The Guide to Operating a Trading Company: Outgoing Freight
David - About Business - September 01, 2020Still wondering how to make your trading business profitable? You're in the right place. The key to operating a trading business is cost control and management. You'll discover hundreds of tiny hidden costs everywhere. And your job is to determine how to optimize these costs to generate profit.
In this article, I'll go about outgoing freight (aka export shipping costs, or transport expenses for sales). I'll give you my insights, and some experience-backed tips and tricks to reduce your shipping expenses in order to increase your profit margins.
Sourcing products is only the tip of the iceberg. Let's see one of many parts you should know about before diving deep into the trading pool.
What You Should Know About Outgoing Freight
Logistics. This is the word you'll always hear everyone talk about, and it's probably the most important one. Logistics firms, basically, enable you to store and deliver your products to your customers.
This is what you should know about logistics and transport for sales in general:
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There are many ways to store products: And they all have very different costs. Make sure you pick the right one. Based on what you're selling, your storage needs will vary. For instance, some chemicals have to be stored under low light exposure, heavy products must be stored on pallets, and lightweight objects can be stored both on shelves and pallets. Before deciding where you'll store your products, make sure you know exactly which services your warehouse provides and how much they cost.
Example: If you sell books, you'd better stack thousands of them on pallets. It will take longer for the logistics agent to pick one, but it'll probably be 5 to 6 times cheaper than shelves. -
Optimize your packaging for storage and shipping: That is particularly important when the cost for storing and shipping one unit of your product is high. For instance, if you sell heavy electronic devices for households, you'd better make your packagings in such a way that they can stack on each other and you can fit as many as possible on one pallet. Your ultimate goal is to fill containers, trucks, pallets, and every other means as much as you can without wasting one single cubic centimeter.
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Logistics is a business of humans: Logistics firms make money based on efficiency. The more they pump out of their employees, the better. Their goal is to sell you human time with a tiny markup. So remember that, no matter what's written on the paper, there are humans. And it means that you won't pay only for basic things such as storage and shipping. You will also face tiny other costs such as packing, relocating your units within the warehouse, printing shipping labels, taping the packaging, applying protective film, etc. Make sure you know exactly what you're paying for. Saying yes to an "additional customary protective film to protect your products" will cost you money.
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Time is money, and so is distance: The faster you want your products to be shipped and delivered, the more expensive it becomes. You must strike a balance between customer satisfaction and costs. And the exact same goes for distance. Shipping and delivering your products within the same country your warehouse is located it will be cheap for sure. Yet once you go international, the cost may skyrocket.
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Visit. Visist. Oh, and visit again: I can't stress this point enough. It is absolutely necessary that you know how your logistics firm works, what are their machines and equipment, and how effective they are. It's quite usual for professional logistics firms to show you what a regular day looks like. They will show you where they store everything, how the employees collaborate to print, prepare, pack, and ship everything. Most of them will even start a timer to show you how good and proud they are. Pay attention to the IT infrastructures. You really want to have your logistics firm use portable devices, modern software, and state-of-the-art tracking systems. These technologies ensure faster and automated treatments, hence lower costs.
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There will be hiccups with shipping and delivery: For this reason, you must envision that a small percentage of your products will either get broken or returned no matter what. That's one of the factors you should base your financial simulations on. And that may also lead you to purchase insurance for a part of the total value that your products represent. Be mindful of that point.
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Prepare for war: Your products will be mistreated. That's life. Have you ever received something broken? And that's pissed you off right? Guess what, it's also pissed the company that sold you this product. Now what can you do about that? From the very first step, make sure your products and packagings are ready for savage. Use foam, sheets, cushioning wrap rolls, egg crates, and so on. Your product should be protected from the day it's produced at the factory. And that will also cost you a little money. By the way, your supplier will certainly be cheaper than your logistics firm, so that's the place where you should look for protective materials.
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Big brother logistics: Make sure your logistics firm takes videos of every move their employees do. You don't wanna track what the employees do. But you need to know exactly what's happened with a specific order when there's a conflict with your customer. If your customers receive defective or broken products, you need to have pieces of evidence to determine at which stage everything fell apart. It's customary to have cameras inside warehouses. That helps tell who's faulty (warehouse agents, shipping agents, packing agents, delivery agents, etc).
These are many factors you must take into account.
Now let's give you some tips to spice up your game!
Tips About Logistics and Outgoing Freight
This is what I learned the hard way:
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Add a warning notice your customers can see: If you sell products that have a high price tag, you should add a warning notice on the box that protects your product and its packaging. In this notice, you let your customers know that they can refuse the delivery if the product seems defective or broken from the outside. That will help you reduce the back-and-forth between you and your customers.
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Make the unboxing experience unique: When you're still within the production phase at the factory, there's not much you can do to make every product and packaging unique. But once you're in the logistics part, you can do what you want. Logistics firms are used to providing additional services to make every order different. Don't hesitate to ask for labels and paper messages that go like "Thank you for your order -NAME-". It makes a huge difference although it adds to your costs.
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Use opaque protective films: If you're afraid that your products get stolen, this is what you need. Opaque materials won't let anybody see what's inside, and that's already a good obstacle to thieves.
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Make sure your e-commerce platform is compatible with your logistics firm's software: There's no such thing as seeing your orders go from your e-commerce website directly into your logistics system. If that's not the case, you'll have to pay someone to develop additional software that sends your orders to your logistics firm so they know exactly what they're up to.
That's all!
Hopefully, these tips and insights will help you better manage your trading company, and most specifically, your shipping expenses.
Additional Resources
If you're interested in starting your own trading business, these resources could be useful:
Let me know in the comments what you'd like to learn about! I'd be glad to help with anything business-related.
