5 Ways to Find Hidden Savings on Shipping

FedEx employees sort through items being shipped through the Fedex World Service Center.
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FedEx employees sort through items being shipped through the Fedex World Service Center.

If you're like most small-business owners, you've already compared rates on package delivery and you're shipping goods in the smallest possible boxes. What more can you do to save money on shipping?

Plenty. Here are five tips on how to make a good shipping program even more efficient and save money:

1. Take control of returns. Many small-business owners leave returns in customers' hands, says FedEx vice president of marketing Scott Harkins. Often, small retailers or e-commerce businesses simply provide a return address and advise customers to ship the goods back via whatever method they prefer at their own expense. Owners may think they're saving money with this approach, but often they're not, Harkins said.

If customers do their own repackaging and shipping, they often omit the packing slip, creating confusion back at the warehouse or store when the package arrives and item numbers have to be researched. Hand-scribbled addresses and missing return addresses or customer names also cause delays.

Customers may call to ask when they'll see a credit, generating costs for your sales staff or call center. Furthermore, you have no idea how many returns are coming, which can result in over staffing or under staffing and additional cost or delays.

To avoid those problems, you can streamline this process by providing printable return labels from your website and using your company shipping account for returns, Harkins said. You'll be able to claim more shipping volume and negotiate a better discount with your carrier, as well as get a better idea of return volumes and ensure that packages arrive with the needed information for speedy processing.

Even when you use your own shipper, you can still deduct the return shipping cost from the customer's refund credit, Harkins said. That's a fairly routine customer cost and few customers will object.

2. Negotiate rates based on future growth. When PetFlow opened in New York City in 2010, shipping volume was small. But the online pet-food company could demonstrate steady growth and forecast that it would do much more volume in future, said co-founder Alex Zhardanovsky.

By sharing its projections with FedEx, which handles all of PetFlow's shipping, Zhardanovsky said he was able to essentially get next year's shipping rate right away. PetFlow continues to renegotiate as volume increases — the company's sales this year are expected to reach $30 million and to be double that in 2013. Harkins said FedEx does take current and future shipping levels into account.

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3. Put your warehouse near customers. When a small business starts out, most customers may be local. But as you grow, more far-flung customers can mean skyrocketing delivery costs.

That's why PetFlow quickly added a second warehouse on the West Coast, Zhardanovsky said. PetFlow even spent $2,500 to truck some East coast merchandise to the second warehouse. Prior to this move, some multiple-item orders required a delivery from each warehouse, an inefficiency that can more than double delivery costs and cause customer dissatisfaction as well. "Every two-package delivery generates a customer-service call," Zhardanovsky said. "They say, 'Where's the rest of my order?'"

Entrepreneurs don't have to guess where to put another warehouse, either. Harkins said FedEx works with customer lists to locate the exact ZIP code where a second warehouse would be best. If your business can't afford to add an entire second warehouse, consider leasing part of a facility from a third party. That's what PetFlow did with its first West Coast warehouse space.

4. Get international expertise. Forming a partnership with a major international carrier can pay off in time and cost savings when you ship goods into or out of other countries.

Such shippers can help small businesses deal with the dizzying array of often arcane rules that vary from country to country, said DHL senior vice president Mike Parra. Two of the biggest questions are whether your shipment is considered "formal" or "informal" — in other words, business or personal — by the country in question, and whether or not you owe a duty. In many countries, shipments under $2,000 in value are considered informal, even if they come from your business.

5. Audit your invoices. Shipping invoices are increasingly complex, particularly if you ship internationally, says shipping consultant Marcello Medini of PNG Logistics in Lancaster, Pa. Medini said most small businesses never audit their invoices to see if they've been overcharged. But there can be more than 150 separate variables on a shipping invoice, so mistakes are common.

Shippers may not like it, but you always have the right to audit your billings, Medini says. In audits PNG has handled for larger companies, Medini says he's routinely uncovered tens of thousands of dollars of erroneous charges. Common errors include failing to apply a company discount code or billing for a residential delivery when in fact the package went to a business.