Shipping costs are one of the most important items in the e-commerce companies’ budgets. The forecasts are not optimistic: in 2018, a ten-percent plus increase in shipping costs was recorded. Service prices are growing slowly, but the discounts granted by courier companies are rapidly decreasing at the same time. So the question arises, where to look for savings in this situation? One of the best answers is the optimization of packaging costs.
The simplest reaction to the increase in the price of courier services is to transfer the costs to the customer. With large orders, a ten-percent plus increase can go unnoticed. However, it is a very risky move in the case of small business. When the cost of delivery begins to amount to a significant part of the overall cost of the contract, the competitiveness of the company is in question and the customers may be lost easily.
Savings for a small and a big business
The optimization of the logistics costs is beneficial for everyone – for large and small companies, retailers, as well as wholesalers. An advantageous position is enjoyed by big market players who can negotiate individual rates with courier companies. The largest ones have their own forwarding systems.
Smaller businesses can count on favorable price terms by using brokers. Virtual couriers use small orders to compose large volumes, which gain in bargaining value in negotiating prices with courier companies. For the end customer, cooperation with the broker is not much different from dealing directly with the courier company. Only the price of the shipment may often be even half the price.
Also outsourcing is becoming increasingly popular and used for the optimization of forwarding costs. It means that the entire process (storage, packaging, delivery) is subcontracted to a specialist company. The efficiency (in terms of saving money) of this solution depends on many factors, including the specifics of the business. There is no doubt that this option is worth considering.
Once we have used all the limited possibilities to reduce external costs, it is worth taking a closer look at the processes that occur before the delivery is passed to the courier.
The potential lies in every package
The method of preparing parcels for shipment may result in unnecessary cost, as well as in measurable savings.
To optimize the packaging process, you have to meet a number of conditions, of which the two most important are:
- optimal selection of packaging – choice of the right size of packaging for the size of the goods facilitates and speeds up the work of packers, reduces the necessary storage space, minimizes the risk of mechanical damage – the costs of labor, storage, and the replacement of damaged goods are reduced;
- optimal usage of the space in the package (in the parcel, on the pallet, in the delivery truck) – it prevents expenses on “air transport”, reduces the number of packages, allows you to fit in the parameters of the sortable package (“How much does a tonne of styrofoam weigh?“), and hence – results in a tangible decrease of the overall storage and delivery costs.
In addition, you get also “soft” benefits: the aesthetic appearance and carefully arranged content of the package builds a positive image of the seller to its customers.
The machine will do it for you
A sign of the times in which we live is that human work is progressively being substituted with automatic machines. Everywhere, where precise and error-free execution of repetitive tasks or complicated calculations is required, automation – machines or algorithms (applications, systems) – is unbeatable. This also applies to the optimization of the packaging of goods.
Calculating the maximum number of packages sized 40 x 40 x 20 cm, which will fit on a euro pallet (120 x 80 cm) loaded to a height of 100 cm does not exceed the ability of the primary school pupil. However, trying to find a solution to dozens of similar maths task – one by one and under time pressure – can result in an avalanche of errors, even in the case of an experienced forwarder.
The algorithm will handle thousands of such brain teasers. It will provide the right result in an incomparably shorter time than that needed by a human and will prepare a visualisation of the arrangement of packages/pallets in a container or on a trailer. The packer instead of wasting any time on unnecessary trials, will only copy the received pattern with parcels. The whole process will run without errors, without unnecessary waste of time, without exposing the product to potential damages, without mistakes in loading and delivery. How does it work? Check it out for yourself by visiting our Loading Optimization Software page.
Packaging planning algorithms are perfect for an e-commerce shop, wholesaler, warehouse, forwarding company. Their use is not only a reasonable choice, but more often a necessity. Electricity and fuel prices are on the rise, which is reflected in increasing courier service prices. If this trend continues, optimization of packaging costs through applying automation may turn out to be Shakespeare’s “to be or not to be” moment for many companies in e-commerce.