No More Guesswork: Shipping Budgeting Tips
So often, businesses set their shipping budgets only to find they’ve missed the mark. Many factors contribute to blown budgets – unpredictable surcharges, unforeseen market conditions and poor planning being a few examples. Even the best-laid budgets can fall apart. But, if you want to turn your shipping operations into a profit center, you need a mastery of your costs.
To put you on the path to shipping in the black, take a look at our budgeting tips to identify commonly missed, unforeseen costs and strategies for smarter, leaner shipping.
Carrier considerations for your shipping budget
Even if your shipping volume doesn’t change much, it’s important to comb through your shipping expenses – nickels and dimes quickly add up to a bombed budget. It might not be the most exciting project, but studying your freight and parcel invoices often offers clues to the trends chipping away at your resources. Here are a few places to start:
- Rate base – Each carrier has a different rate base. Understanding if your favorite carriers come in higher or lower than their competition may help with rate negotiations or changing your go-to trucks.
- Costs per shipping zone – You may find that certain carriers are cheaper or more effective based on pickup and delivery locations.
- Cost per SKU – Some items cost more to ship than others. These costs cover packaging requirements, safety, handling resources, physical aspects of shipments and more. This is critical to determining product profitability and scaling the business.
- Service levels – Are you expediting too often? Can you consolidate pickups? Simple process changes can lead to more economical carrier services.
- Common surcharges – Parcel and freight carriers have many accessorials ranging from a few bucks to hundreds of dollars in fees per infraction. Some, like fuel surcharges, are unavoidable. But many others are a result of issues that can be easily rectified.
Reducing costs is a great goal. However, carriers shouldn’t be evaluated on costs alone. Each has strengths and weaknesses to their fleet and services among other factors. Also, remember that carrier costs aren’t set in stone. For example, they implement a general rate increase (GRI), which bumps base rates 4-6% each year.
Demand planning and your budget
Demand planning is the process of understanding the ebb and flow of sales. This can include year-over-year sales comparisons, seasonal trends, research and market knowledge. You can also incorporate your major marketing events such as product launches, tradeshows or high-impact campaigns into demand forecasts.
Because shipping volume determines carrier, material, replenishment and labor costs, your budget will be more guesswork than strategic without customer demand informing forecasts. Understanding your demand takes collaboration from across the business, and unexpected events can throw a wrench in the best plans. It’s important to consider demand abruptions – be it dips and spikes – so you’re prepared. Having a third-party logistics company (3PL) help with demand planning adds valuable shipping industry knowledge for more resilient shipping budgets and operations.
Getting the most out of your budget
You need an accurate shipping budget for resource allocation and to prepare operations. But, if that’s all you’re getting out of setting a budget, you’ll never turn shipping into a differentiator. Clever businesses know how to shift resources and make smart choices to operate leaner or even build new shipping services into their repertoire.
It’s one thing to offer small business shipping tips to control the budget. While we do have those resources, like our small business shipping hub, we do more. As a 3PL focused on building relationships with small and medium-sized businesses (SMBs), what we want is to help shipping add value to your business while keeping costs on schedule.
Do your shipping expenses line up to your budget estimates? What blows up your shipping budget? Let’s work together to find additional resources under the rug and in-between the couch cushions that open new opportunities in your shipping.