How can I lower my distribution costs?

Costs are generated from start to finish in business: from storage, to sales, to shipping. Some are unavoidable; others can be minimized or eliminated entirely. The following five tips can help you cut your distribution costs.

1. Form partnerships
Small companies typically only have small quantities of freight and are unable to achieve cost-efficient load factors. As a result, it often makes sense for them to form partnerships with other businesses who serve the same customers. This enables them to make better use of available truck capacity. And that reduces shipment costs and accelerates delivery.

2. Integrate shipment, inventory and order data
A solid pool of data is essential. It is important to maintain sales and inventory data, and to capture the shipment data used by CEP providers – and to assign these data to customer orders. It also makes good sense to analyze customer order behavior, as this can identify opportunities for improvements.

3. Cross-docking
With cross-docking, goods received are transferred directly to outbound trucks for delivery to the customer. In other words, the products are not placed into storage – eliminating these costs entirely.

4. Package consignments in your distribution center
To avoid the costs associated with using external companies to package your products, and to prevent possible inventory damage or loss, it can be advisable to create your own in-house packaging units. The dimensions of the consignments should be chosen to create a weight that avoids excess shipment costs.

5. Minimize chargebacks
Chargebacks are always time-consuming and expensive. Invoiced amounts have to be cancelled, with corresponding charges. But it is possible to cut costs. A key aspect is transparency for the customer: if there are likely to be delays or problems with delivery, inform the customer immediately. It can also help to have documentary proof of delivery.