How To Buy Shipping Supplies

Shipping supplies, such as corrugated cartons and bubble wrap, would be the third highest overhead cost (after labor and facilities cost ) in most order fulfillment operations. Whether or not you outsource your order fulfillment or do it in house, maintaining shipping supplies cheap is a high priority for people who ship in bulk.

Blanket Purchase Orders Are a First Step in Cutting Costs

Most shipping-supplies buyers begin with neighborhood or online vendors and purchase in small lots at published prices. As purchasing volume rises, the next step is to contact the vendor's custom quotation department to negotiate a blanket arrangement subject to quantity discounts. This will require buying bigger quantity, but the cost savings could be significant.

See our products:

These are the stock packaging vendors that we work with at eFullfillment Service, the company that I have:

Additionally, bought and free USPS shipping supplies are available in the USPS shipping supply shop.

Simply Buying in Bulk Is Not Always Cost Effective

Screenshot of shipping-supplies-ROI spreadsheet.

The unit cost of transport supplies decreases as buy quantity increases, but additional quantity requires extra investment in packaging inventory on hand. The test is when the additional savings divided by the excess investment yields sufficient yield compared to your other investment opportunities. You may use this downloadable spreadsheet to help compute this.

In the above example, for an 11 x 11 x 11 carton bought from Uline at published prices, the cost savings from purchasing 500 cartons rather than 250 is $45.00, but the extra investment is $150.00.

The return on investment (ROI) is $45.00 divided by $150.00, or 30 percent, and, in my experience, any ROI over 15 percent is good enough.

But, in that exact same case, the savings to move from a 500-carton amount to a 1,000 amount is just $10.00. Yet the excess investment is $295.00, to get a ROI of just 3%, which is much too low for a fantastic use of limited working capital.

Release Against a Blanket Order Can Boost ROI

There's a way around the low ROI issue, which is to place blanket orders with your providers subject to batch releases over time. The blanket order commits one to the volume needed to reach the reduced unit price, but then you release in quarterly or monthly amounts before the blanket order volumes are filled. This provides you the cost savings you'll need, but lowers the extra investment per discharge to a point your ROI can then exceed your minimum.

Getting Custom Cartons Made Locally Can Reduce Costs Even More

If it's possible to set a blanket order for at least 1,000 cartons of the same size, you might have the ability to lower costs even more by getting your cartons made to order by a carton maker in your area. To find one or more vendors, ask your local yellow pages a heading such as"Boxes-Corrugated & Fibre."

The carton supplier will create the cartons you will need to your specific size requirement and can imprint your company logo and revenue message also. The carton maker will deliver to your website and may be happy to warehouse your production run and discharge against a blanket amount, which enhances your ROI and conserves your floor space also.

Dunnage Materials Could Cost More Than the Cartons

In our experience as a fulfillment house, the cost of packing materials, like sealing tape, vinyl envelopes, foam peanuts, bubble wrap, Kraft paper and inflatable packaging cushions --called"dunnage"--often adds up to greater than the cost of the corrugated cartons.

A fantastic way to manage this problem is to post the unit cost of all the dunnage materials which you use at your packaging stations so that everybody concerned can realize how much expenditure is involved.

By way of instance, the published price of Uline's standard 5/16" x 12" x 375' bubble wrap is $36.00 in single rolls, or more than $.10 per square foot delivered. That cost alone for a shipment that needs 4 running feet of bubble wrap is $.40 per package or $400.00 per 1,000 such bundles.

While buying dunnage materials, you may use the identical discount versus investment ROI calculation as used for cartons, although ease of use may be just as important as unit costs. In our business, by way of instance, we've found that high quality, 3-inch carton tape is quicker to apply and thus includes a net lower cost per bundle in contrast to"cheaper" tape due to the labor expense involved.

The Biggest Cost of Packing May Be Hidden

When purchasing shipping supplies, there's a hidden cost, which can be wasted shipping weight or DIM minimal weight caused by use of cartons which are unnecessarily large because the perfect size carton isn't provided.

The way to get around this problem is to inventory your pick and package work area with a complete array of stock sizes, from small to big, so that wasted carton and dunnage weight can be avoided while still adequately protecting the contents.

Likewise, your shipping staff should be trained to prevent use of"free" priority mail or flat rate cartons if UPS or FedEx delivery is more affordable, taking into account the cost of the carton which you supply.

The best way to avoid hidden costs of packing is to receive all the cost information before your pick and pack employees in the kind of graphs and posters so that they can make the correct decisions as they go along.

Summary

Shipping-supplies expense is a huge part of order fulfillment costs. The best way to control that cost is to purchase in bulk, subject to ROI review. Sharing cost information with your employees, and personnel training, can minimize wasted cost both in usage of expensive packaging materials and at the hidden cost of additional shipping weights.

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