Between rising shipping rates and confusing ecommerce fulfillment options, many emerging suppliers feel blocked from succeeding in retail. Plenty of newer CPG brands are struggling to manage it all.
In a recent podcast episode with RangeMe (hosted by Joe Tarnowski), Bulu co-founder Paul Jarrett shared some invaluable insights into the world of shipping rates and fulfillment options.
With common pitfalls to avoid (and plenty of juicy tips to avoid them), any supplier new to the industry can walk away much more prepared than before. Here’s some of what Paul covered in the episode.
Trap #1: Thinking Logistics is Complicated Simply because It Is Complex
Many people believe logistics is complicated. Part of this comes from the number of exceptions and that can arise when multiple companies are involved with anything — for instance, when one company has a surcharge for gas and another doesn’t. A problem with many components may be complex, but that does not necessarily mean it is difficult.
This can make logistics seem complicated and intimidating at first. Companies can use this assumption to their advantage, charging more to perform simple tasks for you.
Make logistics easier by breaking down processes and understanding accountability
Logistics can be simplified by understanding who is accountable for owning each element of this process, including the relevant relationships — from suppliers to retailers. This clarity will help you troubleshoot issues more effectively. To start with:
Inbound logistics can be summarized as “getting the stuff to make the thing.” They focus on supply, receiving, and relationships with suppliers, vendors, and distributors. The processes here relate to sourcing the product, handling it, and storing it.
Outbound logistics are about “getting the thing to the place.” They focus on demand, delivery, and relationships with customers, retail, and wholesale companies. The processes here revolve around picking the product, packing it, and shipping it.
It may help to have a visual (like a chart) showing who on your team is responsible for each of these processes and relationships.
Once you have a grasp of these elements, you’ll always understand where to go for what you need, and your logistics stress will evaporate pretty quickly.
Trap #2: Thinking You Can't Get Good Prices on Materials Yet
Some people believe they can't get good prices on materials or shipping rates until they have some level of scale. This is a mistake.
Don't just accept the first price you see: ask lots of questions, and ask advice rather than focusing on cost savings.
Paying the price listed on the logistics company website is like going to a used car lot and taking the first offer. Never pay this full price.
Part of this involves making sure you understand where the prices are coming from, because they’re not always necessary parts of the deal. Don’t assume anything is included if it’s not explicitly stated. Questions might include:
“What does that mean?”
“Do you provide returns?”
“How many items do you put in each box?”
“Do you control warehouse temperature?”
Next, rather than simply asking for a lower price, ask what your rep would do if they were in your position. Sign the contract right there? Or consider a different setup? You’d be amazed at how often they’ll give you something, like “oh I wouldn’t do pallet storage for this, I would do XYZ.”
Don’t be afraid to circle back to the question if they dodge it. Most people will give you a helpful answer eventually, and if they were assuming you already knew certain best practices, they might not have thought to tell you in the beginning. Part of the reason this works is you’re getting them to take off their sales rep hat for a minute and speak with you as a human.
Piggyback off local for cheaper materials
Learn from local businesses who are already shipping products. They can provide valuable insights and may even offer opportunities to collaborate or piggyback off their shipping rates.
It’s WAY better to do this in person, simply walking up to the warehouses or business. There are an incredible amount of opportunities that arise in conversations like this that simply don’t happen from a phone call or an email.
Competition + FOMO = better price
Take advantage of a competitive marketplace, and any company’s fear of missing out.
When negotiating for a better deal for example, make them aware that you’re looking in multiple places. You can increase the sense of competition by giving both competitors a deadline, “because the deadline is October 1st, so we can make holiday sales.”
Give this argument some extra punch by telling them the better deal their competitors are offering. For instance, “and because I don’t think they’re going to beat you on the shipping rates, but they are going to beat you on fulfillment rates and the cost of their returns.”
Notice the word “because” in these. Adding “because” after your request will get you better results in any situation.
