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By Hallie Mummert
Climbing fuel prices coupled with consumers' desire for instant gratification create a challenge for direct marketers trying to keep their shipping costs under control. Target Marketing turned to several fulfillment experts for ideas on how direct marketers can walk the fine line between customer service and shipping cost management.
1. According to the experts, while the order handling and kit/order assembly processes benefit from continual improvements, the "rules of delivery" don't seem likely to change much in the coming years. So the insights that follow represent a set of best practices for delivering product and literature in the most economical fashion.
2. When time and tracking are not an issue, consolidators offer the best value on parcel shipments. Consol-idators typically take eight to nine days to deliver packages, where a carrier—i.e., FedEx, UPS, DHL, USPS—usually delivers in three to four days, says Marc Klein, director of sales for SC Fulfillment Services, a full-service fulfillment and call center operation in Monroe, Wisc. You can save 80 cents to $1 per parcel, he continues, depending on the weight of the package.
3. Delivery through a carrier is more economical for low-volume parcel shipments. Besides the fact that consolidators won't accept low-volume jobs, the longer delivery times involved in consolidating small shipments might result in increased contact center costs, explains Craig Collins, director of marketing, MCRB Fulfillment, a full-service fulfillment and telemarketing company with headquarters in Chatsworth, Calif. Orders are likely to sit on a trailer, waiting for it to fill up before the consolidator will truck it to the U.S. Postal Service entry destination. In the meantime, customers may be calling in to ask why their orders haven't arrived. Carrier shipping prices are reasonable compared to the customer service and brand equity costs associated with disappointed customers.
4. Match the delivery method to the customer. For high-end products, high-value customers or lead generation prospects where conversion is dependent on fast delivery of the fulfillment kit, Collins advises using a carrier to ensure prompt receipt. Otherwise, you're safe shipping standard orders via a consolidator.
5. Skip any of the charges involved with insurance, if the product cost is so low that it's cheaper to replace any misdirected orders. Even if a customer complains that his order didn't arrive, and you have UPS or FedEx delivery confirmation, you're still more likely to send a replacement order than argue with the customer, says Klein. But, you might want to put such non-delivery complaints into customer history, so you're able to flag customers who repeatedly claim they didn't receive their order.
Use a carrier when it's important that you be able to track orders. Carriers typically offer tracking services at no charge. Since consolidators inject shipments into the postal mail stream at the delivery destination unit, they are not able to provide tracking information, says Collins. You most likely will want to track expensive shipments, he adds, but some direct marketers are finding it a competitive advantage to make the shipping process transparent to the their customers via an online tracking interface. Customers can use this tool to check the progress of their order without the need to call a customer service line.
Another benefit of tracking: It offers direct marketers the ability to pinpoint delivery bottlenecks and establish average delivery windows, says Richard Walker, vice president of sales, The Corporate Communications Group, a full-service marketing communications support firm in West Caldwell, N.J. This information can be leveraged to determine the optimal kit assembly procedure or order picking/packing system that will offer right-time delivery at the lowest cost. For example, he explains, companies squeeze the delivery window with late materials and last-minute changes to fulfillment kits, resulting in excessive shipping costs for overnight or two-day delivery. By knowing delivery times for all regions, you can best determine which delivery method is needed for any fulfillment scenario.
6. Leverage your negotiation power with carriers. Large companies often can contract for better shipping rates with carriers who take into consideration the direct marketer's overall corporate shipping expenditures, Walker says. Then, their fulfillment partner will follow whatever carrier selection guidelines they set for specific shipping scenarios. On the other hand, Walker explains, small direct marketing companies will find more advantage in having their fulfillment firm negotiate their rates. Vendors can strike a better deal by leveraging the shipping volume conducted on behalf of numerous small clients.
7. When partnering with a fulfillment firm, consider the number of locations it offers and the placement of these facilities. If a significant percentage of your orders come from a few regions, you can offset multiple inventories with lower shipping costs based on shorter delivery distances, says Walker. Make sure the vendor provides you with one account person, he advises, no matter how many of its facilities you use.
8. Determine if you can use the carrier's free packaging. Taking advantage of a carrier's free boxes, tubes and mailers will put money back into your pocket, since the fulfillment firm won't have to charge you for supplying packing supplies. When you're talking about 20,000 cartons or more, says Walker, the savings really can add up. But remember that the package will feature the carrier's logo, a detraction for some companies that want to leverage the brand moment when a customer receives his order.
9. Be open to using different packaging materials. A padded envelope might provide adequate protection for your merchandise, plus it will weigh less and reduce your shipping costs, offers Jeff Ehrlich, president of Fulfillment Plus Inc., a full-service fulfillment company in Holtsville, N.Y. As mentioned before, consider the presentation value of each packaging type, since customers will consider it when evaluating your company's service.
10. Consider the impact dunnage has on shipping costs. When it comes to saving money, Klein hasn't found much difference in weight between paper, recyclable foam peanuts or inflatable bags. Overall, the labor costs for using peanut fill are lower than other types of filler, he says, but this material is not very consumer-friendly. The best way to cut costs on dunnage is to use a wide variety of shipping boxes, he advises, so you need less packing materials. Of course, this depends on the fragility of the product being shipped.
11. You might be able to save money by splitting a large order into smaller shipments. The rates for parcels weighing more than 1 pound can be triple that of packages that weigh less, says Ehrlich, so it can be cost-efficient to turn one package into two shipments. Even with the additional labor and packaging costs factored in, you save when you keep packages under 1 pound.
Hallie Mummert is editor in chief of Target Marketing magazine. She can be reached at (215) 238-5437.
