improve accuracy. With fewer jobs for staff, there’s also less risk of data entry errors and lower costs because you need less help to run your 3PL.
By utilizing warehouse management software, you can accomplish the following:
- Combine and streamline shipments to improve shipping efficiency.
- Reduce mistakes to cut shipping costs significantly.
- Access to numerous carriers and compare prices to find the most affordable option.
- A single dashboard provides complete visibility of all your shipments.
- Ensure real-time updates on shipment status for your customers.
- Improve service levels and reduce customer churn to achieve customer satisfaction.
From Errors to Accuracy
To manage carrier costs accurately, it’s essential to take the time to verify that invoices are correct and up-to-date and ensure that your fulfillment systems are processing payments promptly. It’s also important to consider the non-monetary shipping costs, including accurate measurements, dimensions, and packaging. This can help you avoid costly surcharges and ensure your deliveries are successful. Finally, implementing a warehouse management system can save you time, prevent shipping delays, compare prices, and reduce errors.
Key Takeaways:
- Inaccurate invoices can result in overcharges of 3%-5% of total invoice values.
- Auditing invoices thoroughly and double-checking for accuracy is important to avoid invoice errors.
- In-depth knowledge of accessorial charges can minimize mistakes and unexpected fees.
- Efficient fulfillment systems are necessary to avoid late fees and interest charges.
- Avoid costly overcharges by ensuring accurate and timely payment of carrier bills.
- Accurate measurements, dimensions, and packaging are crucial to avoid expensive surcharges.
- Diversifying carrier mix can prevent shipping delays and expensive fees.
- Using a warehouse management system can save time, reduce errors, and compare prices.
Jul 7, 2023 | 3PL Warehouse Management, Blog, Economics of 3PL, Fulfillment
Are your outbound shipping costs eating your 3PL’s profits? Today, we will cover five critical factors affecting your shipping costs and provide actionable tips to help you reduce them. We’ll give insights on everything from delivery speed to special handling fees to ensure you make operational decisions that save time and money.
Factor 1 | Weight and Zone
For products shipped domestically within the US, two key factors come into play: the destination zone and the package’s weight.
Zone
Carriers have established nine zones across the US, with the origin address as Zone 1. Your shipping fees increase as your package moves further from its origin. Here are the current zones with their mileage differences from the source.
- Zone 1: 1-50 miles
- Zone 2: 51-150 miles
- Zone 3: 151-300 miles
- Zone 4: 301-600 miles
- Zone 5: 601-1000 miles
- Zone 6: 1001-1400 miles
- Zone 7: 1401-1800 miles
- Zone 8: 1801 miles or greater
- Zone 9: US territories & APO or FPO addresses
Weight
When it comes to shipping packages, weight matters, it’s a simple concept: the heavier the package, the more you’ll have to pay to get it where it needs to go. But it’s not just about weight; the package’s dimensions also play a significant role.
It’s a tricky balance – you want your package to be the right size to hold your products but not so large that it triggers DIM weight surcharges. Investing in a packaging design strategy is worth the time to determine the optimal package size and weight to avoid unnecessary expenses. It’s a small step that can significantly impact your bottom line.
Shipping Calculators by Carrier:
International
If you’re not taking advantage of duty relief programs for international shipping, you’re leaving money on the table. The numbers don’t lie – Section 321 alone can save you up to 20% on duty fees, and that’s a significant amount. So, what exactly is Section 321 all about?
Section 321 of the Trade Facilitation and Trade Enforcement Act has revolutionized the eCommerce shipping costs for shippers from Canada or Mexico sending goods into the U.S. to individual customers. With tax and duty exemptions, faster clearance, and reduced paperwork, shippers have remarkable advantages at their fingertips.
Section 321’s duty-free entry for goods valued at $800 USD per person per day is a smart way for businesses to grow, as it offers savings for brands looking to get their items to American consumers. While certain products are restricted, these regulations should not deter businesses from enjoying the benefits Section 321 can bring.
Factor 2 | Delivery Speed
The persistent and aggressive growth in eCommerce demands a seamless process to satisfy customers’ needs, and delivery speed is an essential aspect of any business that hopes to keep up with customer demands in today’s marketplace.
