The cost of just about everything, including fulfillment, has risen in recent years. Labor is a major component of the overall cost of fulfillment. While technology can help make the process more cost-efficient, highly automated fulfillment centers do not work for the majority of B2C shippers who do not ship high enough volumes. However, there are still many strategies that can help reduce the cost of fulfillment, including using a 3PL to handle this part of your business.
The Most Common Fulfillment Fees
In order to be able to reduce fulfillment fees, it is important to understand some of the components that make up the total cost of fulfilling an order, particularly if you work with a 3PL.
Onboarding: This is a flat fee that covers integrating a business and setting up an account with software or other tools needed to fulfill orders.
Receiving: Transporting products to a warehouse means shipping and logistics fees, that can possibly be reduced with a slower shipping service.
Picking and Packing: This is a cost of fulfillment that is necessary, but some services do cost more, like extra SKU’s.
Inventory: There is a cost of carrying and storing inventory.
Shipping: Working with a 3PL (third-party logistics provider) can help to find volume shipping discounts.
Ways to Reduce Fulfillment Costs
Reducing fulfillment costs will require assessing your process and reviewing where you can cut costs.
Improve Associate Retention
The number one way to reduce labor costs of fulfillment is to improve employee retention. The average turnover rate for logistics employees is 31%. Money is lost in recruitment costs, training and onboarding costs, reduced productivity of new hires, and increased mistakes. Satisfied distribution centers and warehouse managers help to increase other employee satisfaction. There are many different ways to show appreciation to increase retention.
Revamp the Picking Process
The picking process can be very time-consuming, particularly if it is not done correctly. A WMS (Warehouse Management System) can identify similar orders so they can be processed separately from regular, multi-SKU picking process in batch picking. Batch picking can help optimize the picking process and save money.
Optimize Inventory Forecasts
Inaccurate planning can leave fulfillment center operations off balance. Forecasts can help to create the warehouse labor plan so that you are not paying for too many people or left short-handed and missing deadlines. The run rate can also help guide the plan. Simple communication with the fulfillment center about a change can go a long way in making sure everything is aligned. Improved forecasts can reduce fulfillment costs by reducing overtime and expedited shipping.
Organize Inventory
Warehouse slotting, or organizing inventory, can help to reduce travel time. The less time spent looking for items, the lower the cost of labor. A good WMS system can:
- Organize popular items within easy reach so that they can be picked quicker.
- Put items that are often ordered together next to each other.
- Balance picking across multiple aisles.
- Take seasonality into consideration.
A picking process that is more efficient will reduce labor costs, depending on the product mix.
Automate Processes
Warehouse automation options can reduce the number of people that are needed but cannot replace them entirely. There are some lower-cost ways to minimize the amount of labor needed, for example, checking for order accuracy can be done by scanning products with a barcode as they are placed in a box to ensure the order is accurate. The scan can also be done at time of picking eliminating the need for a manual final check. Being able to automate repeated tasks can lead to large savings over time.
Right-Size Packaging
Choosing a box size that is too big for an item is a waste of money, but you can optimize your product packaging by choosing the right size packaging. Smaller packaging can save not only on packing materials but also on shipping costs with less weight and dimensional sizing. Additionally, any packaging extras like inserts will add on to the time it takes to fulfill orders.
Your Trusted Partner
Working with a 3PL can also help to reduce fulfillment costs. When choosing a fulfillment partner, finding one that fits your business’s needs is important. Red Arrow Logistics can evaluate your fulfillment process to help to reduce excess expenses and add value so your shipping process is optimized.
Red Arrow offers the scale and scope of services including air, ocean, and ground transportation to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email us at [email protected] or give us a call at 425-747-7914.