Use “The Walk-Away”, because you’re just negotiating their commission
When a deal isn’t working out the way you wanted, and they’re not budging, don’t be afraid to walk away. This is a classic negotiation tactic because it works so well, when used correctly. More often than not, if you do it right they’ll give you a call back within days.
Get free boxes, software, business cards, labels
Many times, companies (like Salesforce, HubSpot, or Shopify for instance) will give you a free subscription for a period of time, if your business is growing. They know that if they can get you hooked on their software, you’ll become a loyal paying customer once your business is more established.
For physical items, print companies will often provide stickers and business cards for free that also include their logo. In many cases, you can give them a call and ask to get the branding removed. The same applies to labels and boxes.
Go to materials conferences free as a buyer
Simply letting them know “Hey we’re likely to buy X in the future but not now,” can help you make connections. These events are great places to meet the types of people who can give you advice and contacts to get better deals later on.
When in dire need of information, try posting bad advice online
It’s funny that this works, but hey, here we are. We don’t recommend you do this often by the way, and only if you really need advice and aren’t finding answers when you post questions. On sites like Reddit or Quora, people are much more likely to correct your incorrect suggestions, rather than reply to a question you ask. Just be sure to be a decent person and edit your post with the correct information once you have it.
Don’t dismiss credit card offers
Companies like AMEX sometimes have some amazing deals with companies like FedEx. Don’t write these off, even if you’re not using credit cards much.
Ask suppliers for excess, damaged, or leftover inventory
This is great in your early days, whether you need boxes or other materials. Believe it or not, you’re usually doing them a favor by taking these things off their hands.
Talk to 3 experts in the field
When trying to get a problem solved, don’t hesitate to reach out to people in the industry, whether they’re working directly in that area or something in a similar world to it. You will learn a lot, and get different perspectives to consider, even if the first one answers your question.
In short: ask, and you shall receive — but remember to think long term
These savings tips will be helpful as you’re first growing your business, but of course you’ll soon outgrow them. Focus on creating a business model, not a hustle, as finding cost-saving hacks and workarounds like these won’t give you a scalable model for a business.
Trap #3: Thinking You Already Have Good Shipping Rates
If you’re resting comfortably with your shipping rates, you run the risk of getting screwed. Websites, apps, etc, make money off you, or cuff you, especially when you’re not paying close enough attention. Here are a few things to remember:
Quick tips for shipping rates:
Shipping rates are fluid and require constant management (this is important!)
Read between the lines in the buried PDFs from material suppliers, vendors, UPS, etc. You’d be surprised how many misconceptions there are about who will ship what, or for how much. If USPS won’t ship it, you might be able to make your case with the postmaster.
Negotiate verbally with your reps.
Be carrier-agnostic — shipping to customers? Look at all your options
Ship by cubic weight (size+distance) versus just weight
Consolidate your items into one package. Your fulfillment company and carrier might even be counting products differently.
Consider not paying for returns (for low-cost items), and simply send the new item, as it’s generally cheaper than processing the return
Consider scrapping 2-day shipping, especially for refillable items
In short, you need to negotiate (verbally), reduce the number of trucks used (or times the truck goes back and forth), and be able to leverage your forecasting to work with your rep so they can work more effectively for you.
Boxing It Up
Materials, labor, and shipping rates probably make up most of your costs. If you’re not managing shipping rates like labor and materials, you might be getting taken advantage of.
Remember:
Logistics aren’t too complicated once you know who to go to for the important things
You can save a ton of money by just asking the right way.
Shipping rates require constant management — there are very few ways to get the best rates without handcuffs.
For a deep dive into these insights, listen to the podcast episode here. __________
Bulu is a subscription-first, full-service 3PL. We’ve launched and fulfilled subscription boxes for Fortune 500 companies like Disney, GNC and Crayola as well as growing ecommerce companies. Our warehouse, processes, training and software is designed to meet the needs of subscription first. We’ve seen how subscription boxes or subscribe & save functionality can grow customer lifetime value, increase customer retention and grow a business overall. That’s why we’ll install subscription buying options to a Shopify site FREE when you partner with us for fulfillment.
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