Margin integrity is crucial if you want to stay profitable. At ShipHero, we understand that maintaining a delicate balance between cost and delivery speed is essential for our margins to remain healthy. It hasn’t been an easy process, and we’ve made our fair share of mistakes.
Nevertheless, we’ve learned that customers expect two-day delivery from Amazon but are generally willing to wait three to four days for other businesses. However, specific expectations, such as real-time tracking, still need to be met.
90% of customers want immediate updates and real-time order visibility. Adopting technological solutions can improve delivery experiences and lower consumer inquiries.
32% of global shoppers will abandon their carts if an estimated shipping time is too long. Rising standards are forcing 3PLs and carriers to reevaluate traditional distribution models.
Fulfillment Trends
Get ahead of the trend by utilizing micro-fulfillment centers (MCFs) to cut delivery times. MCFs are strategically placed in urban areas and stocked with popular products, making it easy for customers to pick up their online orders. This gives shippers the flexibility to meet rising consumer expectations promptly.
Although setting up these local centers can be challenging and pricey, it pays off in the long run by reducing shipping costs and providing an efficient and cost-effective service. Leading 3PL companies are already reaping the benefits of this strategy and improving their overall performance.
Last Mile Delivery
Last-mile delivery accounts for 53% of the total shipping cost, and 3PLs simply can’t afford to miss the mark here. The final stage of the delivery process is where customer satisfaction and profitability are either made or broken. Unfortunately, too many managers responsible for supply chain and digital functions face significant challenges in this crucial area.
But fear not; there are solutions. By partnering with the right players, businesses can meet and exceed their customers’ expectations while boosting their bottom line. That’s why we offer Veho’s efficient and cost-effective last-mile delivery solutions.
By prioritizing necessary orders and reducing failed deliveries, Veho can make money while delivering the high level of service customers deserve while saving your 3PL money on last-mile delivery.
Factor 3 | Warehouse Teams and the Packing Process
When it comes to the efficiency of a warehouse, it’s essential to have a well-oiled team handling the packing process. After all, warehouse teams can make or break the whole operation. Here are some questions to ask yourself regarding your teams.
Are you investing in training your team?
Training is crucial for a proficient team, minimizing staff turnover, and boosting profits. It should cover SOPs, equipment handling, inventory management, customer order systems, and obtaining certification for specific tasks.
How efficient is your packing station?
Regularly assess your packing station’s efficiency to identify areas for improvement and reduce labor costs. Implement one-touch stations and focus on ergonomic design and workflow to optimize productivity and reduce errors.
Are you optimizing your picking paths?
Optimizing your picking paths might be the key to unlocking higher profit margins for your business. It’s simple – a slower picking process leads to increased picking costs, inevitably leading to higher product prices for your customers.
Are you using automation?
While a 95% to 98% order accuracy rate may seem reasonable, it still allows for a 2% margin of error or potentially even worse outcomes. These errors can result in significant financial losses for your warehouse.
Fortunately, implementing warehouse automation can reduce human error and improve inventory control. This will significantly enhance picking accuracy, bringing it closer to 100% and ultimately saving you money by reducing mistakes and mispicks.
Are you analyzing the correct data?
Measuring data is crucial to improve business operations. Knowing your warehouse’s key performance indicators (KPIs) is essential. Collecting and analyzing the correct data identifies inefficiencies and avoidable expenses. You’ll need to track everything from receiving through shipping to get a complete picture of your operations.
Here are a few KPIs to consider:
- Inventory Days of Supply: The day’s sales of inventory (DSI) is a financial ratio that indicates the average time, in days, that a company takes to turn its inventory, including goods that are a work in progress, into sales.
- Parcel Bill Accuracy: Review your parcel bill charges regularly to avoid overcharging. Request detailed bills from carriers if you spot any errors. This information can be helpful when renewing shipping contracts.
- Receiving Efficiency: This metric determines how well the receiving area performs overall. It is determined by the volume of inventory received/ number of hours worked. So, for example, you may receive 2000 goods per week and only have two employees at 40 hours each. So in this example, it would be 2000/80 = 25 goods per hour being processed.
