Freight costs are rising across the board, whether you are using trucking, rail, ocean shipping, air cargo or another option. Not only is shipping less reliable than it has been in the past, but the strapped supply chain is also asking for more in the way of rates and fees.
If you’re facing increased freight costs then it is natural to turn to your budget to see how you can make it work. Here are our tips for optimizing your budget to better handle these costs and keep your margins stable.
Volume-Based Discounts
Shipping more may seem like a
counter-intuitive solution to your problem, but it can work. Many carriers
offer volume-based discounts. In fact, some will even offer free shipping if
you’re over a certain minimum order. If you can ship more to get a better deal,
it is worth looking into it. Note that you don’t have to necessarily have a
larger inventory for this. If you work with multiple shippers, moving all of
your product or materials to one may make it more affordable overall.
Focus Your Products
When volume won’t work, narrowing what you
ship will. Many retailers are focusing on cutting out products that do not
perform as well as their core products. Sometimes you may even need to consider
whether your core products are performing as well as they should. Whatever is
selling well, make it your priority to have it on the shelves or in stock. Cut
whatever isn’t performing well (doesn’t sell more than five units per month or
isn’t carried in at least half of the markets).
Introduce new products in this market very
carefully. Track your data so that you know sooner if a new product is
performing well enough to merit its shipping costs.
Self-Distribute
When you don’t have something in stock that
a customer needs, you may lose them entirely to a place that does. That’s why
we’re seeing some retailers end up buying their stock at the local Costco, just
to deal with shipping instabilities. When you can self-distribute as a
temporary measure, it can make sense to keep your customer base loyal.
New Suppliers
Finding local suppliers for your materials
may reduce your shipping costs substantially. Even if you have previously
looked into local options, you may find that their prices are now more
competitive, and that their delivery will be more reliable in comparison to our
current freight woes.
Increase Your Prices
Sometimes you should not absorb increased
costs. If your shipping rates have raised substantially, this may be one of
those costs you simply should pass onto your customer. However, you should focus
on doing this with caution. Driving away customers with sudden spikes in prices
is not wise.
Dispute Resolution
It is costly to have delayed and missed
shipments. One way you can give your budget a break is to have a dispute
resolution method worked out with your shipper, in your contact with them.
Do you need to make your business and
budget more flexible? J D Factors can help with invoice factoring services.
Find out more today.
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