top 5 tips for reducing shipping costs in the retail industry
TRANSCRIPT
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17 Top 5 Tips for Reducing Shipping
Costs in the Retail IndustryDON COBURN, President, Bottom Line Experts
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17 for Redu
cing Shipping Costs in the Retail Industry Bottom Line Experts
Don Coburn – President
January 15, 2017
SPONSOR
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
Challenges in Retail Shipping• “Free Shipping” has Become the Expected Norm• Consumers are Impatient – Want Instant Gratification• Strong Shift from Malls to E-Retail / E-Commerce• Shipping Costs Continue Sharply Rising Every Year• Small Parcel Shipping Costs Have Risen 35% in Past 5 Years• LTL Carriers Imposing Sharp Rate Hikes Annually• Far Outpacing Inflation
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
Speaker BackgroundCorporate Expense Reduction Specialists – Focus on Shipping / Freight
LTL / TL / International / Intermodal Shipping• 400+ auditing staff, 3,000+ clients• $750M in Shipping & Freight Buying Clout• Work with Some of Largest Retailers in the Country
Small Parcel Shipping• 50+ Auditing Staff (mostly ex UPS / FedEx)• Former UPS / FedEx Pricing Analysts, Sales Execs, Mgmt• 500+ Clients, $200M in Documented Client Savings since 2008
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
$26M in Annual Shipping/Freight Savings From These (11) Retail Clients ($2.4M Avg)
Retail Industry Focus
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
Audience Background
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1:Focus On Inbound Shipping
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound Shipping
By Show Of Hands:• Who Receives FREE SHIPPING on Some / All Inbound
Shipments?
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound Shipping
By Show Of Hands:• Who Believes These Inbound Shipping Charges are
ACTUALLY Free???
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound ShippingInbound Shipping is NOT “Free”, In Fact It Is a Profit Center• Inbound Shipping is Nearly Always Marked Up• Some Vendors Specify Shipping Charges on Invoice, Others ‘Bury’ it
Most Scrutiny and Effort Tends to be on Outbound Shipping• Inbound Shipping is Neglected, Seldom Scrutinized• Inbound Shipping is NOT Free• Inbound Shipping is a Vendor Profit Center
Retailers Are Overpaying for Inbound Shipping
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound ShippingStep 1:Estimate Inbound Shipping Cost:• Typically Range From 5% - 10% of Total Goods Purchased (Inventory)
• Not to be Confused With COGS (Cost of Goods Sold)
• Example: $100M Retailer:• $25,000,000 Goods Purchased Annually x 7.5% =
$1,875,000 Annual Inbound Shipping Costs (est)
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound ShippingStep 2:Begin with Small Parcel Shipping (SPS)• Require That Vendors Use Your Small Parcel Account # for Inbound
Parcel Shipments• Most Vendors Will Comply• Exception: • They Are Passing Along Their Direct SPS Costs (VERY Rare)• If Vendor is Much Larger Than You (Higher SPS Spend)• Their SPS Rates Are Better Than Yours
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #1 – Inbound ShippingStep 3:LTL / TL Shipments• Focus Initially on Your Largest (Top 5) Vendors• Ask Vendors to Requote with Modified Terms
• Some Will ‘Play Ball’, Some May Not• “We Want to Buy Your Products but Not Your Shipping Services”• Request New Terms: FOB Vendor Dock• Identify Actual Inbound Shipping Costs
• Solicit Quotes for Inbound Shipping on Top 5 Vendors
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #2:Consolidate Your Small Parcel Shipping (SPS)
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #2 – Consolidate Small ParcelMany Companies Use Multiple SPS Carriers• Sometimes Customer-Driven• Small Service Differences May Exist• Some Perform Package-by-Package Cost Assessments to Select Carrier
for Each Shipment
$15.75$16.85
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #2 – Consolidate Small ParcelMultiple Parcel Carriers Is Rarely More Cost-Effective• More Cost Effective to Pool Spend with (1) SPS Carrier• Carrier Pricing Includes Target ‘Tiers’• SHARP Dropoff in Incentives for Falling Below Target Tier
Sample Small Parcel Tier Incentive Schedule *
Service(s)Weekly Transportation Charges Ranges ($)
0.01 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00$xx,xxx.99 xx,xxx.99 xx,xxx.99 xx,xxx.99 xx,xxx.99 and up
Next Day Air - Letter - Prepaid Frt 0.00% 35.70% 51.00% 52.00% 53.00% 54.00%
Next Day Air - Package - Prepaid Frt 0.00% 36.40% 52.00% 53.00% 54.00% 55.00%
Next Day Air Saver - Letter - Prepaid Frt 0.00% 35.70% 51.00% 52.00% 53.00% 54.00%
Next Day Air Saver - Package - Prepaid Frt 0.00% 36.40% 52.00% 53.00% 54.00% 55.00%
2nd Day Air - Letter - Prepaid Frt 0.00% 31.50% 45.00% 46.00% 47.00% 48.00%
2nd Day Air - Package - Prepaid Frt 0.00% 33.60% 48.00% 49.00% 50.00% 51.00%2nd Day Air - Hundredweight - Package - Regular Pickup 0.00% 15.40% 22.00% 23.00% 24.00% 25.00%
* For Illustration Purposes Only. Not actual data.
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #2 – Consolidate Small ParcelDrive as Much Volume to (1) Carrier as Possible• Reduce Carrier Choices for Customers
• Amazon Offers No Carrier Choices
• Change E-Commerce Shipping Options• Offer Time-in-Transit Choices, Not Carrier Choices
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #3:Create Shipping Rules for Parcel Shipments
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #3 – Create Parcel RulesAn Optimal Mode Exists for Every Shipment• Mode Shifting / Optimization Can Offer HUGE Savings in Parcel• Two Day Shipments May Not Require “Two Day” Shipping Mode• Next Day Shipments May Not Require “Next Day” Shipping Mode• Manual Analysis is Possible• Some Specialists / Experts Offer Software Optimization Solutions
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #3 – Create Parcel Rules
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #3 – Create Parcel RulesParcel Rules Sheet• Publish and Distribute to All Responsible for Initiating Shipments• Include Rules for Various Zones & Transit Times• Create Method(s) for Evaluating Adherence to Rules Sheet• Run Weekly Reports to Highlight Non-Compliant Shipments
• Distribute to Customer Service / Shipping Department
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #4:Separate LTL and Parcel Contracts
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #4 – Separate LTL/SPS ContractsSmall Parcel Carriers Also Offer LTL Services• Frequently Attempt to ‘Link’ Contracts Together• Sales Tactic to Limit Choices / Avoid Carrier Changes (Hooks)• VERY Seldom is Favorable for the Client• NEGOTIATE SPS AND LTL CONTRACTS SEPARATELY
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #5:Use Rewards Cards for Payment Method
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
TIP #5 – Use Reward CardsSmall Parcel Carriers Allow Bill Payment with Credit Cards• No ‘Penalties’ are Assessed for This• Some Business Rewards Cards Are Offering 1.5% – 2.0% CASH BACK
Reta
il’s B
IG S
how
2017
| #
nrf1
7Re
tail’
s BIG
Sho
w 20
17 |
#nr
f17
Questions