- Order Picking Accuracy: Accuracy in order picking is vital to ensure that orders are shipped correctly. Mistakes can be costly and time-consuming, so tracking this metric is crucial to keep customers happy and avoid the hassle of correcting errors.
- Warehouse Capacity Utilization: Warehouse capacity means the space available to store things. Businesses need to use the area efficiently and save money on warehouse operations.
To understand your warehouse capacity utilization, you can calculate it in a few easy steps. Ideal utilization is 80%, which is average to maximize your warehouse space. To calculate your warehouse’s usable space:
-
- Measure the total square footage, clearance height, and unusable areas (offices, bathrooms, break rooms).
- Subtract the unusable square footage from the total to get the usable square footage.
- Multiply it by the clearance height to obtain the usable volume in cubic feet.
Factor 4 | Special Handling Fees
As a shipper, you’re no stranger to handling fees for hazardous materials and fragile items. But did you know that these fees can have both advantages and disadvantages? Let’s take a closer look at how they can impact your bottom line.
Hazmat
- Revenue Generation: Shippers can generate extra revenue through Special Handling fees, which help cover the expenses of safely transporting fragile or hazardous items. These fees contribute to the overall profitability of the shipping industry.
- Risk Management: To transport hazardous and delicate items safely, shippers should charge special handling fees, conduct inspections, and employ trained personnel. Risk management practices are essential to ensure secure transportation.
- Competitive Advantage: Shipping companies specializing in hazardous and delicate items can become industry leaders by charging extra for their expertise. This draws customers seeking experienced shippers with a deep understanding of complex shipments.
Shipping hazmat and fragile items can be profitable, but shippers must address customer concerns and competition while complying with regulations.
Fragile
When it comes to shipping fragile items, there’s no room for error. After all, damaged items don’t just impact your bottom line – they can also significantly affect your reputation. That’s why taking proactive steps is essential to ensure your items arrive at their destination in one piece. One way to do this is by enlisting the help of your special projects team to assemble kits or pre-assemble your items.
Factor 5 | Surcharges
Surcharges are a necessary evil in shipping and logistics, so they can be the bane of your bottom line if you’re not careful. That’s why it’s essential to be informed and proactive about the different types of surcharges your product lines may encounter.
Navigating outbound shipping can be a complex and costly process for 3PL operators. Negotiating base rates with carriers is just the beginning; understanding accessorial charges and selecting the best base rate based on package specifications is key to mitigating costs. The challenge lies in the surcharges associated with specialized services, which can drive up costs and make it challenging to predict expenditures.
Additionally, general rate increases can significantly impact carrier base rates for 3PLs. However, the right approach and tools can reduce shipping expenses. By utilizing shipping cost strategies, analyzing costs, and planning, surcharges can be minimized.
How to Reduce Shipping Charges
Size and Weight
It is important to be mindful of shipping charges, as they can quickly add up and cut into your profits. One way to reduce these costs is by considering the size and weight of your parcels. Oversized boxes or improper packaging can result in higher fees. Look for carriers that offer the correct type of flat-rate shipping or the fees that make the most sense for you and your products.
Additionally, be aware of dim weight pricing (as we discussed at the top of this article), which considers the box’s length, height, and weight. This can sometimes result in extra fees for light packages that take up a significant amount of truck space.
Team Training
Reducing shipping charges is crucial for businesses of all sizes, and optimizing warehouse operations can help achieve this goal. Proper software training is essential to maintain consistency with the packing team and reduce unnecessary costs.
A warehouse management system (WMS) like ShipHero can provide automation that streamlines business operations, but it needs to be used accurately. Your WMS training program should cover all aspects of the hardware and software and the different methods used to manage goods efficiently within the warehouse. By emphasizing the importance of WMS training and implementing consistent warehouse practices, your business can reduce shipping costs and improve overall efficiency.
Equipment
Troubleshooting internal errors such as incorrect scales and improperly stocked packing stations can also enable you to minimize touchpoints and increase automation. With automation rules, packers can always use the appropriate box when shipping specific products. These steps allow you to confidently assert control over your shipping process and save valuable business resources.
