Gobbling Up the Profits
Un-Stuffing the Turkey Shipping Costs
"We have to ship those turkeys today!" Tommy smiled as he leaned back in his chair, thinking about how this Thanksgiving season was the month he had waited for all year.
Gobbler Inc was having a record year in selling whole turkeys this year as more folks were having to stay home to enjoy this tasty bird in smaller gatherings. Every day the orders seemed to be doubling. The only monkey wrench in the business was his shipping costs. Since each turkey weighed about 30 pounds, those costs mounted up. Tommy suspected he was paying more in shipping than he should and trimming that cost could go directly to his bottom line.
So, as much as Tommy wanted the shipping to go smoothly, he also wanted the cost reduced. Fortunately, Tommy’s cousin, Cobb, was in the business of making frozen pies. Shipping almost 2 million pumpkin and other pies every Thanksgiving, Cobb knew a lot about shipping costs. Maybe he would have some ideas on how to improve the shipping and reduce their costs.
Tommy invited Cobb over to Gobbler for a pre-Thanksgiving turkey lunch to see what tips Cobb could provide as the company headed into the holiday season.
Are you improving and optimizing your shipping process in order to reduce costs? You have more control over this large expense area than you know.
Cobb came prepared and served up four ways that Gobbler could reduce shipping costs.
1. Eliminate Free Carrier Shipping Stations
Cobb knew from his recent plant tour that Gobbler was running separate packing and shipping stations in their warehouses. Much of this was due to warehouse operations staff thinking that a free shipping system provided by a carrier had no cost to Gobbler. They couldn’t have been more wrong!
Free carrier-provided shipping station systems impact warehouse operations by creating an unnecessary two-step packing and shipping process.
Cobb suggested that Gobbler replace the standalone free carrier-provided shipping station systems with a centralized multi-carrier shipping system. This multi-carrier shipping system could be integrated for real-time communications with the ERP or Warehouse Management System (WMS).
With this approach, the shipping label on the box could be generated right at the packing station. This streamlined process would result in a significant reduction in labor and labor-related costs. It also might reduce packing errors as a bonus benefit!
2. Carrier Rate Shopping Software
Cobb was eager to share his experience with rate shopping which saved thousands of dollars on Cobb’s frozen pie shipments.
Cobb shared a statistic with Tommy that was surprising. Less than 50% of manufacturers bother with rate shopping. It is more typical of companies to just rely on a primary carrier to deliver most of their shipments.
Tommy thought to himself “Yeah, but we are happy with our carriers.” Cobb saw that Tommy was not impressed, so he dove deeper. “I bet you have the mistaken belief that the more you ship with an individual carrier, the higher your discount will be.” Tommy nodded.
Cobb told Tommy that when he introduced rate shopping software and shifted to multiple carriers, he improved both his primary discounts and his overall savings by more than 10%. That’s a lot of dough!
3. Standardize Packaging
“What box sizes do you use here?” asked Cobb, knowing that turkeys come in different sizes and weights. Tommy said “We use a bunch of different boxes. Once we slap a label on the side, we are good to go!”
“Are you having to ‘void fill’? asked Cobb.
Tommy looked up, “What’s that?”
Boxes with excess space need to stuff the empty space in the box with a filler so that the turkeys inside don’t move around. That means there is more packing material used and so more costs.
Shippers can work with their box vendors to provide better sized box choices that accommodate weight-based and dimensional shipment rating.
Another statistic of note is that more than 50% of shippers use box sizes that are bigger than needed. Box size utilization can be analyzed to standardize packaging. This is a one-time evaluation that improves the cost-effectiveness of shipping. Better boxing means lower costs!
4. Transportation Management System
Cobb had recently implemented a Transportation Management Systems (TMS) that could closely integrate with his ERP system. The process flow from order to warehouse to shipping was improved and Cobb was already reaping the benefits.
The streamlining of carrier invoice reconciliation prior to payment meant that Cobb needed less people in Accounts Payable. This was shaving off costs for each invoice because of the reduced manual processing.
Tommy took note of this. He had added so many staff in Accounting because they were always behind. With a TMS system, perhaps they would spend more time on Accounts Receivable!
Tommy took one last bite of the turkey stuffing and leaned back in his chair. “Thank you, cousin, those are darn good ideas!”
“That’s what I am here for!” Cobb grinned at Tommy, waiting for his annual Frozen Turkey to take home.
“Come on over to our house this year,” Tommy invited, “and bring some of your Pumpkin Pie!”
“Great,” Cobb chuckled, “I’ll bring all my kids and in-laws, too!”
This would be a great Thanksgiving.