Smaller shippers need to think ahead of the curve
JBF Consulting has been rather fortunate to have a roster of clients that many people instantly recognize. We typically work with large shippers (those with hundreds of millions in freight spend) that have complex operations, processes, and technical challenges.
But what about the smaller guys?
The SMBs (Small and Medium Businesses) or even the ‘micro-shipper’ (those that have a handful of parcel shipments a week) that is just getting a business off the ground?
These folks are in no position to be thinking about multi-year, multi-national, multi-million dollar programs.
These shippers need relatively simple, easy to use solutions that solve business problems quickly and effectively, while having some shelf life. We work with plenty of these organizations as well, albeit the value proposition is often a bit different.
“Often the last piece of the puzzle turns out to be what makes or breaks a product-based business ... LOGISTICS!”
Think about the evolution of a business in its purest sense.
An entrepreneur has an idea for a new or better widget and goes to work in his or her basement. They tinker, they fail. They test, they try again. They use friends and family as guinea pigs. Finally, success! But wait. Our inventor is just that; an idea guy. They don’t know how to market, how to build brand awareness, how to know if there is even a business here.
But suppose our budding Billy Gates does know a marketer, an attorney, maybe even some industrial engineers.
All is good, right? Not quite.
Often the last piece of the puzzle turns out to be what makes or breaks a product-based business - logistics. That is, how do we get stuff we need to make stuff, then get that stuff to customers that want our stuff?
Many of the smaller shippers we have worked with end up taking the ‘bootstrap’ approach. That is, they squeeze in enough time to become knowledgeable enough to move products. Solutions often become a matter of convenience, rather than strategic in nature. But smaller shippers need to think ahead of the curve.
Here’s a few thoughts that may be helpful:
Learn How Shipping Costs are Calculated
Shipping costs vary depending on a number of factors, so it's important to understand what goes into cost calculations.
The five main factors impacting costs are as follows:
- Speed or Transit Time. For example, next day air versus ground service
- Services. Such as insurance, packaging, tracking, or obtaining a signature confirmation of receipt, etc.
- Weight and Dimension. The larger and heavier your item, the more it will cost. And, it's not just weight. Dimensional weight, or DIM, is also a factor.
- Destination. The further your package travels and certain high population areas or addresses cost more.
- Shipping Volume. As your business grows (along with the amount of shipping you do), you can negotiate lower rates.
Know Your Mode / Carrier Options
What are the best modes and carriers for small businesses? First, it's important to understand that not all are created equally. Nor do they perform the same services.
- Small Package or Parcel: USPS, FedEx, UPS are the most common for small packages at varying service options;
- LTL (Less than Truckload): Old Dominion, Saia, Yellow, and many others are national and/or regional carriers that combine your freight with others to make full loads. Typically slower, but more cost effective than parcel;
- TL or FTL (Truckload): May national and regional carriers; here you are buying the whole truck, typically for a point-to-point move;
- Others: Air freight, bulk, refrigerated, rail, ocean, intermodal, and fleets are additional options when your requirements expand and become more complex.
Many small businesses fail to realize that shipping rates are negotiable.
- Don’t just settle for the rate your carrier charges you;
- Know your freight profile and do a thorough comparison of the base rates various carriers offer before focusing on preferred carriers, and then negotiate;
- If the fit is right, the carrier needs your business as much as you need their service. As noted earlier, knowing your freight and shipping patterns will be a huge asset here
- Consider using multiple carriers to fulfill your shipping needs. For instance, you could use one carrier for domestic shipments and the other for international.
Irrespective of your size, you still make the decision where to spend your freight dollars. The market is tight now, but your approach should remain the same.
Obtain Shipping Software
Shipping software for small business can save you time and money, and you don't even have to be too technically inclined to use it. Good shipping software can perform the following:
- Provide real-time shipping rates across carriers based on product/package specifications.
- Reduce shipping rates through arrangements made with large carriers.
- Customize, buy, and print shipping labels, packing slip, and BOLs.
- Provide a summary of shipments and other metrics so you can see where you ship the most and how much your shipments tend to cost.
- Support returns management, generating return labels with each shipment.
Eventually, you will graduate to supply chain execution systems to manage planning, procurement, transportation, distribution, etc. But early on you need to get away from manual tasks and use technology to automate routine tasks.
"smaller shippers need to think ahead of the curve"
Partner with a Fulfillment Expert
Shipping for small business doesn't have to be complicated. Instead of trying to figure out the vagaries of finding the best small business shipping solutions for yourself (and trying to negotiate with the different carriers for good shipping rates), you may want to consider partnering with a fulfillment specialist/3PL.
A fulfillment partner can ship your products from centers near where your customers are — helping to minimize the cost of shipping.
Additionally, fulfillment specialists have long standing relationships with carriers that allow them to negotiate highly favorable rates—not to mention the advantage of being able to do bulk business with carriers to streamline costs.
"We know you won’t be a little guy forever."
Engage a Supply Chain Expert
There are professional services firms like JBF Consulting that understand the evolution shippers go through and are expert at helping develop a strategy and roadmap. We become your advisor and advocate in the marketplace to improve current operations, develop a strategy based on your growth projections, and provide you a holistic approach to expand the business.
We know you won’t be a little guy forever.
Dennis Heppner is a Principal at JBF Consulting. Dennis’ expertise in transportation, logistics and supply chain operations, and third-party providers spans 25+ years. His experience is broad-based, spanning entire supply chains, including business process redesign, sourcing, distribution network design, transportation management, distribution operations, outsourcing selection, and business strategy for major manufacturers, distributors, retailers including eCommerce, and service organizations.
About JBF Consulting
Since 2003, we’ve been helping shippers of all sizes and across many industries select, implement and squeeze as much value as possible out of their logistics systems. We speak your language — not consultant-speak – and we get to know you. Our leadership team has over 70 years of logistics and TMS implementation experience. Because we operate in a niche — we’re not all things to all people — our team members have a very specialized skill set: logistics operations experience + transportation technology + communication and problem-solving skills + a bunch of other cool stuff.