Automation
We offer a variety of automation rules to help businesses save money on shipping charges. Our VIP customer treatment rule ensures that your most valuable customers receive a gift SKU or marketing insert with their orders, express shipping, and prioritized order processing. Our pre-sale item rule helps businesses save by setting a partial shipping flag for orders that exceed a specific dollar amount.
Additionally, SKU-specific notes can be assigned to certain items, which is handy for fragile items that require special handling. Finally, we automate box type selections, streamlining the packing process and saving businesses time and money on shipping. With the proper automation rules, businesses can significantly reduce shipping charges and improve their bottom line.
3PL Profitability
To summarize, consider all five critical factors mentioned in this post to reduce your outbound shipping costs: destination and origin, delivery speed, warehouse team processes, special handling fees, and surcharges.
With the right tools and expertise, you can ensure that your 3PL profitability remains reliably on track. And with hard work and dedication to intelligent decisions about outbound shipping strategies—increasing or decreasing delivery speeds or minimizing surcharge risks— you should be more than capable of achieving your goals.
It takes a lot of work, but investing time now to craft an efficient system for managing outbound shipments will pay off down the line. To start managing your outbound shipments efficiently today, try a ShipHero demo and get a jump start on reducing those shipping costs!
Key Takeaways
- Five critical factors affecting shipping costs include weight and zone, delivery speed, warehouse team processes, special handling fees, and surcharges.
- Shipping fees increase as packages move further from their origin, and weight and package dimensions also significantly affect shipping costs.
- Duty relief programs for international shipping, such as Section 321, can save up to 20% on duty fees.
- Last-mile delivery challenges can be solved with partnerships like Veho, which can save money and streamline the process.
- Delivery speed is important for eCommerce businesses, but faster delivery times come with higher costs. Local fulfillment centers and efficient processes can help reduce costs.
- Investing in team training, efficient packing procedures, optimizing picking paths, using automation, and analyzing the correct data can improve warehouse efficiency and reduce costs.
- Hazmat and fragile handling fees can protect businesses from fines and reputation damage, but choosing the proper packaging and labeling is vital.
- Understanding surcharges and negotiating base rates can help mitigate shipping costs for 3PL operators. Planning and analyzing costs can also minimize surcharges.
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.
Let us know how we can help you today by scheduling a call HERE.
Jul 3, 2023 | Article
A warehouse management system (WMS) or a warehouse management software is an essential tool for controlling inventory and ensuring products are delivered to customers efficiently. It plays a vital role in warehouse operations, coordinating various parts of the supply chain, and enhancing the picking process within the whole warehouse system. This system is crucial for managing inventory levels, inventory visibility, controlling stock, and ensuring seamless operations, meeting the needs of businesses, distributors, and sales channels. Learn more about warehouse management processes here.
What Is Warehouse Management Software for Ecommerce?
A WMS for eCommerce is a software solution that monitors inventory levels, tracks stock, and streamlines warehouse processes. It automates order fulfillment, optimizing a proper warehouse management system, supply chain fulfillment operations and meeting the needs of businesses, users, and customers. This system is crucial for managing inventory, controlling stock levels, and ensuring seamless operations, integrating with other ERP systems and software systems and providing support for various organizational needs.
How Does WMS Software Work to Streamline Warehouse Operations?
Managing effective logistics operations can be challenging without the proper warehouse management systems. a WMS system is an online storage platform designed to help businesses store information about their business locations and products. Functional features vary based upon requirements like picking, packing, or shipping. The major goal of this is the smooth movement of your products between the warehouses. This warehouse management system benefits and optimises warehouse space utilization by analyzing information from the system. This software manages inventory and supplies while monitoring inventory performance, etc. The best solution will help you to get more customers.
What Is the Difference Between a Warehouse Management System and an Inventory Management System?
A warehouse management system software monitors the storage of products at warehouses or warehouse centers. It helps keep items in optimal storage places with proper packing and pick-up. WMS software is a useful tool for managing all labor in an industrial warehouse and monitoring worker performance. Inventory management systems help manage inventory in the warehouse staff inventory room including raw material, finished products, or components needed in manufacturing. They monitor stocks and notify businesses of how much final goods and raw materials are required to produce products.
