How Ecommerce 3PLs Use Rate Shopping to Reduce Shipping Costs
Date: July 21,2020
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We know times are anything but normal right now, so we want to share best practices, tips and tricks that we see emerging in the third-party logistics (3PL) warehousing space.
A big theme is the huge spike in ecommerce! So big in fact that order volumes are up 47% more than the same period last year. During one of our recent Ecommerce Connectivity webinar, we polled attendees to learn how many 3PLs were currently using rate shopping. Only 26% were actively performing some sort of rate shopping to receive improved shipping rates. So today we will cover rate shopping 101; what it is, why your warehouse should be doing it, how to get started, and much more.
3PL Rate Shopping 101
First off, rate shopping is not specific to the ecommerce world, in fact rate shopping is most often tied to things like mortgage rates or insurance. The concept is the same though. Your warehouse is looking to perform a service for your customer which must be done by a specific date and you are looking for the cheapest price. The big difference here is your ecommerce warehouse might need to do rate shopping for hundreds or thousands of orders per day.
To get started with rate shopping, you need to have access to at least two different carrier accounts. Although the more carriers you have, or that your customers have, the more price options are available to you. Keep in mind that carriers often offer different service levels and this needs to be considered depending on the service level requested by the purchaser You can check these rates at various service levels by logging onto your carrier account and putting in the dimensions of your package/packages, the weight, and the shipping origin and destination. Now that seems like a lot of work to be doing repeatedly for every shipment exponentially increased for every carrier. That’s where warehouse automation software comes in.
Lower Costs While Introducing a New Revenue Stream
Like most mundane repetitive tasks, computers and/or software has been created to perform these tasks in seconds. Using a direct connection to your carriers, software like a warehouse management system (WMS) can look at the weight, dimensions, destination, service level requested and more to find the best shipping option available in your network and print out the shipping label. This allows warehouses to incorporate more and more carriers in their offering without having to add extra time for each shipment, saving time and money on every order.
You should always keep in mind that not all rate shopping tools are built the same. You should always evaluate the tool and ensure what connections and functionality the WMS or rate shopping software supports. Another thing to be cognizant of is the rates you have for each carrier. All carrier rates are negotiable. The more shipments and labels you produce, the more business you bring to that carrier. You should always have a conversation with that carrier when setting up new accounts, and as volume increases, to ensure you get the best rate available based on your shipping volume. As a 3PL warehouse, you should be rewarded for your high volume and bridge this into an additional revenue stream by charging a markup on shipping costs to your customers while still getting them a more affordable rate than if they were to ship this themselves. Everybody wins!
In summary, using rate shopping is always a good idea to find the best price available on every shipment. Utilizing a WMS, like 3PL Warehouse Manager, can automate that task and make it easy to do on every shipment no matter the volume. Make sure you negotiate your carrier rates and use them to increase profit margin, save time, and win more business.
To learn more about how 3PL Warehouse Manager’s SmartParcel solution can enable you to perform rate shopping, click here.
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Louis is a Solutions Engineer with a specialty in SaaS technology for the logistics industry. Passionate about using technology to solve business challenges and alleviating pain points through systems integrations such as AI, Business Intelligence, transportation, and warehouse management solutions for 3PLs.