Tips to Reduce Your Company's Packaging & Shipping Expenses

[Chasers11]

Hey guys,

I thought I would post some helpful tips for decreasing your small parcel shipping costs since this is becoming more of an issue with the majority of the shipping companies increasing their shipping rates. In this post, I will focus mainly on dimensional weight and which box to choose based off of it.

The most important factors UPS and other companies take into consideration when calculating your shipping is the weight and dimensions of your box. I’ve seen many businesses that do not realize the effect these factors have on their costs. Since logistics is one of the main expenses for many small businesses, it is definitely worth your while to learn about some of the main factors that affect your shipping costs.

Dimensional Weight
This is calculated by multiplying the length by the width by the height, and then dividing the total by a particular factor. FedEx and UPS will use this to gouge you if you are not careful.

For ground shipping, your rate is based off of the greater of dimensional weight or actual weight when your box is over 3.0 cubic feet. For air shipping, your rate is based off of the greater of dimensional weight or actual weight for ALL packages. Before January 3 of this year, the dividing factor was 194 for UPS and FedEx. Effective after January 3, the factor became 166 for boxes 3.0 cubic feet or larger for shipments in the US (whether ground or air). So what does this factor change mean? Higher costs for all of us!

You want to be very particular about the dimensions of the box that you choose for your product. If the size of your total package is over 3.0 cubic feet, then you want to make sure that you are being charged for the ACTUAL weight and not the DIMENSIONAL weight (for ground). You need to be worried about dimensional weight in ALL air applications though. So, use a box that is custom fit to your item to keep your dimensional weight down. Ideally, it should be lower than your actual weight.

Choosing the Dimensions for Your Box
Let’s look at how to figure out how to size your box to your product. It’s the general rule that you should have at least 2 inches between your item and the box for padding (bubble wrap, wrapping paper, foam, etc.). This will ensure that your product makes it to its destination safely.

So, let’s say you sell individual custom coffee mugs. The mug is 5” tall, 4” wide, and has a depth of 5” (including the handle). If you sell these mugs individually, find a box or mailer that is 7” x 6” x 7”. If shipping ground you will be charged the actual weight on the item since your package is less than 3.0 cubic feet. Not only does finding a box that extends 2 inches out from every angle save you on shipping, it generally saves you on the cost of packaging materials since many packaging companies tend to charge more for a cube box, than a non-cube box.

If you are shipping items in small or large case quantities (i.e. 6 or 12 items), you may consider designing your case sizes around your sales tiers. This cuts costs on packaging (i.e. you are buying one box instead of 6 individual boxes) and it decreases the likelihood that your dimensional weight will outweigh the actual weight.

Let’s say your sales department is selling product A in quantities of 6 units. If your sales department is consistently selling 12 units at a time, it might make sense to design your packaging so that you are able to ship out Product A in case sizes of 6 units and 12 units. This minimizes your dimensional weight for a common sale and decreases your packaging material costs. In many companies, this can lead to major cost cuts.

Ideally, each of your products should have its own packaging dedicated to it (preferably in sync with your sales tiers). This ensures that your packages arrive safely and you are not paying an arm and a leg for unnecessary shipping and packaging expenses.

I’ll post another post here in a couple of weeks with some more detailed solutions to packaging issues that will save your company money. Hope you enjoyed!

Chase Hague
Founder and CEO
Prism Packaging Solutions, LLC
prismpackagingsolutions.com

[rogercbryan]

What about Bound Printed Matter and Pre-Sort Media Mail?

[chanson]

Good tips Chase. I think more of this type could help a lot of members. Shipping costs are rising, and it sucks, but I dont see them taking a decline any soon! Cheers!

[Chasers11]

Thanks chanson. I was surprised that no one was really posting on these topics when they can have a huge impact on operating costs. So, I decided to take the initiative!

rogercbryan, in terms of dimensional weight, for a lot of bound printed matter the actual weight will exceed the dimensional weight because of the density of the materials. So, you'll normally be rated at the actual weight of the materials. However, this could change depending on several factors (shipping quantities, material dimensions, packaging materials weight, etc.). Later on , I'm going to get into different shipping materials and what kind of an effect that will have on your rates.

[chanson]

We have been dinged pretty good when shipping rack servers express. It can really throw a wrench into your project budgets if you dont plan properly. I am always on my guys to make sure they have their projects planned well. Hardware surprises get costly!

One thing I find frustrating with shipping is receiving from our distributors. We have no control over their process'. It is a huge part of their business so I have to assume they do anything and everything they can to keep costs down, but it would be nice to know more about their warehouse operations. I could fly out there of course, but then I am technically just racking up even more expenses related to shipping ;P

Looking forward to your next set of tips!