Profiling the Types of Warehouse Management Systems
Different warehouse management systems offer various features and functionalities. Choosing the right WMS depends on the company’s size, order volume, shipments, and the number of products. It’s essential to consider the business’s specific needs, including vendors, stock control, devices, and overall determine the role of warehouse management software. The system’s level of integration with business processes are also vital considerations.
Integrated Vs. Standalone WMS
Warehouse management software has two types: An integrated WMS is generally included by a current ERP provider. ERP software is the primary system for billing, accounting, inventory management. Warehouse management software accepts orders and manages inventory, order delivery of goods. If all the items can fit into a single software platform, it becomes much easier to know which order should be invested in.
On-Premises Vs. Cloud-Based WMS
On premises WMSs are those that require you to manage and maintain the hardware and software that runs your computer. While this provides you full control in terms of up-time and security, it also has a high upfront cost since it is your responsibility. You must also maintain a regular WMS system operation. While very little enterprises may enjoy an on-site WSMS, managing things is difficult. Alternatively, cloud-based WMS systems can be charged as a service fee, but can be hosted remotely.
An Examination of Traditional On-Premise WMS Solutions
Traditional on-premise WMS solutions provide customization and integration with other enterprise systems and platforms. These systems adapt to the company’s specific warehousing needs, including vendors, stock control, devices, and more. They offer benefits in managing inventory, tracking products, controlling the warehouse process, and integrating with manufacturing and distribution channels.
Exploring the Benefits of Cloud-Based WMS Solutions
Cloud-based WMS solutions adapt to technological changes and integrate with eCommerce platforms for data exchange. They ensure compliance with shipping regulations and scale operations to accommodate business growth. These cloud technology and software solutions are essential for warehouse automation, cost control, and enhancing efficiency in the warehouse or distribution center operations, providing visibility into supply chain management and 3pl integrations.
Mobile Apps for Enhanced Warehouse Management
WMS mobile apps enable real-time reporting of stock items and warehouse status. They provide insights into the warehouse and retailers, enhancing visibility, planning and control. Training on WMS apps is essential for warehouse managers and employees to maximize efficiency and functionality, and they often include tools for order management and performance tracking for warehouse workers.
Top 10 Best WMS for Ecommerce
The top 10 best WMS for eCommerce include:
- Shopify
- Netsuite
- SAP
- Ordoro
- Linnworks
- Infoplus
- SkuVault
- Mintsoft
- Manhattan
- ShipHero
These major ecommerce platforms offer various features for inventory management, order processing, and shipping, catering to different business needs and market demands, including solutions for order management, fulfillment, and supply chain management tasks.
ShipHero
ShipHero is an optimal WMS for eCommerce businesses, enhancing visibility and customer satisfaction. It organizes operations, and inventory accuracy reduces common warehouse issues, and integrates with various platforms. ShipHero is a solution that caters to both DTC and B2B operations, providing a seamless workflow and efficient warehouse management solution, including capabilities and modules for storage systems, sales, and service distribution centers.
Core Features of a WMS for Ecommerce Businesses
WMS platforms offer features to optimize picking, packing, and maintaining stock levels. They provide real-time tracking inventory data, automate warehouse operations, and enhance customer service. Integration with sales channels, shipping label generation, and coordination with logistics are essential functionalities. Explore best practices for warehouse bin storage systems here, including aspects of cost management, picking efficiency, and tracking inventory and online tool integration.
Examining the Benefits of a WMS for Ecommerce Businesses
With the right WMS solution, businesses can improve efficiency across operations, from stock management integrated logistics to better customer service and satisfaction. WMS software assists organizations in reducing costs, enabling faster shipping, and saving on shipping & logistics. Understanding warehouse automation costs can further optimize eCommerce through warehouse management systems, including aspects of supply chain automation, order tracking, and inventory control.
Key Takeaways
In the realm of eCommerce warehouse management systems implementation, several crucial insights emerge:
- Holistic Optimization: Effective warehouse management systems serve as pivotal tools for optimizing various facets of eCommerce operations, from inventory control to customer satisfaction.
