Shipping Cost Savings Goldmine Management Tips

Packaging, shipping and handling costs represent a large portion of variable business costs and are often overlooked by inexperienced planners. As a result in many businesses this presents a fabulous opportunity to make changes that will have an immediate and noticeable effect.

When asked what it costs to provide a product most people add up the pieces and give you the total. If we make toasters, we say the cost of the toaster is one cover, 2 elements, a spring mechanism, power cord, thermostat and 14 screws: $10.

A slightly more experienced manager will tell you the cost of that same product is labor plus materials. Your toaster now costs $10 for all the materials, and 20 minutes to assemble at $15 per hour. $10 + $5 = $15. That’s a 50% increase. If you manufacture 1 million toasters every year, that's a jump from $10 million to $15 million dollars in your calculated costs.

What so many business managers fail to include in their costs is that the toaster goes in a box with an instruction manual, and has to be sent from your factory to the store across the country. That toaster may cost $15 to build, but the cost of getting a toaster on the shelf in a store is $15 plus a box, plus an instruction manual, plus a crate, plus someone to put a load of toasters in that crate, plus the cost of shipping itself. On many products the box required to ship a product safely costs more than the product inside. For many mass produced products packaging normally costs more than the product itself.

So how is it that shipping and handling cost so much, and yet get overlooked by so many business managers? We just don’t think about it. It's a line on a balance sheet somewhere that most of us never get to see. It's accepted as a normal cost of business and it doesn't sound very exciting to go and fix.

But let me tell you what is exciting. Walking into your boss's office and telling him or her you've found a way to save the company thousands of dollars by bumping up your shipment sizes, changing to a less expensive cardboard box, or predicting shipment needs in advance and shipping in 2 weeks by sea instead of 2 days by air. All of these are relatively easy changes to make if the right questions are asked. Unfortunately most managers don’t even know what the cost of shipping and handling is.

So don't overlook your packaging, shipping and handling costs. They all play a part in the cost of doing business. If you don’t know what your business shipping and handling costs are, go find out. Then walk over to the loading bay and ask someone to show you what they have to do to get something ready to ship. You might be amazed at the inefficiencies you find, and more than likely the packers and shippers themselves already have a long list of solutions for savings locked away simple because no one has ever bothered to ask them.

Shipping and handling cost savings are a potential goldmine for managers looking to make their mark. They are expensive. They happen all the time. There are often overlooked. They are an opportunity. My management tip for you is to go seize that opportunity and make a difference.


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