Drop Shipping Efficiency

“I got 90% off base shipping rates. I know a guy, I can connect you.” RUN. 🚩 When merchants ask for advice on how to optimize costs, there is always someone who “knows a guy” or someone who claims to be an amazing negotiator who can grind down your carrier. If you hear that, you should run. This isn’t exhaustive, but here are the real ways to save on shipping costs: 1) Is your inventory in the right place? Understanding where your demand comes from will dictate where to locate your inventory.  Placing your inventory in the right place drives down the distance that a package travels, and therefore drives down your cost.  If you aren’t doing a network analysis before you start, you are already off on the wrong foot. 2) Can you leverage scale? One reason 3PL’s exist is that they are points of aggregation. Labor can be shared across multiple accounts for order processing, and a carrier can pick up packages from multiple brands at one location, reducing the total cost. 3) Can you utilize multiple carriers? Different carriers focus on different weight bands and locales.  There are great carriers for lightweight packages and better ones for heavier products.  Regional carriers might serve one region really well, but not be nationally focused. 4) Do you have the technology in place to realize these gains? It’s a non-negotiable to have a system that can dynamically route orders to the correct fulfillment location.  Ask if your provider uses "rateshopping." This should not be hardcoded based on zip code. It should be dynamic based on your inventory levels and the location of the buyer.  Second, if you are utilizing multiple carriers, you want to ensure you have software that can shop for rates in real-time, looking at packages, destinations, and rates from the carrier. 5) Can you optimize your packaging materials? It is expensive to ship air.  Making sure you have the right boxes and are creating denser packages drives better returns. If someone’s “advice” for better rates is to talk to “their guy,” they are full of it. Run. There are concrete ways to optimize costs.   It takes great software and a plan to make it happen. There are also so many talented consultants who can help you with this (a few come to mind below). Nate Skiver, Kathleen Sullivan Garman , Robert Clemons, Timur Eligulashvili, John McClymont, Aaron Alpeter

If you're a 3PL or Brand shipping for yourself, 2024 is going to be the year of efficiency - Labor has never been more expensive - Capacity in major markets still remains low from historical standards, driving rents up - Financing and capital are still at the highest rates in recent years All of these trends are virtually out of your control, so what's next for your growing operation? 1. Increase your output en masse, not in the outliers Superstar packers are a dime a dozen, but your team of packers increasing their average of 5 more packages per hour per person is within reason. 5 more packages per hour with 10 packers is an extra 100,000 packages/year. $1 profit per order is $100,000/year. 2. Take a systematic approach to non-revenue-generating activities Inventory drives your most important metrics of pick & pack. By becoming intimate w/ your velocity and SKU turnover reports, you can work to reduce pick times. Saving 10 seconds per order on avg, with 10 pickers, picking 60 orders/hour at a $15/hour rate is $52,000/year in savings. 3. Mis-Shipments and Missed SLAs are the most common reasons for refunds & order replacements. A WMS with a proper picking workflow and flexible order routing management helps prevent or at least reduce this. Taking your error or reship rate from 1% to 0.1% with 10k shipments/week takes a $20 fully loaded refund value from $104,000/year to $10,400/year. Saving $93,600/year So what would close to an extra (almost) $250,000/year in savings do your warehouse? If you were like us in our journey of scaling an in-house shipping operation and a 3PL, probably a whole lot Interested in getting access to tech, events, and resources to help drive these savings? Drop a comment or DM me 2024 is the year of efficiency 💸💸💸

Most e-commerce brands spend up to 20% of revenue on fulfillment while competitors keep it under 12% Same product, same customers, totally different profit margins. Here's what's actually killing your fulfillment costs: The margin destroyer nobody optimizes Moving product from warehouse to customer includes storage, labor, packaging, and shipping. Most brands never separate this from other expenses so they can't improve it. Healthy benchmark sits around 11-13% of total revenue. What pushes costs too high 1. Shipping strategy problems - Offering free shipping without order minimums - Customers ordering single low-value items - No threshold to make economics work 2. Product design issues - Heavy or oversized items costing more to move - Assembly required before shipping increasing labor - Packaging eating up dimensional weight charges 3. Geographic inefficiencies - Warehouse located far from customer concentration - Shipping cross-country when most buyers are regional - Paying premium zone rates unnecessarily 4. Delivery promises you can't afford - Same-day or next-day options without premium pricing - Customer expectations set without cost analysis - Logistics requirements driving up expenses 5. Operational waste - Manual picking and packing creating errors - Complex returns processes burning time - No automation where it makes sense How to fix it Require minimum order values before offering free shipping - higher orders make shipping percentage drop naturally. Optimize package dimensions - right-sized boxes reduce dimensional weight and material costs together. Move warehouse closer to customer density - location determines zone rates and same region shipping costs less. Charge appropriately for speed - premium delivery should have premium pricing or eliminate it completely. Automate repetitive tasks - automated systems cut picking errors and increase throughput speed. Tighten inventory forecasting - less excess stock means less storage space and lower carrying costs. Redesign products when possible - flat-pack or collapsible versions can cut package size dramatically. Split channels by product type - bulky items work better retail while compact products suit direct shipping. The margin advantage Competitors absorbing high fulfillment costs sacrifice profit while optimized brands reinvest savings into growth and acquisition. Better economics means sustainable scaling without burning cash on logistics. That's why we built Ottit - watching e-commerce brands lose thousands monthly to fixable fulfillment problems is frustrating. Book a call and I'll show you where your costs are bleeding profit.