- Integration of Technologies: The integration of advanced technologies such as AI, robotics, and augmented reality is reshaping the landscape of warehouse management, enabling streamlined processes and heightened efficiency.
- Customer-Centric Focus: Beyond operational enhancements, these systems prioritize enhancing the customer experience by ensuring accurate order fulfillment, timely deliveries, and hassle-free returns.
- Security and Accountability: Warehouse management systems extend their capabilities beyond logistics, embracing security measures that safeguard inventory and uphold the integrity of the entire supply chain.
- Sustainability Considerations: As sustainability gains prominence, warehouse management systems play a role in minimizing waste, optimizing packaging, and aligning with eco-friendly practices.
- Adaptation to Trends: The dynamic nature of the eCommerce sector requires warehouse management systems to continually evolve, adapting to emerging trends and market shifts.
- Strategic Decision-Making: With real-time analytics and reporting, businesses gain insights for informed decision-making, optimizing inventory levels, and staying ahead of customer demands.
In sum, eCommerce warehouse management systems stand as essential pillars that not only enhance operational efficiency but also empower businesses to navigate the complex and evolving eCommerce landscape with agility and customer-centricity.
Frequently Asked Questions About Ecommerce and Warehouse Management Systems
What Are the Different Types of Warehouse Management Systems?
There are two main types of storage space for enterprise systems: on-premise and cloud-based. On-premise is installed on company devices, while cloud-based uses cloud storage.
What Are the Three Components of a Warehouse Management System?
The three components of transportation management systems are software, data recording via mobile or cloud based systems, IoT communication equipment, and automatic identification technology like SKUs or barcodes.
What are the four 4 benefits of a warehouse management system?
Many businesses have adopted WMS systems to optimize efficiency and productivity for the best performance possible. Using an integrated logistics and storage system, the company can move outbound processes, reduce human error and maximize efficiency while improving overall business performance through automation upgrades.
What are the benefits of using a WMS rather than a physical inventory system for a large company?
By using an automated Warehouse Manager system, the business can improve inventory accuracy and increase transparency as the system provides the warehouse with an accurate view of demand. Moreover, enterprises have the ability to leverage specialized WMS systems to monitor order management.
What are the potential benefits of WMS?
A WMS can dramatically increase inventory administration, resulting in faster turnover. The ability to reduce inventory movements can help an organization reduce lead time and reduce the need for safety stocks.
What is the role of WMS in warehouse operations?
Warehouse management systems (WMSs) are software applications used for managing warehouse activities and tracking inventory. This warehouse yard management also takes care of all shipments from their entry into a stockyard to their storage location until the delivery is complete.
What is the role of WMS?
WMS helps ensure efficient transportation inventory movement of goods or materials within warehouses. WMS handles numerous functions for this movement such as an inventory management system to pick up, receive and put the shipment away.
What is the difference between SAP and WMS?
Inventory Management allows and enables you to control stocks in different warehouses using SAP Inventory Management. It can be easily adapted to any warehouse to track inventory in store bins. Contact ShipHero today for a demo today.
Jul 3, 2023 | Blog
The Warehouse Management System (WMS) for Shopify is a software tool that coordinates various warehouse tasks like restocking shelves, scanning products for receiving, and packing items for shipping. Installed on computers and handheld devices, it enables warehouse employees to work in harmony, organizing warehouse processes efficiently. It also helps businesses in tracking, reporting, and managing different types of goods, including all things related to the fulfillment center. Learn more about warehouse management processes here.
The Benefits of a Warehouse Management System for Shopify Stores
A WMS can enhance the operation of your Shopify retail business, saving costs and optimizing space and work time. If you’re scaling your business, a WMS can handle vast amounts of information related to tracking, order management, warehousing, and customer fulfillment. It’s a vital part of modern inventory and warehouse management software and warehousing for companies of all sizes, including small businesses.
Real-Time Stock Levels and Availability
WMS offers real-time tracking of warehouse inventory levels and stock information. It integrates with Shopify for data exchange and manages inventory allocation and optimization. This functionality ensures that customers receive their orders promptly, and you can find more about warehouse bin storage system best practices here. It also helps in managing stock levels and offers visibility to users, all in one place, and allows merchants to plan effectively.