Climbing fuel prices coupled with consumers' desire for instant gratification create a challenge for direct marketers trying to keep their shipping costs under control. Target Marketing turned to several fulfillment experts for ideas on how direct marketers can walk the fine line between customer service and shipping cost management.
1. According to the experts, while the order handling and kit/order assembly processes benefit from continual improvements, the "rules of delivery" don't seem likely to change much in the coming years. So the insights that follow represent a set of best practices for delivering product and literature in the most economical fashion.
2. When time and tracking are not an issue, consolidators offer the best value on parcel shipments. Consol-idators typically take eight to nine days to deliver packages, where a carrier—i.e., FedEx, UPS, DHL, USPS—usually delivers in three to four days, says Marc Klein, director of sales for SC Fulfillment Services, a full-service fulfillment and call center operation in Monroe, Wisc. You can save 80 cents to $1 per parcel, he continues, depending on the weight of the package.
3. Delivery through a carrier is more economical for low-volume parcel shipments. Besides the fact that consolidators won't accept low-volume jobs, the longer delivery times involved in consolidating small shipments might result in increased contact center costs, explains Craig Collins, director of marketing, MCRB Fulfillment, a full-service fulfillment and telemarketing company with headquarters in Chatsworth, Calif. Orders are likely to sit on a trailer, waiting for it to fill up before the consolidator will truck it to the U.S. Postal Service entry destination. In the meantime, customers may be calling in to ask why their orders haven't arrived. Carrier shipping prices are reasonable compared to the customer service and brand equity costs associated with disappointed customers.
4. Match the delivery method to the customer. For high-end products, high-value customers or lead generation prospects where conversion is dependent on fast delivery of the fulfillment kit, Collins advises using a carrier to ensure prompt receipt. Otherwise, you're safe shipping standard orders via a consolidator.
5. Skip any of the charges involved with insurance, if the product cost is so low that it's cheaper to replace any misdirected orders. Even if a customer complains that his order didn't arrive, and you have UPS or FedEx delivery confirmation, you're still more likely to send a replacement order than argue with the customer, says Klein. But, you might want to put such non-delivery complaints into customer history, so you're able to flag customers who repeatedly claim they didn't receive their order.
Use a carrier when it's important that you be able to track orders. Carriers typically offer tracking services at no charge. Since consolidators inject shipments into the postal mail stream at the delivery destination unit, they are not able to provide tracking information, says Collins. You most likely will want to track expensive shipments, he adds, but some direct marketers are finding it a competitive advantage to make the shipping process transparent to the their customers via an online tracking interface. Customers can use this tool to check the progress of their order without the need to call a customer service line.
Another benefit of tracking: It offers direct marketers the ability to pinpoint delivery bottlenecks and establish average delivery windows, says Richard Walker, vice president of sales, The Corporate Communications Group, a full-service marketing communications support firm in West Caldwell, N.J. This information can be leveraged to determine the optimal kit assembly procedure or order picking/packing system that will offer right-time delivery at the lowest cost. For example, he explains, companies squeeze the delivery window with late materials and last-minute changes to fulfillment kits, resulting in excessive shipping costs for overnight or two-day delivery. By knowing delivery times for all regions, you can best determine which delivery method is needed for any fulfillment scenario.
6. Leverage your negotiation power with carriers. Large companies often can contract for better shipping rates with carriers who take into consideration the direct marketer's overall corporate shipping expenditures, Walker says. Then, their fulfillment partner will follow whatever carrier selection guidelines they set for specific shipping scenarios. On the other hand, Walker explains, small direct marketing companies will find more advantage in having their fulfillment firm negotiate their rates. Vendors can strike a better deal by leveraging the shipping volume conducted on behalf of numerous small clients.
7. When partnering with a fulfillment firm, consider the number of locations it offers and the placement of these facilities. If a significant percentage of your orders come from a few regions, you can offset multiple inventories with lower shipping costs based on shorter delivery distances, says Walker. Make sure the vendor provides you with one account person, he advises, no matter how many of its facilities you use.
8. Determine if you can use the carrier's free packaging. Taking advantage of a carrier's free boxes, tubes and mailers will put money back into your pocket, since the fulfillment firm won't have to charge you for supplying packing supplies. When you're talking about 20,000 cartons or more, says Walker, the savings really can add up. But remember that the package will feature the carrier's logo, a detraction for some companies that want to leverage the brand moment when a customer receives his order.
9. Be open to using different packaging materials. A padded envelope might provide adequate protection for your merchandise, plus it will weigh less and reduce your shipping costs, offers Jeff Ehrlich, president of Fulfillment Plus Inc., a full-service fulfillment company in Holtsville, N.Y. As mentioned before, consider the presentation value of each packaging type, since customers will consider it when evaluating your company's service.
10. Consider the impact dunnage has on shipping costs. When it comes to saving money, Klein hasn't found much difference in weight between paper, recyclable foam peanuts or inflatable bags. Overall, the labor costs for using peanut fill are lower than other types of filler, he says, but this material is not very consumer-friendly. The best way to cut costs on dunnage is to use a wide variety of shipping boxes, he advises, so you need less packing materials. Of course, this depends on the fragility of the product being shipped.
11. You might be able to save money by splitting a large order into smaller shipments. The rates for parcels weighing more than 1 pound can be triple that of packages that weigh less, says Ehrlich, so it can be cost-efficient to turn one package into two shipments. Even with the additional labor and packaging costs factored in, you save when you keep packages under 1 pound.
Hallie Mummert is editor in chief of Target Marketing magazine. She can be reached at (215) 238-5437.
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