In the expanding world of commerce retailers and online shopping, shipping and handling techniques are crucial to consider. While many of us may find shipping & handling the same, it’s perhaps not. And as an owner of e-retailers, you should learn and know the differences between shipping and handling. This will help you understand the nuances of the supply chain and work towards better inventory management.
Further, as a business owner, a clear concept of shipping and handling will also help you understand the impact of its cost in your day-to-day activity.
What are Shipping and Handling?
In supply chain management, shipping and handling is packing and delivering the goods from the retailer to the customer. It involves picking, packing and ensuring that the purchased items reach the end customer on time and in a proper condition, the way it was dispatched.
Shipping Vs. Handling: What’s the Difference?
With e-commerce growing in leaps and bounds, the need of the hour is a trusted shipping partner adept at handling purchased items. While shipping and handling often go hand-in-hand, this is how one can differentiate between the two.
Shipping: Shipping is the end-to-end process of sourcing and delivering the goods. It generally covers the cost of transporting the goods, like surcharges, fuel charges etc needed for travelling distances to transport the goods from one point to the next. Shipping charges will, however, vary depending on the end customer’s geographical location.
Handling: Handling involves several steps required for the order fulfilment process. It includes the labour charges required for receiving the goods, packing and putting them into boxes or cartons, generating shipment labels, loading them properly into a truck and ensuring that the condition of the purchased items remains intact during the shipment process. Handling fees will also vary depending on the several touchpoints of the item.
Why You Can’t Overlook Shipping and Handling
Meeting your customers’ needs will always lead your business strategy. Ensuring proper shipping and handling of goods has a long-term impact on your customers, in terms of creating a loyal customer base.
In today’s flourishing e-commerce business, having a well-knit shipping and handling service helps your e-retail compete head-on with your competitors. The pace at which the goods are being delivered and how well they are being delivered also help the company build a reputation.
Shipping and handling also have a lasting effect on customer acquisition and loyalty, hence, we cannot emphasize enough the crucial role of shipping & handling.
Top 4 Factors That Go Into Forming a Shipping and Handling Strategy
Shipping and handling are all about ensuring customer satisfaction while not creating a big hole in your pocket. While free shipping is a bonus to attract more and more customers, shipping and handling of goods cost a company. And someone has to pay for it!
Besides, a customer would always want their items on time, shipping at a lower cost or perhaps free, replacement of damaged products and so on. Hence, an inefficient shipping and handling strategy can lead to frustrated customers and empty carts.
Here’s what you must remember while framing shipping and handling strategies:
Capabilities and resources
The foremost factor on which your shipping and handling strategy must rest is the capabilities of the management and the resources available to your inventory and supply chain. If your company serves a large customer base across geographies, then it’s recommended that e-commerce ties up with a logistic solution to make the shipping and handling of goods easier. Of course, one must ensure that there are resources to afford the same.
On the other hand, if the company is in its nascent stage, outsourcing shipping and handling may cost the management a fortune. If order volume is still low, it’s cost-effective, if shipping & handling is taken care of by the in-house team. In that case, the shipping and handling fees can also prove cost-effective for both buyers and sellers.
Where the goods are being shipped is one of the most crucial factors to consider as it directly impacts business expense. If your warehouse is at a location, far away from the delivery point, then shipping and handling expenses might spike for you. Also if most of the customers are from rugged terrain, the cost shoots up. This will only add on extra shipping and handling fees for the customers if the company has to outsource the process to a third-party logistics company.
It’s recommended for a growing business to have several stores across places after assessing the average buyers’ location. Although this operation might sound more expensive in the first place, having your stores spread out will be more cost-effective, as it will help the business avoid abysmal shipping and handling fees.
The size and nature of the products should also determine the strategies of your shipping and handling to prevent a massive cost.
Let’s consider the examples of frozen food and beverages or temperature-sensitive items. Extra costs for these purchased goods will be incurred in terms of storage. Again for fragile items, extra prevention steps must be taken when handling the products. In these cases, shipping and handling fees will automatically shoot up.
Also, the size, weight, and volume of the products sold would require you to decide whether the shipping and handling can be managed by an in-house system or be outsourced.
A trick to remember is that bulk ordering always helps you avail shipping discounts. Hence, e-commerce businesses often encourage customers to buy in bulk and offer free shipping!
If your e-commerce has the resources to avail tech-savvy methods of shipping and handling the purchased items and goods, go for it! Bulk shipping, handling, international shipments, and so on can send your inventory management into a spiral. Considering the different challenges (as discussed later), you must tie up with a developer to help you streamline the entire process.
With their help, you and your customer can automatically update the shipment, track the same, and get easy approval of customs forms and other necessary documents. This way, your inventory management team will also be alerted whenever an order is placed, and it becomes an easy job.
Warehouse and storage resources available to you
Given the nature of your items and the geographical location of end customers, the warehouse and storage of the purchased items will determine the cost of your shipment, thus deciding the shipping and handling fees.