Automated Inventory Replenishment
For Shopify, WMS replenishes stock to maintain optimal store inventory levels, updating inventory information and stock availability in real time. It streamlines the flow of inventory in and out of warehouses, ensuring timely order fulfillment. Automation plays a key role in this process, reducing errors and enhancing efficiency, thus improving sales for retail businesses.
Functionalities Across Channels
WMS puts everything in the right place at the right time, benefiting retailers and companies selling products through the online store, Shopify. It coordinates logistics for timely order fulfillment, streamlines workflows, and generates comprehensive reports on warehouse operations for Shopify. It also helps in managing returns and offers tools for better functionality, including trial options for sellers and services for various retail sectors.
Keeping Inventory Accurate Across Sales Channels
WMS ensures accurate inventory tracking within Shopify, reducing errors and returns. It offers visibility to customers’ favorite brands and helps in managing sales channels efficiently. It also helps in tracking orders and managing suppliers, offering a number of solutions for different types of retailers, and collecting reviews from customers.
Understanding Shopify Inventory Management Challenges
Companies using Shopify face challenges in inventory and supply chain management, such as getting the right amount of products from suppliers. WMS offers warehouse automation solutions to these challenges, streamlining warehouse processes and ensuring efficient order management. It also helps in managing manufacturing resources and offers solutions for different types of retailers, including e-commerce businesses, and helps in planning the right amount of stock.
Products That Don’t Integrate Into Shopify
When products don’t integrate into Shopify, WMS synchronizes data between the Warehouse Management System and Shopify, facilitating efficient warehouse management. It also helps in managing different types of integrations and offers support for various apps, including warehouse management software itself, and helps merchants in their daily tasks.
Phantom Inventory
Phantom inventory, a record-keeping error, can cause delays in order fulfillment. WMS manages the receiving and inspection of goods to prevent such discrepancies. It also helps in managing returns and offers tools for better functionality, including software solutions, and the solution ensures that people receive their orders without any issues.
Managing Multiple Warehouses in Different Locations
WMS for Shopify scales operations to accommodate business growth and increased demand. It enhances customer satisfaction through efficient order processing, delivered regardless of the number of warehouses. It also helps in managing stock levels and offers visibility to users, all in one place, and ensures that a lot of effort is saved in managing multiple locations.
Choosing the Right Warehouse Management System for Your Business
Choosing the right Warehouse Management System impacts the success of entire supply chain of your Shopify business. The ideal WMS organizes warehouse layout, allocates resources efficiently, and ships orders promptly to customers. Consideration of warehouse automation cost is also vital. It also helps in managing returns and offers tools for better functionality, including software solutions, and helps in planning for future growth.
The Top 10 Best WMS for Shopify
The top 10 best WMS for Shopify include ShipHero, Megaventory, Veeqo, SwiftCount, Logiwa, Veracore, Craftybase, PowerHouse, ShippingEasy, and ShipBob. ShipHero stands out as user-friendly with automation features to streamline processes. It also helps in managing returns and offers tools for better functionality, including software solutions, and collects reviews from users.
Key Takeaways
If you operate a Shopify business without WMS, you’re working harder than necessary. WMS optimizes your shopify warehouse management, processes and scales your business. It also helps in managing returns and offers tools for better functionality, including software solutions, and ensures that all aspects of the business are covered.
Frequently Asked Questions
How Can Warehouse Management Systems Enhance Customer Satisfaction?
WMS enhances customer satisfaction by tracking inventory and replenishing it before running out, avoiding delays. It also helps in managing returns and fulfillment operations offers tools for better functionality, including software solutions, and ensures that people receive their orders on time.
How Do Warehouse Management Systems Aid in Getting Full Use of Resources?
Warehouse management systems maximize warehouse space and time and manage financial resources. It also helps in managing returns and offers tools for better functionality, including software solutions, and helps businesses in planning and execution.
What Are the Potential Issues With Products That Don’t Integrate Into Shopify?
Some WMS platforms can be customized to integrate with the Shopify store, while others automatically do so. It also helps in managing returns and offers tools for better functionality, including software solutions, and ensures that merchants have a smooth experience.
Contact ShipHero today for a demo.