Given the order’s nature, volume and location, you must decide whether the company has the required warehouse and storage capacity or it must be outsourced.
Challenges to shipping and handling
While e-commerce businesses eventually realize the importance of shipping and handling, it takes a lot of time for companies to sit together and chalk out different strategies to deliver the goods at an optimum cost and via the fastest route. And to overcome various challenges in the course of shipment.
One of the biggest challenges is the inability to track your shipment. Technical glitches, unreliable logistic partners, delays in routes, etc. can often create hurdles in your product’s delivery. However, with the services of a third-party logistics firm, you can find the right shipment partner for your company to update your shipment details automatically.
Shipments are often lost in transit; in that case, a company must quickly resolve the issue. A tie-up with an able logistic partner often will offer the customer insurance for the lost items. However, as a parent company, you should have an in-built system to be prompt with customer complaints, even in the case of mishandling of the goods. A quick service always creates a good reputation.
International shipments are often delayed due to a lack of document completion, including customs forms and duties declarations. These documents are crucial to shipping purchased goods internationally.
It is recommended that e-commerce businesses partner up with a Saas solution that helps a company to apply and procure customs data needed to deliver shipment to the rightful end customer.
In general, outsourcing shipping and handling to a third-party company helps a company achieve a better deal in delivering goods. This also allows the management to take that time off and utilize it to develop other disciplines of the business that needs one’s attention.
How to Calculate Shipping and Handling Costs in 4 Steps
The several factors in building the strategy also impact the shipping and handling costs/fees. In addition, four more factors must be analyzed to calculate the shipping and handling costs of the purchased items.
Determine your delivery time
Faster deliveries will cost you more than the time taken for standard deliveries. If a buyer needs the purchased item overnight or in a day or two, that delivery will have higher shipping and handling charges than the one that will take 2-3 working days to deliver.
Similarly, the delivery location will also impact the shipping and delivery fees. International shipping will be more expensive due to air freight, for faster delivery, than the ones which require sea or road transportation. However, sea and road freight will take more time to deliver.
Get estimated costs
If you’re a big business with ample resources, affording an expensive shipping and handling carrier should not be a big deal. However, if you’re growing e-commerce, you must have an estimated process cost.
Given the weight, volume, and dimension of the purchased items, along with the location of the address, shipping and handling fees can shoot up. It’s recommended that you tie up with shipping couriers, giving you an estimated value after measuring the goods and calculating the cost based on the required travel. This will help you choose the most valuable option, the carrier.
Determine if any shipping costs will be factored into the product cost
This is your trick to satisfy the customer base. If the purchased items are expensive, you might want to include the shipping and handling charges to spare the customer from shelling out another extra buck. However, it could also be the reverse, where if a customer has already paid $200 for an item, they would not mind paying another $10 as shipping and handling fees.
The other way round, if a customer buys a cheap product, you might encourage them to buy more products by giving a discount on shipping and handling charges. Otherwise, paying $10 for a product and then $10 more for shipping and handling charges might not work well with the buyer!
Add handling costs
Calculating the handling charges separately is often tricky to levy a fee accordingly. To have an estimated calculation, one needs to consider the average spend on labor charges, storage costs, rent of warehouse, packing charges, and so on.
According to market standards, a rough estimate of handling charges is calculated by dividing the monthly operational expenses, including rent, packing supplies, warehouse labor, and storage maintenance charges, by your average monthly shipping volume.
And if you outsource the shipping and handling, the average of the same is provided on their fulfillment costs and fees.
Shipping options that customers expect
An e-commerce business must consider several shipping options that will retain the customers’ loyalty and prove economical.
Flat rate shipping
A flat rate shipping is the shipping and handling fees levied on all products across different price ranges. This, at times, will be profitable for the company if the shipping and handling fees are overcharged and loss if they are undercharged, depending on the items’ size, volume, weight, and transportation.
Two-day shipping is generally the standard delivery time. This is one of the most feasible choices for both company and the customer, as the time is not too long or too short and is required if the shipment is coming via an international border.
Loved by all customers, this will never lead to empty carts! However, to not run out of funds, an e-commerce business offering free shipping might want to include the shipping and handling fees in the product price. And if companies offer free shipping, they advertise big and encourage you to buy in bulk!
How to Outsource Your Shipping and Handling
As an e-commerce owner, you should know when the business has reached a point to divide inventory management responsibilities or outsource the same.
When to outsource
When your business grows and expands, it may often become difficult for the team to manage shipping and handling by themselves. In that case, with enough resources to avail, they can always outsource shipping & handling responsibilities to a logistics solution that can help the e-commerce business with a larger warehouse, warehouse in a remote location, handling procedures, etc.
Outsourcing shipping and handling allow the management team to find time and utilize the same, focusing on other business areas that may require attention.
What you get with a 3PL
A third-party logistic or 3PL will help in streamlining your shipping and handling process to a great extent. It will not only provide you with the most viable options, but it will also help you with storage. It will offer you the best prices and a tech stack to automatically update your details.
It will reduce your burden with shipping and handling, a strenuous process.